2014 11-19 stephen wynn & wynn resorts v james chanos - reply in support of defendant jim chanos...

8/10/2019 2014 11-19 Stephen Wynn & Wynn Resorts v James Chanos - Reply in Support of Defendant Jim Chanos Motion t

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DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO

ARNOLD & PORTER LLPKENNETH G. HAUSMAN (No. 57252)[email protected] A. WINTHROP (No. 183532)[email protected] Y. WALDO (No. 277783)[email protected]

Three Embarcadero Center, 10th FloorSan Francisco, CA 94111-4024Telephone: 415.471.3100Facsimile: 415.471.3400

BOSTWICK LAWGARY L. BOSTWICK (No. 79000)[email protected] Wilshire Blvd., Suite 400Los Angeles, CA 90025Telephone: 310.979.6059Facsimile: 424.228.5975

Attorneys for DefendantJAMES CHANOS

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

STEPHEN WYNN and WYNN RESORTSLIMITED,

Plaintiffs,

v.

JAMES CHANOS,

Defendant.

Case No.: CV 14-4329 WHO

REPLY IN SUPPORT OF DEFENDANTJAMES CHANOSS MOTION TODISMISS PLAINTIFFS COMPLAINT

Date: December 3, 2014

Time: 2:00 p.m.

Courtroom: 2

Judge: Hon. William H. Orrick

Complaint Filed: September 25, 2014

Case3:14-cv-04329-WHO Document38 Filed11/19/14 Page1 of 16


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- i -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO

TABLE OF CONTENTS

Page

I. INTRODUCTION 1

II. LEGAL ARGUMENT 2

A. The Certified Transcript Submitted To The Court Is ProperlyConsidered On Mr. Chanoss Motion To Dismiss. 2

B. Mr. Chanos Did Not Make The Statement Alleged, And His ActualStatements Do Not Support Plaintiffs Claim Despite Their DistortionsAnd Alterations. 4

C. The Statement Mr. Chanos Did Make Was His Opinion, Not A FactualAssertion. 7

D. Plaintiffs Cannot Plausibly Allege Mr. Chanoss Actual Statement WasFalse. 9

E. Plaintiffs Do Not Address Their Failure to Plead Malice With Respect toMr. Chanoss Actual Statements. 11

F. Leave to Amend Would be Futile. 11

III. CONCLUSION 12



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- ii -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO

TABLE OF AUTHORITIES

Page(s)

Cases

Baker v. L.A. Herald Examiner,

42 Cal. 3d 254 (1986) 3

Compuware Corp. v. Moodys Investors Servs., Inc.,499 F.3d 520 (6th Cir. 2007) 8

Daniels-Hall v. Natl Educ. Assn,629 F.3d 992 (9th Cir. 2010) 2, 10

Forsher v. Bugliosi,26 Cal. 3d 792 (1980) 5

Friends of the River v. U.S. Army Corps of Engineers,870 F. Supp. 2d 966 (E.D. Cal. 2012) 4

Good Govt Grp. of Seal Beach, Inc. v. Superior Court (Hogard),22 Cal. 3d 672 (1978) 7

Haub v. Friermuth,1 Cal. App. 556 (1905) 3

In re Edward Q.,177 Cal. App. 4th 906 (2009) 4

In re Gilead Scis. Sec. Lit.,2005 U.S. Dist. LEXIS 3170 (N.D. Cal. Jan. 26, 2005) 10

In re Gilead Scis. Sec. Litig.,536 F.3d 1049 (9th Cir. 2008) 2, 10

In re iPhone Application Litig.,844 F. Supp. 2d 1040 (N.D. Cal. 2012) 11

Kaelin v. Globe Commcns Corp.,162 F.3d 1036 (9th Cir. 1998) 3

Knievel v. ESPN,393 F.3d 1068 (9th Cir. 2005) 3

Leadsinger, Inc. v. BMG Music Publg,512 F.3d 522 (9th Cir. 2008) 11

United States v. Smith,155 F.3d 1051 (9th Cir. 1998),superseded on other grounds by Konop v. Hawiian Airlines, Inc., 236 F.3d 1035 (9thCir. 2001) 5

Statutes

Cal. Code Civ. Proc. 425.16 1



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- iii -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO

