Bricklayers & Trowel Trades International Pension Fund v. Credit Suisse Securities (USA) LLC
2014 U.S. App. LEXIS 8994
| 1st Cir. | 2014Background
- CSFB analysts Kiggen and Martin covered AOL post-merger; CSFB repeatedly issued buy recommendations with price targets that fell from $80 to $75 to $45 as AOL stock declined; shareholders allege misrepresentation and omissions to preserve future banking business, including a bond deal for AOL.
- Shareholders allege CSFB withheld nonpublic AOL layoffs information and information about an AOL accounting investigation; relevant disclosures occurred via The Washington Post and The Wall Street Journal, and AOL later acknowledged SEC inquiry.
- Plaintiffs brought a class action under Section 10(b) and Rule 10b-5, with Section 20(a) claims for CSFB executives.
- The district court precluded expert Dr. Hakala’s loss-causation testimony under Daubert, and granted summary judgment to CSFB without Hakala’s testimony.
- On appeal, the First Circuit affirms the district court’s Daubert ruling and the entry of summary judgment, holding Hakala’s event-study methodology unreliable and lacking loss causation evidence without it.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of Hakala’s event-study testimony | Hakala’s method reliably links misstatements to price moves. | Hakala’s methods fail reliability standards under Daubert. | No abuse of discretion; Hakala excluded. |
| Selection of event dates validity | Dates reflect causal relevance to AOL misstatements. | Dates show cherry-picking and disconnect from allegations. | Court upheld exclusion as unreliable. |
| Use of dummy variables to define baseline | Dummies correctly isolate event effects. | Excessive dummying distorts baseline. | Court upheld concerns; admitted issues not reversed. |
| Control for confounding factors | Hakla account for concurrent information. | Inadequate control for confounds. | Court found lack of reliable confounding control. |
| Loss causation without Hakala’s testimony | Abnormal moves on key dates show causation. | Without Hakala, no triable loss-causation issue. | Summary judgment affirmed due to missing loss causation evidence. |
Key Cases Cited
- Dura Pharm., Inc. v. Broudo, 544 U.S. 336 (U.S. 2005) (requires proof of loss causation tied to the disclosure)
- Basic Inc. v. Levinson, 485 U.S. 224 (U.S. 1988) (fraud-on-the-market presumption of reliance in efficient markets)
- Omnicon Grp., Inc. Sec. Litig., 597 F.3d 501 (2d Cir. 2010) (loss causation and event-study methodology)
- Milward v. Acuity Specialty Prods. Grp., Inc., 639 F.3d 11 (1st Cir. 2011) (Daubert gatekeeping and expert admissibility)
- Ruiz-Troche v. Pepsi Cola of P.R. Bottling Co., 161 F.3d 77 (1st Cir. 1998) (reliance and relevance standards for experts)
- Bazemore v. Friday, 478 U.S. 385 (U.S. 1986) (normal impact of excluding variables on probativeness vs admissibility)