Assessing the defamation case against Michael Lewis

Felix Salmon of Reuters writes about the defamation case filed against Michael Lewis, the author of “The Big Short,” by one of the investors in the book.

Salmon writes, “The specifics of the allegations about Goldman Sachs and Wing Chau might not be spot-on, but the bigger picture is. Lewis’s readers weren’t misled about the financial crisis in general, or Eisman’s story.

“But if Wing Chau can persuade a jury that specific factual allegations against him caused him significant damages, this could be a hard case for Lewis to win.

“Lewis’s best defense, I suspect, will be that the fall-off in Chau’s business was inevitable, after the crisis broke, and that his dismal performance as one of the largest managers of subprime CDOs would have left him with precious little ‘reputation in the business community’ either way. It’s entirely possible that Chau’s friends, being nice to him, have told him that he’s not the reason no one wants to invest with him, it’s the book. But there’s a good chance that they’d come up with some other excuse had Lewis not written The Big Short.

“I suspect this case won’t ever go to jury: Chau doesn’t want to go through discovery, and no one wants to spend enormous sums of money on lawyers. So maybe a well-crafted complaint could get some kind of a payout for Chau quite quickly. But if he wants to fight this case all the way, he end up subjected to some highly embarrassing cross-examination.”

Read more here.