Other Authorities

6A Cal. Jur. 3dAssault and Other Wilful Torts 334 (2011) 3

Louis Loss & Joel Seligman,Fundamentals of Securities Regulation(3d ed.1988) 5



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- 1 -DEF. CHANOSS REPLY ISO MOT. TO DISMISS CV 14-4329 WHO

I. INTRODUCTION

Plaintiffs arguments against the dismissal of their slanderper seclaim rest almost entirely

on convincing this Court to turn a blind eye to the certified Transcript and video of what

Mr. Chanos said as a panelist at the Berkeley Graduate School of Journalisms symposium. Failing

that, Plaintiffs would have the Court accept their cut-and-paste manipulation of the Transcriptin

which they actually substitute the word not for go to transform Mr. Chanoss words into the

oppositeof what he saidinstead of a straightforward reading of the words as spoken by

Mr. Chanos.

This Court should reject these tactics. Mr. Chanos never said or implied that either Wynn

Resorts or Stephen Wynn had violated the FCPA. He merely said, in response to a question from

the symposiums moderator, that he had sold Macau casino operators stock because of risk he

perceived at that time under the FCPA and other aspects of how business is done in China. This

statement is not defamatory on its face, does not imply a factual accusation that Wynn Resorts

violated the FCPA (and says nothing at all about Mr. Wynn personally), and is a non-actionable

statement of Mr. Chanoss historical opinion of investment risk. Moreover, even if Mr. Chanoss

historical assessment of investment risk could be considered a factual assertion, Plaintiffs have not

shown and cannot show that Mr. Chanoss assessment was false. Wynn Resorts admitted and

described the risks of FCPA violations in its judicially noticeable 2011 Form 10-K Annual Report

filed with the Securities and Exchange Commission.

Plaintiffs have failed to identify a defamatory statement by Mr. Chanos, explain how

Mr. Chanoss actual statement was a factual assertion, or make any allegations that Mr. Chanoss

actual statement was made with malice. The Transcript provides all the information the Court

needs to determine that Plaintiffs have no claim against Mr. Chanos, no matter how they might try

to amend their Complaint. Accordingly, Mr. Chanoss Motion to Dismiss should be granted and

this meritless suit should be dismissed without leave to amend. The motion to dismiss was filed at

the same time as a special motion to strike under California Code of Civil Procedure Section 425.16

and Mr. Chanos asks the Court to consider that motion first as it would render this motion moot.



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II. LEGAL ARGUMENT

A. The Certified Transcript Submitted To The Court Is Properly Considered OnMr. Chanoss Motion To Dismiss.

Plaintiffs cannot avoid dismissal of their claim by mischaracterizing the substance of

Mr. Chanoss comments at the symposium in their Complaint, and then arguing that the Court may

not even consider the record of precisely what Mr. Chanos said. In considering a motion to dismiss

a complaint, the court may take judicial notice of documents on which the complaint necessarily

relies if: (1) the complaint refers to them; (2) they are central to the plaintiffs claim; and (3) no

party questions the authenticity of the copy attached to the 12(b)(6) motion. Daniels-Hall v. Natl

Educ. Assn, 629 F.3d 992, 998 (9th Cir. 2010). The court need not accept as true allegations that

contradict matters properly subject to judicial notice or by exhibit or allegations that are merely

conclusory, unwarranted deductions of fact, or unreasonable inferences. In re Gilead Scis. Sec.

Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (citation and internal quotation marks omitted). This

Court can and should consider the Transcript containing Mr. Chanoss allegedly slanderous

statements because it satisfies all three preconditions: the Complaint incorporates the statements by

reference, they are central to Plaintiffs claim, no party contests the authenticity of the Transcript,1

and, as explained in Part II(B),infra, the Transcript contradicts Plaintiffs characterization of

Mr. Chanoss statements.

Plaintiffs argue that their fabricated version of what Mr. Chanos said is all the Court should

consider when assessing the sufficiency of their Complaint. Specifically, they assert that they need

not plead the allegedly defamatory statement verbatim, but only the substance of the statement.

Opp. 6. However, where the action is based on the allegation that the defendant charged the

plaintiff with commission of a crime, the complaint must specify the crime alleged to have been

imputed, along with the recital of the words as spoken, or may set forth the words themselves, and

that a mere allegation that the defendant charged the plaintiff with having committed a named crime

1That Plaintiffs do not dispute the accuracy and authenticity of the Transcript is apparent from their

own repeated reliance on and quotation from the Transcript. See, e.g., Opp. 11-13.



