Experts Involved

Andrew Roper

Principal

Ravi Sinha

Principal

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Securities Class Actions

When facing high-stakes securities litigation, clients value The Brattle Group’s credibility, efficiency, creativity, and network of leading experts.

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Why Clients Work With Us

Tailored Teams and Experts

We source experts whose knowledge best aligns with the characteristics of each case. Our internal, academic, and industry experts hail from a variety of backgrounds, allowing them to speak authoritatively on best practices and preeminent techniques in assessing loss causation; calculating damages; building an appropriate counterfactual; and conducting valuations of equity and debt securities, public and private businesses, and other assets. We do not have a “one-size-fits-all” approach. Instead, we find the right expert and team for every case.

Why Clients Work With Us

Creative Analyses

In a world of changing regulations and fast-moving innovation, we recognize that no two cases are alike. We provide novel, outside-the-box thinking for every engagement, including the latest statistical methods and econometric analysis. Our teams think critically, and our flat organizational structure creates a unique environment that blends creativity, efficiency, and expertise.

Why Clients Work With Us

Neutral, Credible, and Prepared

Driven by data, Brattle experts are at ease assisting on either side of disputes. We work for both plaintiffs and defendants, including private parties and regulatory agencies, such as the US Securities and Exchange Commission (SEC). This broad range of experience not only ensures our credibility, but also prepares our experts to more effectively anticipate the other side’s arguments. As opposing experts counter with fewer surprise arguments, Brattle experts are well prepared to explain and defend their opinions.

Why Clients Work With Us

Resources

Delivering effective services on time and on budget is critical to our clients. Our principals are directly involved in the work, and communicate with our clients to understand their needs while directly managing lean, efficient case teams. This approach ensures that we prioritize and focus our efforts on the most value-added aspects. To ensure efficiency, we also use the latest technology to sift through, accumulate, and analyze data, documents, and events.

Our Experts

Our Creativity

Our Preparation

Our Efficiency

How We Can Help

Brattle has extensive experience supporting clients across all phases of Rule 10b-5, Section 11, and Section 12 securities litigation. Our experts provide preliminary assessments of potential exposure, materiality, and class certification; thorough investigations; liability analyses; damages calculations; expert reports and testimony. We also support mediation and settlement negotiations.

In the early phases of securities class actions, we work closely with our clients to assess the case’s merits. Clients value our expertise in constructing counterfactuals, assessing market efficiency, analyzing evidence of price impact and loss causation, and understanding the extent of heterogeneity among class members when determining class certification. Approaching each engagement with a thoughtful and creative mindset helps to ensure that we consider all aspects of the case, and that the framework used to estimate damages is transparent and accurate.

We also leverage advanced data analytics techniques and robust valuation frameworks in our analyses. By considering each case’s unique characteristics, we are able to identify the most credible method to quantify damages. We have successfully applied these techniques in several high-stakes litigations, where we analyzed large volumes of transaction records and fragmented and unstructured financial data to understand the extent of the alleged fraud.

How does Brattle use trading models to estimate class-wide damages?

Using trading models to estimate class-wide damages in Rule 10b-5, Section 11, and Section 12 matters

In securities class action lawsuits, all parties are interested in determining the amount of aggregate damages that the defendants may face. However, the overwhelming majority of these cases lack access to individual investor trading data, and require both parties to estimate aggregate class-wide damages.

Both plaintiffs and defendants have traditionally relied on trading models as a tool to assess defendants’ liability. Brattle has developed a range of flexible models to simulate the trading activity of market participants, and provides these estimates under various scenarios of interest to counsel.

Trading models are an integral part of estimating aggregate damages in securities class actions, providing a basis for the litigants to discuss settlement and an estimate that the court can use to determine whether a settlement proposal is reasonable. Therefore, trading models, when applied appropriately, often drive the course of the litigation.

Our Client Successes

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More Cases

Class action damages, short-selling and third-party corrective disclosures

Brattle evaluated the price impact and associated harm to shareholders, from an alleged corrective disclosure made by a short-seller. Brattle’s analysis helped our client establish that the company was the subject of a short-and-distort scheme. In this scheme, the short-sellers took bearish positions in the stock prior to releasing a short thesis and benefited from the resultant temporary price decline. Our analysis considered several unique aspects of the case, including the materiality of the alleged misrepresentations and omissions; the impact of financial media on stock prices and therefore on a loss causation analysis; the “pseudo signal” nature of the alleged corrective disclosure (which makes information “appear” as news and result in temporary price movement); and the contrast between the observed price decline and what the counterfactuals might have suggested. We also combined our analysis framework with an examination of the trading records from certain identified short-sellers and put-option traders and showed that these traders profited from coordinated trading around the alleged third-party corrective disclosure, further supporting the notion of a short-and-distort scheme. All claims against our client were ultimately dismissed.

