Feud between Overstock and sued firms escalates

The verbal sparring between Salt Lake-based Overstock.com Inc. CEO Patrick Byrne and companies Overstock is suing escalated Friday, with the attorney of a defendant saying Byrne's actions represent "a clear attempt to divert attention from the sharply deteriorating business of Overstock itself."

Overstock has sued Gradient Analytics Inc., a stock-research firm in Arizona that has published critical reports on Overstock, and New York-based hedge fund managers Rocker Partners, along with executives at both companies. This week, Overstock added libel, intentional interference and unfair business practices to the original complaint of unfair competition.

Gavin J. Rooney of Lowenstein Sandler PC, which represents Rocker Partners, issued a statement Friday describing Byrne's actions as "aberrant behavior."

"Overstock's principal claim in the lawsuit is that Rocker somehow induced Gradient Analytics to write negative reports on Overstock. Gradient, however, wrote its first negative report in July 2003, a full year before Rocker even became a client of Gradient," Rooney said.

"In our opinion, Overstock and its CEO, Dr. Patrick Byrne, continue to make frivolous allegations in an attempt to silence their critics, distract attention from Overstock's poor performance, and prevent the market's fair inquiry into Overstock's business fundamentals and the true reasons for the decline in Overstock's stock price," Rooney said.

Byrne has accused Gradient Analytics and Rocker Partners of contributing to the decline of Overstock shares through biased research reports influenced by a fund that was short-selling Overstock's stock.

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Contributing: Associated Press

E-mail: bwallace@desnews.com