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is not sufficient. 6A Cal. Jur. 3dAssault and Other Wilful Torts 334 (2011) (citing Haub v.

Friermuth, 1 Cal. App. 556 (1905)).

Plaintiffs argue that the Court should ignore the Transcript and the publicly available video

of Mr. Chanoss actual comments, not because they question the authenticity or accuracy of either,

but because neither contains the two video clips shown by the moderator during the panel

discussion. Plaintiffs do not allege that Mr. Chanos appeared or spoke on the video clips, nor do

they explain how the absence of the video clips would prevent this Court from assessing whether

Mr. Chanoss words could plausibly be understood to be slanderper se. This Court has already

considered and rejected Plaintiffs arguments on this point in the context of Plaintiffs request for

discovery prior to consideration of Mr. Chanoss anti-SLAPP motion. ECF No. 30. As the Court

noted, I do not understand why the video clips are essential . . . or how the video clips would help

me decide whether Chanos made the defamatory statement alleged, whether it is an opinion or a

factual assertion, or whether it was reasonably based on Wynns own admissions in SEC filings and

other judicially noticeable material. Id.at 1-2. Plaintiffs present no new arguments in their

Opposition to the motion to dismiss that would warrant a change in the Courts ruling that the video

clips are unnecessary.

The cases Plaintiffs cite as support for the proposition that Mr. Chanoss statement must be

viewed in light of the context of the full communication (Opp. 7) actually support this Courts

consideration of the Transcript. InKaelin v. Globe Communications Corp., 162 F.3d 1036, 1040

(9th Cir. 1998), the court decided that to assess the defendants allegedly defamatory headline, it

needed to consider the rest of the defendants published article. InKnievel v. ESPN, 393 F.3d 1068,

1076 (9th Cir. 2005), the court determined that an image of the plaintiff and his wife and the

allegedly defamatory accompanying caption needed to be assessed in the context of other images

and captions presented in the series published by the defendant. Likewise, inBaker v. L.A. Herald

Examiner, 42 Cal. 3d 254, 261 (1986), the court held that to adjudicate defamatory meaning, the

court must examine the nature and full content of the communication. The unifying aspect of

each of these cases is that the additional material considered for context was thedefendants own

communication accompanying the allegedly defamatory snippet. None of these cases suggests that



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material outside of the defendants own communications provides essential context, much less

suggests that a court should, or even could, exclude from consideration a verbatim transcript and

video of the entirety of the defendants communications. Plaintiffs make an unsupported leap from

the cited cases to assert that the video clips, not alleged to have been created by Mr. Chanos and in

which he is not alleged to appear or speak, are necessary to the Courts analysis of Mr. Chanoss

statements.

The two cases Plaintiffs cite as examples of courts excluding documents submitted in

support of a motion to dismiss are inapposite. InIn re Edward Q., the court assessing the legislative

history behind a particular statute accepted three reports submitted by the Attorney General, but

declined to accept a fourth report because the copy submitted was incomplete such that the Court

could not even determine whether it was appropriate for judicial notice. 177 Cal. App. 4th 906, 910

n.3 (2009). InFriends of the River v. U.S. Army Corps of Engineers, 870 F. Supp. 2d 966 (E.D.

Cal. 2012), the court rejected a partial set of documents submitted in support of an argument over

the appropriateness of an agency action. The court determined that [t]o ensure fair review of an

agency action, [the court] should have before it neither more nor less information than did the

agency when it made its decision. Id.at 974 (citations omitted). Neither of these cases is relevant

to this Courts consideration of whether the Transcriptthe accuracy of which Plaintiffs do not

disputeis appropriate for review on a motion to dismiss a slander claim alleging only Plaintiffs

mischaracterization of Mr. Chanoss words.

Plaintiffs cite no case in which a court weighing a motion to dismiss a defamation claim has

refused to consider the actual words alleged to be defamatory. In assessing whether Mr. Chanoss

statements can be viewed by a reasonable person to be slanderper se, this Court can and should

consider the words Mr. Chanos actually spoke at the symposium, as reflected in the certified

Transcript.

B. Mr. Chanos Did Not Make The Statement Alleged, And His Actual StatementsDo Not Support Plaintiffs Claim Despite Their Distortions And Alterations.