Damages and settlement outcome prediction for a media sector merger

For a Section 11 class action, a Big Four auditing firm engaged Brattle to estimate damages to shares issued in a merger and potential settlement outcomes to a company in the media sector. Brattle’s analysis considered different assumptions about which shares were eligible for the claim and what appropriate but-for prices could have been, and estimated the corresponding damages. Our analysis also considered potential gains recognized during the class period that could be offset against the losses. Brattle worked with the team at Stanford Securities Litigation Analytics to help our client estimate the potential settlement outcomes based on the characteristics of the case. The case settled on terms favorable to our client.

Novel loss causation methodologies for alternative digital securities

Brattle has been engaged in several blockchain and cryptocurrency matters, including to assess loss causation and alleged market manipulation. Brattle analyzed central limit order books, market depth, “off-chain” trade data, order execution, trading strategies, transaction histories, and other trading behavior patterns. Brattle successfully developed and used an instrumental variables regression model to examine causation by controlling for market and macroeconomic factors that impacted both trading in cryptocurrencies and the alleged manipulative activity. Our innovative approach showed that after controlling for appropriate market factors, the alleged manipulative activity had no statistically significant impact on prices.

Industry risk, confounding factors, and loss causation

In a Section 11 shareholder class action, Brattle was retained by an energy company to analyze damages to shares issued in an acquisition. An oil and gas firm was alleged to have omitted material facts about its debt covenants in a registration statement issued as part of the acquisition, and the revelation of this information subsequently caused a stock price decline. Our analysis established that 90% of the alleged losses could be explained by controlling for declining oil prices and deteriorating industry conditions. That is, shareholders in the acquired firm would have suffered similar losses in a but-for world with no acquisition due to worsening market conditions. Further, by examining the firm’s disclosures in the context of its peers’ financial conditions, Brattle’s expert established that the risk of a breach of debt covenants was evident from the information disclosed in the registration statement. The matter settled favorably for our client.

Assessing damages in a supply chain

Brattle supported several experts in a class action lawsuit where a supplier alleged that its customer’s actions had caused it to go bankrupt. Our analysis rebutted the damages claimed using cost accounting theories and supply chain practices, reducing damages claimed to $0. The experts developed arguments and theories as to whether a single customer could cause its supplier to file for bankruptcy. The supply chain report analyzed industry customs against the factual record, academic research, and professional experience on topics including just-in-time inventory management, risk allocation, technology, and information sharing. The tailored deployment of several experts resulted in a favorable settlement outcome for our client.

Denying class certification

The defendant in this matter, a large financial institution, engaged Brattle to analyze whether reasonable basis suitability and alleged associated damages were class-wide issues across a putative class of investors. Brattle examined the structure, governance, performance, and other attributes of several closed-end funds that invested primarily in securities issued by Puerto Rico. Our team performed a range of analyses related to class certification at the fund-level of the investment risk and return profile, disclosures, and performance reporting and attribution. Using these fund-level analyses, Brattle successfully established that there was no class-wide suitability failure and that damages could not be properly calculated on a class-wide level, resulting in a denial of class certification.

Negative causation using an intraday event study

Brattle was engaged by a company in the healthcare sector to develop negative causation arguments and examine corrective disclosure dates using an intra-day event study method. The analysis involved a close assessment of price impact following Halliburton II. We examined the intra-day price impact following corrective disclosure dates, accounting for intra-day price movements of the market, and competitors. Brattle further disentangled the price impact by developing an earnings response model to examine the relationship between earnings announcements and changes in analyst consensus estimates. For the mediation negotiation, our team developed a settlement prediction model, alternative measures of inflation per share, and arguments in support of negative causation and intra-day price impact. Based on Brattle’s analytic framework to measure price impact, our client reached a successful settlement early in the litigation.

Manipulation of inventory receivables

A tech company retained Brattle to provide an expert opinion related to allegations of misleading statements regarding the reporting of production yields. Brattle’s team reviewed and analyzed the customs and practice for reporting procedures in the industry, the company’s supply chain and product initiatives, and sales forecasting during the alleged class period. A detailed analysis of internal sales reports revealed that the company’s sales forecasting was reasonable and consistent, and that variations in the company’s reporting were due to macroeconomic and industry factors. Performing a mapping analysis of the sales forecasting data to the company’s disclosures led to a favorable settlement, far below the plaintiff’s initial claims.

