Episode IV, a New Hope
I had a feeling about Patrick Byrne's first lawsuit. Around the time that an insightful Fool poster suggested that Overstock's (NASDAQ:OSTK) original claims (negligence and unfair competition) were non-starters, we got word that the CEO's legal dream team was preparing an "amended complaint," which would, alas, not reveal the Sith Lord. We've finally seen it, and, no surprise to me, it's not so much amended as almost completely rewritten.

First, it adds a new plaintiff -- one Hugh D. Barron, who, I assume, sold his Overstock shares for a profit, which would be an interesting new twist. (I assume that because the losses of fellow plaintiff, NCANS operator Mary Helburn, are clearly noted, and there's no such claim for Barron.)

He said, she said
After that, the new lawsuit claims libel, intentional interference with prospective economic advantage, unfair business practices, and violations of California corporations code. The libel claims are especially interesting for their sheer irony: They pit a very outspoken man squarely against free speech. We've got a CEO -- who has few qualms about accusing anyone who disagrees with him of being part of a wider conspiracy, as in this thread, where he accuses an inquisitive Fool community member of being a shill for "the miscreants" -- filing suit to keep others quiet.

Fortunately or unfortunately for Byrne -- depending on which side of the words he stands -- our Supreme Court has long held that, under the First Amendment, there's no such thing as a false opinion. For example: "Dr. Peanutbutter is a bathhouse coke head" is a libelous statement -- unless it's true, or unless I make it in court or some other privileged manner. However, the statement "I think Dr. Peanutbutter is acting like a bathhouse coke head" is an opinion, and you can't sue over it. (Of course, the phrases above are just examples, and should not be taken to reflect upon any real Dr. Peanutbutter, should one exist.)

Fact, opinion, or defamation?
So what do we make of the Gradient statements that Byrne's suit calls "defamatory"? Most of them revolve around diverging opinions on Gradient's characterization of various Overstock accounting practices, in which the Overstock complaint declares statements to be false, then describes them in terms that make those same statements look an awful lot like opinions.

Take the tiff over partner revenue, about which the complaint says, "For example, the Gradient/Rocker reports have claimed that Overstock's accounting for fulfillment partner revenue on a gross basis was improper and was likely to be 'solely motivated' by the "desire to report higher revenues.' " (The italic emphasis is mine.) Likely to be? How do you pin a label of "false" on a statement that is characterized by the word "likely?"

To take another example, is the statement "operating cash flow was artificially boosted in 2004" defamatory simply because Byrne disagrees, and insists that the "increased liquidity" provided by a couple weeks' worth of extra "float cash" is an "operational win"?

Is Gradient's categorization of prepaid expenses as "improper" libel because Byrne and his auditors think it's fine? Is it libel if the someone who calls it "improper" stands to make money by suggesting it? Is it libel if that someone knows someone who knows about it, they discussed it, and that person stands to make money from the issuance of the opinion, assuming there's any share-price fallout?

Careful what you wish for
If a court finds it is, there might be a lot of people out there whose lips would be permanently buttoned by Byrne's action, including you and me. Will Tom Gardner and Bill Mann be able to write, "Each year, Marine Products (NYSE:MPX) pays millions in commissions to one of its directors in an enduring deal that we cannot believe favors outside shareholders."? Will you be able to write, "That second-quarter reversed reserve was a complete scam!" or "A CEO should have more important things to do than pen diatribes on public message boards" on a public message board? How about "Seth Jayson is just in bed with the hedge funds."?

How could any of us write anything about a company if the offended CEO or shareholders can cry foul and bring the legal heat every time they disagree with our interpretation of the facts? The costs of speaking out would be too high, putting downward pressure, we might say, on the exchange of ideas. I'm not sure that resulting chill would be any good for our economy or our financial markets, but I don't know that the Overstock plaintiffs care about that. Everyone's for free speech, so long as it's his own. And what's a little knock against the free market anyway when there are shareholders and corporations to protect?

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At the time of publication, Seth Jayson had no positions in any company mentioned. View his stock holdings and Fool profile here. Overstock is a Motley Fool Rule Breakers recommendation. Marine Products is a Motley Fool Hidden Gems pick. Fool rules are here .