A federal judge in New York ruled on Thursday that Spanish drugmaker Grifols may continue its defamation lawsuit against short seller Gotham City Research. The U.S. District Court for the Southern District of New York found sufficient evidence to proceed with the defamation claim. However, the court narrowed the case by dismissing Grifols’ claims for unjust enrichment and unlawful interference.
Defamation Claim Centers on Alleged $95 Million Loan
In its ruling, the court held that Gotham City’s allegation—that Grifols failed to disclose a $95 million loan to Scranton Enterprises—could be defamatory if proven false. This claim survived Gotham City’s motion to dismiss because the court found enough factual detail in Grifols’ complaint to support a possible defamation case.
Other Claims Dismissed
Grifols had also alleged unjust enrichment and unlawful interference. The court dismissed these counts, concluding that the complaint did not present sufficient facts to support those legal theories. As a result, the lawsuit now focuses solely on defamation.
Background: Gotham City’s 2024 Report
The dispute began in January 2024, when Gotham City Research published a report accusing Grifols of overstating its earnings and understating its debt. At the time, Gotham City held a short position in Grifols’ stock. Grifols immediately denied the report’s allegations, but its share price fell by about one-third following the publication.
Short Selling Explained
Short selling involves borrowing shares and selling them on the market. The short seller then aims to buy back those shares at a lower price, return them to the lender, and pocket the difference as profit.
Next Steps in the Lawsuit
Gotham City Research did not immediately comment on the ruling. With the defamation claim intact, both sides will now prepare for further court proceedings. Grifols will need to prove that the loan allegation was false and caused reputational harm, while Gotham City will defend the accuracy and intent of its report.