Adjusting alleged inflation for cofounding effects

Individually named defendants engaged Brattle to examine alleged false and misleading representations related to a restatement announcement by a company in the steel and automobile industry. Our team examined loss causation measuring inflation per share of both equity and debt securities using event studies. Brattle also performed an econometric analysis to measure materiality from reviewing trading records of named defendants and establishing how trading patterns are connected to loss causation. Our research showed that the price impact could not be attributed to management reputational effects as alleged by the plaintiffs. Brattle’s analysis of cofounding effects established that the theory of damages was flawed. The case settled favorably for the company and the named defendants.

Measuring damages from shareholders’ trading records over multiple corrective disclosures

An Australian client engaged Brattle to quantify damages caused by a set of alleged omissions and false and misleading representations that the company revealed over a series of corrective disclosures. Our analysis quantified the per-share damages attributed to the alleged misconduct, as well as the dollar amount of damages for individual registered shareholders. We applied the LIFO/FIFO framework to calculate the damages for shareholders using actual trading records. Our analysis also examined shareholders’ trading patterns – using the trading records of the registered shareholders – and applied the assumption of the trading pattern to a generalized trading model to quantify the open-class damages. Ultimately, our client settled the case favorably.

Earnings manipulation to meet analyst consensus estimates

Brattle was retained to examine allegations by the SEC and the US Department of Justice that a company’s senior management was engaging in earnings manipulation by using reserves and improper revenue recognition to achieve earnings to meet analysts’ consensus estimates. A Brattle team examined senior management’s roles and responsibilities in preparing financial data. A detailed analysis found that the company’s financial statements were presented in accordance with GAAP; the company’s internal controls were operating effectively in accordance with applicable standards; and senior management reasonably relied on subordinates to manage the company’s day-to-day accounting. Performing an intraday event study of the company’s stock price response to announcements of earnings compared to analyst consensus estimates revealed that the alleged earnings manipulation was not material and resulted in de minimis harm to shareholders. The client settled with both regulatory agencies.

Opt-out decisions by institutional investors

Brattle worked closely with a number of institutional investors in a securities class action. The securities at issue included common stock, dually listed in the US and Canada, and more than 10 fixed-income instruments. As part of the mediation negotiations, Brattle worked with counsel to estimate aggregate damages for each of those institutional investors based on their trading history and the terms outlined in the proposed settlement. Brattle conducted event studies to parse out non-company-specific effects on stock prices. In calculating damages based on trading history, Brattle considered different scenarios with regards to LIFO/FIFO and whether pre-class holding could be used to offset trading during the alleged class period. For fixed-income instruments, we analyzed Trade Reporting and Compliance Engine (TRACE) data, taking into account the difference between dealer-to-dealer trades and dealer-to-end-client trades. Brattle also analyzed the potential claims of those institutional investors to facilitate their opt-out decisions.

Overstatement of revenue and understated risk of bad debt

In a Rule 10b-5 matter, Brattle analyzed how the company’s alleged misrepresentations of industry metrics overstated revenue and understated the risk of bad debt. Shareholders claimed that the company – a fast-growing healthcare provider – downplayed its competition risk from lower-cost alternatives and implemented pricing policies that could reduce revenue in the longer term. Our internal team worked with an academic expert in health economics to assess these claims by analyzing case issues on provider reimbursement and market competition. Following a detailed analysis of the alleged misrepresentations, the case settled.

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about brattle

The Brattle Group answers complex economic, finance, and regulatory questions for corporations, law firms, and governments around the world. We are distinguished by the clarity of our insights and the credibility of our experts, which include leading international academics and industry specialists. Brattle has 500 talented professionals across North America, Europe, and Asia-Pacific.

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Andrew Roper

Principal

Ravi Sinha

Principal

Dr. Roper is a financial economist specializing in securities litigation, class certification, internal or regulatory investigations, and matters requiring valuation or damage estimates.

+1.415.217.1000

Drew.Roper@brattle.com

Mr. Sinha brings deep expertise in complex financial and valuation issues arising in securities class actions and disputes involving structured finance, private equity, and derivatives.

+1.415.217.1000

Ravi.Sinha@brattle.com

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