As the Transcript shows, Mr. Chanos never made the statement alleged in the Complaint,

that Wynn and Wynn Resorts had violated the Foreign Corrupt Practices Act. Compl. 12.



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Undeterred by this fact, Plaintiffs attempt to salvage their slanderper seclaim by stitching together

the words Mr. Chanos did say and using bald assertions unsupported by the record to fabricate the

meaning they desire. Plaintiffs Opposition relies on three such distortions: (1) that Mr. Chanos

expressly state[d] that he went short in U.S. casino operators Mr. Adelman and Mr. Wynn

because . . . [they] were in contravention of the Foreign Corrupt Practices Act (Opp. 13), (2) that

Mr. Chanos stated that Macau casino operators [go] across the legal line ( id.), and (3) that

Mr. Chanos said that he shorted2

Macau casino operators in 2009-10 (id.). None of these assertions

is true, as the Transcript itself shows. Each is a cut and paste manipulation of Mr. Chanoss words.

Because Plaintiffs depend upon distortions and draw inferences that are so obscure and attenuated

as to be beyond the realm of reasonableness, they have no probability of prevailing on their claim.

Forsher v. Bugliosi, 26 Cal. 3d 792, 805 (1980).

Plaintiffs entire Opposition depends on these gross misstatements of the record. Plaintiffs

assert that Mr. Chanos expressly state[d] that he went short in U.S. casino operators Mr. Adelman

and Mr. Wynn because . . . [they] were in contravention of the Foreign Corrupt Practices Act.

Opp. 13:10-13. But Plaintiffs only quote the phrases U.S. casino operators Mr. Adelman and

Mr. Wynn and Foreign Corrupt Practices Act because nowhere does Mr. Chanos expressly

state[] that he went short or sold Wynn Resorts stock because it was in contravention of or

violating the FCPA.

More strikingly, Plaintiffs purport to quote Mr. Chanos as stating that Macau casino

operators [go] across the legal line. Opp. 13:19-21. Mr. Chanos never said that. He made the

oppositeassertion, which makes Plaintiffs editing of the Transcript particularly egregious. His

actual words were: And, although, they hide behind the facade of the junket companies,

increasingly, from aif not across the legal line, to use my friend Bethany McLeans term, it was

2Short selling is . . . sell[ing] stock which [one] does not own, anticipating that the price will

decline and that [one] will thereby be enabled to cover, or make delivery of the stock sold, bypurchasing it at the lesser price. If the decline materializes, the short seller realizes as a profit thedifferential between the sales price and the lower purchase or covering price. United States v.Smith, 155 F.3d 1051, 1053 n.1 (9th Cir. 1998) (citing Louis Loss & Joel Seligman, Fundamentalsof Securities Regulation699 (3d ed. 1988),superseded on other grounds by Konop v. HawiianAirlines, Inc., 236 F.3d 1035 (9th Cir. 2001).



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legal fraud. RJN (ECF No. 17) Ex. 1 (Transcript) 6:14-19. Mr. Chanoss very next words,

explaining the words legal fraud, confirm that he was asserting the exact opposite of the

fabricated phrase that Macau casino operators [go] across the legal line: While they might be

adhering to every aspect of legal requirements in what they were doing, there was still an attempt to

mislead and an attempt to obfuscate and I just couldnt get comfortable with that. Transcript 6:20-

25 (emphasis added). The explicit point he made is that while they might not cross the legal line, he

still was uncomfortable.

Finally, Plaintiffs misstate the record in their description of the dates Mr. Chanos said he

was longi.e., held stock inthe Macau casino operators and when he sold that long position.

Plaintiffs erroneously describe late 2009, early 2010 as the time at which Chanos admittedly

made his first short bet in Macau casinos. Opp. 13:6-9 (arguing that symposium audience could

also infer that, by late 2009, early 2010 the time at which Chanos admittedly made his first short

bet in Macau casinos he had uncovered information that caused him to abandon his long position

and assume a short position.). But here too, Mr. Chanos said no such thing. Mr. Chanoss words

in the Transcript are unequivocal: And when we first put our short bet on in China in late 09, 2010

that David [Barboza] wrote about,we were actually long Macau casinoson the thought that I

wanted to be long corruption and short property. Transcript 5:23-6:4. That is, while the Kynikos

funds were shortotherChina-related companies in late 2009 and early 2010, at that time they were

longthe stock of Macau casino operators like Wynn Resorts. Thus, Plaintiffs contention that

Mr. Chanos stated at the symposium that his firm had shorted Macau casino operators in 2009-10

based on his findings of FCPA violations (seeOpp. 13:4-14:5) is the exactoppositeof what

Mr. Chanos said.

