Last week, after a five week trial before the Honorable Judge Ronald A. Guzman, a federal court jury in Chicago delivered a verdict against Household International and three officer defendants and in favor of Compass Lexecon’s client, a class of investors. The jury determined that all four defendants violated federal securities laws and that as a result, Household’s stock price was inflated by $23.94 a share for much of an 18 month period. Daniel R. Fischel, Compass Lexecon’s Chairman and President, provided expert testimony on materiality, causation and the quantification of inflation on behalf of the plaintiff class in the case. The case now moves to a damages phase which could result in one of the largest, if not the largest, damage awards in a jury trial commercial case in American history. This result is particularly significant because there have been virtually no securities fraud cases to go to verdict in recent years.
After an unsuccessful Daubert challenge, Professor Fischel at trial quantified inflation using two different methods – the first focusing on stock price reactions to specific disclosures and the second focusing on analysis of stock price movements over a longer period based on a leakage model. Professor Fischel also responded to various criticisms and claims by defendants’ experts as the only rebuttal witness. The jury adopted the per share inflation calculations taken directly from Professor Fischel’s leakage model in its verdict. Mike Keable, Jessica Mandel, Jerry Lumer, Cliff Ang, Peter Clayburgh and many others from our Chicago office worked on the case and provided invaluable assistance. We worked with Mike Dowd, Spence Burkholz, Dan Drosman, Azra Mehdi, and Luke Brooks from Coughlin Stoia Geller Rudman & Robbins LLP who successfully represented the plaintiff class.