02 Aug 2021 Cases

Compass Lexecon's Clients Prevail in Rare Holder’s Claim Securities Fraud Jury Trial

2 minute read


Compass Lexecon’s President Professor Daniel R. Fischel Testifies Successfully for Defendants

The Plaintiff in this unusual California state court holder’s action, Ahmed Hussein, claimed he planned to sell his large stake in Quality Systems Inc. (now known as NextGen Healthcare) after he became disillusioned with the company. Mr. Hussein further claimed that he was convinced not to do so by a series of false statements that he relied on that covered up a massive fraud which was later revealed. Hussein and his expert claimed that he suffered over $400 million in damages as a result. After a two-week jury trial in Orange County, California, a jury wholly rejected Plaintiff’s claims. The trial was closely watched as the first holder’s action to go to trial since the 1930s.

Compass Lexecon’s President Professor Daniel R. Fischel was retained by Defendants to provide expert testimony concerning whether the economic evidence supported Plaintiff’s claims and to respond to Plaintiff’s expert’s opinion that Mr. Hussein suffered hundreds of millions of dollars in damages.

At trial, Professor Fischel testified that Mr. Hussein’s pattern of waging proxy contests, continual complaints about the Board and management, and his overall behavior were inconsistent with a plan to sell shares in light of the economics of shareholder voting and the economic literature on the choice between exit and voice as applied to corporate shareholders. Professor Fischel also testified about the fundamental flaws underlying Mr. Hussein’s expert’s opinions about damages and opined that the economic evidence did not support an award of any damages. The jury agreed and rendered a total defense verdict.

Compass Lexecon worked closely with counsel from Latham & Watkins, LLP including Peter W. Wald (co-lead counsel with Michele D. Johnson), Nicholas J. Siciliano, and Whitney B. Weber who successfully represented the Defendants. Professor Fischel was assisted by a team in Compass Lexecon’s Chicago office that included Jessica Mandel, Ran Wei, Nabila Lotayef, David Ross, Anne Marie Yale and Samuel Hollander.

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