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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.

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.

Our Focus

  • Accounting liability
  • Assessing damages for Rule 10b-5, Section 11, and Section 12
  • Class certification
  • Confounding factor analysis and loss causation
  • Counterfactual analysis
  • Digital asset and alternative securities investments
  • Event studies (including use of high-frequency market data)
  • Fundamental valuation analysis
  • Market efficiency and trading behavior
  • Materiality analysis of misleading/false statements and omissions
  • Tracing of shares (using LIFO/FIFO methods and trading models)
News

Brattle Principal Bin Zhou, Associate Adrienna Huffman, and Senior Associate Chi Cheng have published a Law360 article that uses a new dataset to show how experts could potentially use data-driven quantitative methods to assess accounting materiality in accounting materiality disputes.

Engagements
REPRESENTATIVE ENGAGEMENTS

Below is a list of representative engagements for our Securities Class Actions practice.

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 confounding 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 confounding 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.

Experts
Publications
Article
Coronavirus (COVID-19) May Bring Litigation Fever
March 13, 2020
Published in Securities Regulation Daily
Article
Bitcoin Futures Markets: A Year Later
March 15, 2019
Ioannis Gkatzimas and Marek Zapletal
Published in Mondaq
Article
Recent Outperformance of Passive Investment Funds Has Provided a Rationale for Some ERISA Retirement Investors to Cry Foul. Is There a Case for Active Management?
February 27, 2019
Published in Wolters Kluwer Dailies
Article
Examining the Role of Market Price in Appraisal Part 1
September 10, 2018
Dirk Hackbarth and Bin Zhou
Published in Law360
Article
Examining the Role of Market Price in Appraisal Part 2
September 11, 2018
Dirk Hackbarth and Bin Zhou
Published in Law360
Article
How Blockchain Could Rescue 10b-5 Damages
August 24, 2018
George S. Oldfield, Angela Lam, and Ethan Moore
Published in Law360

The article discusses the potential use of a blockchain-based recording system in solving 10b-5 damages allocation issues. 

Article
Securities Class Actions: Trading Models to Estimate Individual Investor Trading Activity and Aggregate Damages
May 2017
Published by The Brattle Group, Inc.
Article
The Bid-Ask Spread in the Danish Stock Market: Evidence from the 1990s
August 25, 2016
Published in the International Journal of Economics and Finance

The paper investigates the cost components of the bid-ask spread and the changes in the spread around earnings announcements on the small Danish stock market in the 1990s.

Article
Private Class Action Litigation Risk of Chinese Firms Listed in the U.S.
June 01, 2016
Torben Voetmann, Jan Jindra, and Ralph A. Walking
Published in the Quarterly Journal of Finance
Article
Correct Application of Event Studies in Securities Litigation
December 17, 2015
Pavitra Kumar and Torben Voetmann
Published in Event Study Tools
Presentation
High-Frequency Trading in Litigation
March 26, 2015
Paul Hinton, Pavitra Kumar, and Lauren J. Schreur
Presented to The Knowledge Group
Article
High-Frequency Trading Litigation Presents Complex Issues for Experts
June 2014
Zachary Ziliak, Pavitra Kumar, and Torben Voetmann
Published by The Brattle Group, Inc. Published on Law360
Article
What Makes Securities Class Actions with Accounting Allegations Different?
2011
Elaine Harwood, Adoria Lim, and Laura Simmons
Published by the American Bar Association
News & Knowledge
August 11, 2020
Brattle Experts Discuss Applying Blockchain Technology to Equity Trade Settlement in Law360 Article

Brattle Principal Sujay Dave, Principal Emeritus George Oldfield, and Litigation Specialist Ethan Moore have coauthored a Law360 article titled “Using Blockchain to Settle Trades Could Alter Litigation.”

July 20, 2020
Yingzhen Li to Participate in Webinar on Halliburton II and Fraud-on-the-Market Theory

Brattle Senior Associate Yingzhen Li will participate in The Knowledge Group’s webinar, “Halliburton II and Fraud-on-the-Market Theory: Legal Challenges and Strategies Impacting Class Certification in 2020,” taking place Monday, July 20 from 9:00–10:30 a.m. (PT)/12:00-1:30 p.m. (ET). The recording will be available on Tuesday, July 21.