A plain reading of the transcript (and review of the video) make it abundantly clear that

Mr. Chanos said he decided to sell not because he discovered violations or contravention of the

FCPA, but because of concerns with the risk he was taking with clients money under [the FCPA]

and a variety of other . . . aspects of exactly how business is done there. Transcript 6:11-14. No



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amount of Plaintiffs twisting and distortions can convert what Mr. Chanos said into a statement or

implication that Wynn Resorts had actually violated the FCPA.3

C. The Statement Mr. Chanos Did Make Was His Opinion, Not A FactualAssertion.

To survive a motion to dismiss, Plaintiffs Complaint would need to plausibly allege that

Mr. Chanoss statement conveyed a factual assertion andthat he either deliberately cast his

statements in an equivocal fashion in the hope of insinuating a defamatory import to the reader, or

that he knew or acted in reckless disregard of whether his words would be interpreted by the

average reader as defamatory statements of fact. Good Govt Grp. of Seal Beach, Inc. v. Superior

Court (Hogard), 22 Cal. 3d 672, 684 (1978). Plaintiffs have not shown they can meet either

requirement.

First, Plaintiffs failure to accurately identify what Mr. Chanos actually said at the

symposium completely undermines their analysis of whether Mr. Chanoss statement was a factual

assertion. Because Mr. Chanos never said that Mr. Wynn or Wynn Resorts had violated the FCPA,

Plaintiffs contention that such an accusation is provably false (Opp. 14-15) is beside the point.

Mr. Chanossactualstatementthat he had sold stock in the past because he was concerned then

about the risk [he] was taking with clients money under Foreign Corrupt Practices Act and a

variety of other, you know, aspects of exactly how business is done in Chinais a classic opinion

regarding Mr. Chanoss perception of investment risk that cannot be proven true or false.

The nature of Mr. Chanoss statement as pure opinion is evident from the time sequence set

out in his words. Mr. Chanos was speaking in 2014, but he was describing his state of mind at an

earlier point in time, setting out his predictionat that earlier timeabout thefutureperformance of

Wynn Resorts stock. SeeTranscript 5:24-7:1 (describing the Kynikos funds long position in

Macau casinos from 2010 onwards, describing a period of investigation and research, and then

3The three distortions of the Transcript described in the text are not the only examples of Plaintiffs

effort to rewrite what occurred at the symposium. For example, in arguing for discovery of thevideo clips, Plaintiffs claim Mr. Bergman, the symposium moderator, asked Mr. Chanos a questionimmediately after playing the first of two film clips. Opp. 8:6-10. In fact, Mr. Bergman first askeda question and received an answer from investigative reporter David Barboza, and only then turnedto Mr. Chanos. SeeTranscript 3:9-4:7.



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concluding with a sale of the positions in Macau casino operators). He explicitly contrasts his

views from the time of the sale (in 2012) with his current views: So we got out of our Macau

casinos andnow, I think, more importantly, I think, were looking at the Macau situation as a

conduit for, in effect, wholesale capital flight on China which has implications for the banking

system and the credit system there. Transcript 7:1-7 (emphasis added). With this time sequence in

mind, Mr. Chanos unmistakably was describing his forward-looking prediction at the time he sold

the stock in Macau casino operators, that by its nature cannot be a factual assertion. See

Compuware Corp. v. Moodys Investors Servs., Inc., 499 F.3d 520, 529 (6th Cir. 2007) (credit

rating held to be predictive opinion, and therefore not actionable factual assertion).

