Overstock.com got a big boost from a California judicial panel in its fight against short-sellers.

The three-judge Marin County appeals court refused to dismiss Overstock’s controversial suit against short-seller Rocker Partners and forensic research shop Gradient Analytics.

Overstock’s suit argues the two conspired to maliciously spread inaccurate and defaming information.

The panel offered spirited and broad-ranging support to Overstock’s claims, rejecting almost every argument made by the appellants’ lawyers.

Gradient, in a press release, described the ruling as technical and said it would appeal the decision to the California Supreme Court.

Ironically, the ruling comes as Gradient’s original concerns – laid out in a series of reports from 2003 to 2006 – have largely borne fruit.

Overstock.com’s earnings shortfalls and inability to generate cash have forced it to issue stock – after telling investors it had no plans to do so – twice, at increasing discounts to the market price.

Three directors, including Chairman Jack Byrne – the father of Chief Executive Patrick – have resigned over concerns about Overstock’s litigation. The Securities and Exchange Commission is investigating the company and Patrick Byrne.