Compass Lexecon’s Clients Prevail In Case Alleging $6 Billion Short Selling/Manipulation Scheme

September 12, 2012

Fairfax Financial Holdings Limited, et al. v. S.A.C. Capital Management, LLC, et al. This case was recently litigated in New Jersey state court and centered on plaintiffs' assertion that Compass Lexecon’s clients and other "Enterprise members" (i.e. hedge funds and financial analysts) engaged in a "massive, illegal, and continuing scheme" designed to depress Fairfax's stock price, in order to generate a massive profit for the Enterprise via the practice of "short-selling."  Plaintiffs brought a variety of common law claims including claims of tortious interference, trade libel, and conspiracy and sought more than $6 billion of damages for, among other things: (1) increased costs of raising capital, (2) the purportedly forced sale of assets with damages calculated as the difference between the selling price and the latter higher repurchase price, (3) lost profits from lost insurance underwriting, (4) increased cost for officers and directors insurance, and (5) continued reputational damages.  In his written report and deposition, Compass Lexecon’s President, Professor Daniel Fischel extensively criticized plaintiffs’ experts, labeling their analyses “junk science.”  Prior to the trial, the Court granted motions to dismiss filed by a number of defendants, but Compass Lexecon’s clients Morgan Keegan and Exis proceeded to trial.  Subsequently, on the first day of trial, the Court ruled that plaintiffs had presented no admissible proof of damages because, among other reasons, their experts’ analyses were “totally unreliable.”  As a result, the Plaintiffs had no admissible evidence of damages, and the entire case was dismissed.  We worked with Roger Kaplan of Greenberg Traurig, LLP and Diane Sumoski of Carrington, Coleman, Sloman & Blumenthal, L.L.P. who successfully represented Morgan Keegan.  We also worked with Steven Reisberg and Tariq Mundiya of Wilkie Farr & Gallagher LLP and Bill Carmody and Jacob Buchdahl of Susman Godfrey LLP who represented, respectively, SAC Capital and Third Point LLC who were dismissed from the case prior to trial.  Professor Fischel was assisted by David Ross, Anne Marie Yale, Jonathan Polonsky, Elizabeth Wall, and Jessica Mandel of Compass Lexecon’s Chicago office.

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