Second, Plaintiffs cannot reasonably allege that Mr. Chanos purposefully phrased his words

in an ambiguous fashion to imply that he had undisclosed facts showing that Plaintiffs had violated

the FCPA. Nothing in Mr. Chanoss decision to sellin and of itselfimplies that he believed that the

Plaintiffs had actually engaged in violations of the FCPA. The mere existence of rumors or

investigations is often enough to depress a companys stock price. Moreover, nothing in

Mr. Chanosswordsimplied that he had evidence that the Plaintiffs had violated the FCPA. Again,

it bears repeating what Mr. Chanos actuallysaid at the Symposium:

I began to really get concerned about the risk I was taking with clients money underForeign Corrupt Practices Act and a variety of other, you know, aspects of exactlyhow business is done there. And, although, they hide behind the facade of the junketcompanies, increasingly, from aif not across the legal line, to use my friendBethany McLeans term, it was legal fraud. While they might be adhering to everyaspect of legal requirements in what they were doing, there was still an attempt tomislead and an attempt to obfuscate and I just couldnt get comfortable with that. Sowe got out of our Macau casinos . . . . (Transcript 6:10-7:1)

That is, far from implying that he had evidence that Mr. Wynn or Wynn Resorts had

violated the FCPA, Mr. Chanos went out of his way to suggest that he did nothave such evidence

and that the discomfort that he felt about his Macau casino investments arose from the casino

operators business practices, which, he conceded, might be legal, not across the legal line, and

adhering to every aspect of legal requirements.



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D. Plaintiffs Cannot Plausibly Allege Mr. Chanoss Actual Statement Was False.

Even if Mr. Chanoss statement could be understood to contain a factual statement beyond

what he said about his own concerns about risk, Plaintiffs cannot allege or prove that at the time

Mr. Chanos sold his investments in Macau casino operators, there was no risk under the FCPA or

the way business is done in China. Wynn Resorts contemporaneous SEC filings reflect this.

Wynns 2011 Form 10-K, filed in early March 2012 (just before the Kynikos funds sold their

holdings), confirms this. RJN (ECF No. 17) Ex. 26. It extensively describes the risks of FCPA

violationsdespiteWynn Resorts compliance programs:

Any violation of the F oreign Corru pt Practices Act or applicable Anti-M oneyLaunderi ng l aws or r egulations could have a negative impact on us.[] . . . We are subject to regulations imposed by the Foreign Corrupt Practices Act(the FCPA) and other anti-corruption laws . . . .Internal control policies and

procedures and employee training and compliance programs that we haveimplemented to deter prohibited practices may not be effective in prohibiting ourdirectors, employees, contractors or agents from violating or circumventing ourpolicies and the law.If our directors, employees or agents fail to comply withapplicable laws or Company policies governing our international operations, theCompany may face investigations, prosecutions and other legal proceedings andactions which could result in civil penalties, administrative remedies and criminalsanctions.Kazuo Okada, one of our directors, has failed to comply with internaltraining in these matters and has failed to return to the Company an executedAcknowledgment that he agrees to comply with the Companys Code of BusinessConduct and Ethics. For additional information on the Freeh Report, which detailednumerous instances of conduct constituting prima facie violations of the FCPA byMr. Okada and certain of his affiliates, and the redemption of Aruze USA, Inc.sshares, see Item 8Notes to Consolidated Financial Statements, Note 19Subsequent Events.Any determination that we have violated the FCPA could havea material adverse effect on our financial condition. (RJN Ex. 26 at 25 (WynnResorts 2011 Form 10-K) (emphasis added))

This party admission by Wynn Resorts contradicts Plaintiffs allegations that Mr. Chanoss

statement, even if considered a factual assertion, was true. Wynn Resorts itself admitted that there

could be violations of the FCPA that would have a material adverse effect on [its] financial

condition;ipso facto, Plaintiffs cannot allege that Mr. Chanoss statement that there was a risk

[he] was taking with clients money under Foreign Corrupt Practices Act and a variety of other, you

know, aspects of exactly how business is done there was false.

The Wynn Resorts 2011 Form 10-K is among the documents that Plaintiffs argue the Court

should reject from its consideration of the Motion to Dismiss. RJN Ex. 26. The 2011 10-K, along

with other exhibits submitted with the Request for Judicial Notice, contradict what the Complaint



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refers to as readily available information that Mr. Chanos allegedly disregarded and purposefully

avoided in making his allegedly defamatory statement. Compl. 19. Mr. Chanos expressed that he

decided to sell his stock in Macau casino operators because of his concern of risk under the FCPA

and a variety of other . . . aspects of exactly how business is done there. Transcript 6:11-14. For

this Court to assess whether Plaintiffs have plausibly alleged slanderper seon the basis of what

Mr. Chanos said, it should look at Mr. Chanoss actual words as well as the readily available

information Plaintiffs reference and rely upon for their claim. Cf. Daniels-Hall v. Natl Educ.