May 19, 2020
Brattle Experts to Discuss Economic Analysis in Antitrust, Consumer, and Securities Class Actions During CBA Webinar

Brattle Principals Armando Levy, Lisa Cameron, and Matt Aharonian will join a Chicago Bar Association (CBA) webinar to discuss “Economic Analysis in Antitrust, Consumer and Securities Class Actions,” which will take place on May 19 at 12:00 p.m. (PT)/2:00 p.m. (CT)/3:00 p.m. (ET).

May 11, 2020
Brattle Experts Author Article on Quantitative Materiality Assessment Methods

Brattle Principal Bin Zhou, Associate Adrienna Huffman, and Senior Associate Chi Cheng have published a Law360 article that uses a new dataset to show how experts could potentially use data-driven quantitative methods to assess accounting materiality in accounting materiality disputes.

March 13, 2020
Brattle Experts Author Article on Types of Litigation That May Arise as a Result of COVID-19

Brattle Principal Adoria Lim and Associate Jack Turner have authored an article on the types of litigation that may arise as a result of the COVID-19 outbreak.

July 01, 2019
Brattle Economists Discuss the Standards for Evaluating Market-Making Behavior in OTC Markets

Brattle Senior Associate Sujay Dave and Principal Emeritus George Oldfield have coauthored a Law360 article that discusses the differences between exchanged-based and over-the-counter (OTC) market-maker practices, and why it is important for prosecutors to understand these differences.

October 24, 2018
Brattle Contributes to Agreement on Attorney's Fees in Facebook's Abandoned Share Reclassification Plan

On October 24, 2018, Facebook agreed to pay $68.7 million in attorney’s fees in connection to a shareholder lawsuit over the proposed reclassification of the company’s common stock that was canceled by Facebook’s board of directors last year.

September 12, 2018
Brattle Economist Offers Expert Opinion on the Relevance of Market Price as Appraisal Remedy

Brattle Principal Bin Zhou and Boston University Professor Dirk Hackbarth have authored a two-part paper series for Law360 on the relevance of market price in measuring fair value.

August 24, 2018
Brattle's George Oldfield Publishes Article on Potential Role of Blockchain in 10b-5 Damages Cases

Brattle Principal George S. Oldfield co-authored an article for Law360 on the potential use of a blockchain-based recording system in solving 10b-5 damages allocation issues.

November 15, 2017
Matthew Aharonian to Present on The Knowledge's Group's Webinar on Securities Class Actions

Brattle Senior Associate Matthew Aharonian will participate on The Knowledge Group’s webinar, “Securities Class Actions: Trends & Developments in 2017 & Beyond,” taking place November 15, 2017 from 12-2 pm EST.

October 19, 2017
Torben Voetmann to Present at Practising Law Institute's (PLI's) Program on Finance for Lawyers and Other Professionals

Brattle Principal Torben Voetmann will present at Practising Law Institute’s (PLI) program, “Pocket MBA 2017: Finance for Lawyers and Other Professionals,” taking place October 19-20, 2017 in San Francisco, CA and via webcast.

September 25, 2017
Brattle Contributes to Shareholder Victory in Facebook Proposed Reclassification

On September 21, 2017 Facebook’s board of directors voted to abandon the pending reclassification of the company’s common stock.

June 13, 2017
Brattle Consultants to Present on Case Studies in Securities Litigation at BASF CLE Event

Brattle Principals Torben Voetmann and Ioannis Gkatzimas, and Senior Associate Pavitra Kumar will present at the Bar Association of San Francisco (BASF) Securities Litigation Section’s Continuing Legal Education (CLE) event, “Case Studies in Securities Litigation: What Works After Halliburton,” taking place June 13, 2017 in San Francisco, CA and via webcast.

March 15, 2017
Sujay Dave to Present Elements of Securities Litigations on The Knowledge Group's Webinar

Brattle Senior Associate Sujay Dave will present during The Knowledge Group’s webinar, “The Elements of Securities Litigation: Understanding the Basics,” taking place March 15, 2017 from 12-2 pm EST.

February 08, 2017
Torben Voetmann to Discuss Halliburton II and Fraud-on-the-Market Theory at The Knowledge Group's Webinar

Brattle Principal Torben Voetmann will present during The Knowledge Group’s webinar, “Halliburton II and Fraud-on-the-Market Theory: New Legal Challenges and Strategies Impacting Class Certification,” taking place February 8, 2017 from 12:00-2:00pm EST.

September 06, 2016
Matthew Aharonian to Discuss Halliburton II and the Price Impact Rule at The Knowledge Group's Webinar

Brattle Senior Associate Matthew Aharonian will present during The Knowledge Group’s webinar, “Halliburton II and the Price Impact Rule: Impact on Securities Class Actions,” taking place September 6, 2016 from 12:00-2:00 pm EST.

August 30, 2016
Paper by Torben Voetmann Investigates Bid-Ask Spread in Danish Stock Market

Brattle Principal Torben Voetmann recently authored a paper investigating the cost components of the bid-ask spread and the changes in the spread around earnings announcements on the small Danish stock market in the 1990s.

June 01, 2016
Torben Voetmann Authors Paper on Private Class Action Litigation Risk of Chinese Firms Listed in the U.S.

Brattle Principal Torben Voetmann has co-authored a paper published in the Quarterly Journal of Finance that analyzes the litigation risk of Chinese firms listed in the U.S.

May 27, 2016
Adoria Lim to Present and Torben Voetmann to Moderate at ABA's Western Regional CLE Program on Class Actions and Mass Torts

Brattle's Adoria Lim will present and Torben Voetmann will moderate at the American Bar Association’s (ABA) 3rd Annual Western Regional CLE Program on Class Actions and Mass Torts, which will take place at the Bar Association of San Francisco on May 27, 2016, at 2:00 pm – 3:00 pm PST.

April 20, 2016
Matthew Aharonian to Present Webinar on Halliburton II and the Price Impact Rule Decision

Brattle Senior Associate Matthew Aharonian will participate in The Knowledge Group’s webinar, “Halliburton II and the Price Impact Rule Decision: Then & Now,” taking place April 20, 2016 from 12:00 pm - 2:00 pm EST.

April 14, 2016
Torben Voetmann to Present on Class Actions at ABA Section of Litigation Annual Conference

Brattle Principal Torben Voetmann will present at the American Bar Association’s (ABA) 2016 Section of Litigation Annual Conference, taking place April 13-15, 2016 in Chicago, IL.

December 23, 2015
Brattle Economists Author Law360 Article Examining Methodology Findings in Halliburton Class Decision

Brattle Principals Torben Voetmann and Paul Hinton and Senior Associate Matthew Aharonian recently co-authored an article published on Law360, “Battle of the Experts: The Focus on Event Studies in Class Certification.”

November 10, 2015
Pavitra Kumar and Torben Voetmann Author Article on Event Studies in Securities Litigation

Brattle senior associate Pavitra Kumar and Brattle principal Torben Voetmann recently published an article in Event Study Tools, which illustrates the use of traditional and intraday event studies in securities litigation.

March 26, 2015
Paul Hinton and Pavitra Kumar Present at High-Frequency Trading Litigation Webinar

Brattle principal Paul Hinton and senior associate Pavitra Kumar recently presented in the webinar, “High-Frequency Trading Litigation in 2015,” hosted by The Knowledge Group on March 26, 2015 from 3:00 pm – 5:00 pm EST.

July 10, 2014
Michael Goldstein Quoted in Wall Street Journal Article on High-Frequency Trading

Brattle academic advisor Michael Goldstein, a Professor of Finance and Chair of the Finance Division at Babson College, was quoted in a recent Wall Street Journal article, “The Markets Unplugged."

June 27, 2014
Brattle Economists Co-Author Article Highlighting Complex Issues for Experts in High-Frequency Trading Litigation

Principal Torben Voetmann and senior associate Pavitra Kumar, along with Zachary Ziliak of Ziliak Law, have authored an article that discusses the complexities and challenges for experts arising from increased litigation surrounding high-frequency trading.