Assn, 629 F.3d 992, 998 (9th Cir. 2010) (noting that a court may take judicial notice of a document

on which the complaint necessarily relies if: (1) the complaint refers to the document; (2) it is

central to the plaintiff's claim; and (3) no party questions the authenticity of the document attached

to the 12(b)(6) motion). The Court need not accept as true Plaintiffs allegations about the readily

available information when their characterization of such information is contradicted by Plaintiffs

own admissions in SEC filings, press releases and news reports. See In re Gilead Scis. Sec. Litig.,

536 F.3d at1055 (noting a court need not accept as true allegations that contradict matters properly

subject to judicial notice or by exhibit).4

Plaintiffs do not question the authenticity of any of the additional materials submitted in

support of the motion to dismissin fact, they explicitly rely on at least one of the documents for

their own Opposition. See, e.g., Opp. 10 (citing and relying upon facts from RJN Ex. 14). Thus,

the Court should take judicial notice of the additional documents submitted with the Request for

Judicial Notice, particularly documents such as RJN Ex. 26 which contain party admissions

contradicting the allegations in the Complaint.

4Ignoring the fact that their Complaint references and implicitly relies upon allegations of the

content of the readily available information that Plaintiffs claim Mr. Chanos ignored, Plaintiffstake issue with Defendants citation toIn re Gilead Scis. Sec. Lit., 2005 U.S. Dist. LEXIS 3170, at*10-11 (N.D. Cal. Jan. 26, 2005). But in that case, the court acknowledged that it in ruling onmotion to dismiss it may take into consideration 1) documents that the complaint explicitlyreferences or on which it implicitly relied; and 2) public filings with the SEC.



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E. Plaintiffs Do Not Address Their Failure to Plead Malice With Respect toMr. Chanoss Actual Statements.

Plaintiffs attack a straw man with respect to malice. Plaintiffs arguments on the adequacy

of their malice pleading address only the allegation that Chanos stated that Wynn and Wynn Resorts

violated the FCPA. As explained above and in the Motion to Dismiss, this is not what Chanos said.

With respect to Mr. Chanoss actual words (about risk under the FCPA and the way business is

done in China), the Complaint is silent. In their Opposition, Plaintiffs offer no arguments to suggest

that they have alleged that Mr. Chanos knew the statements regarding the risk of investing in Macau

casino operators were false or made with reckless disregard for their truth.

F. Leave to Amend Would be Futile.

Dismissal without leave to amend is appropriate where plaintiff would not be able to cure

his defective pleading by amendment. Leadsinger, Inc. v. BMG Music Publg, 512 F.3d 522, 532-

33 (9th Cir. 2008). Plaintiffs slanderper seclaim rests on the faulty premise that Mr. Chanos

stated something that he did not: that Wynn and Wynn Resorts had violated the Foreign Corrupt

Practices Act. The Court has before it the Transcript of what Mr. Chanos said at the symposium

and it is readily apparent that no such statement was made or implied. Plaintiffs cannot plausibly

identify any slanderous statement by Mr. Chanos. Moreover, Plaintiffs fail to articulate any factual

allegations upon which an amendment could be based. These failures show that amendment would

be futile, and therefore, the Court should dismiss the Complaint without leave to amend.5

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5See In re iPhone Application Litig., 844 F. Supp. 2d 1040, 1077-78 (N.D. Cal. 2012) (dismissing

cause of action because plaintiffs theories regarding how defendants activities constituteactionable conduct were defective and it appeared that additional allegations would not remedy thedefects).



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III. CONCLUSION

For all the reasons given, Plaintiffs Complaint fails to state a claim upon which relief could

be granted and it should be dismissed without leave to amend.

Dated: November 19, 2014 Respectfully,

ARNOLD & PORTER LLP

By: /s/ Kenneth G. Hausman

KENNETH G. HAUSMANDOUGLAS A. WINTHROPJULIAN Y. WALDO

Attorne s for Defendant JAMES CHANOS

BOSTWICK LAWDated: November 19, 2014

By: /s/ Gary L. Bostwick

GARY L BOSTWICK

Attorne s for Defendant JAMES CHANOS


2014 11-19 stephen wynn & wynn resorts v james chanos - reply in support of defendant jim chanos...

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