Plaintiffs sued defendant on a securities fraud claim. Plaintiffs hired a Finance Expert Witness to provide testimony. Defendants filed a motion to exclude this testimony, which was denied by the court.
Facts: This case (Mauss v. Nuvasive, Inc. et al – United States District Court – Southern District of California – February 1st, 2018) involves a claim of securities fraud. The plaintiffs allege that the defendants made false and/or misleading statements. They also claim that the defendants failed to disclose material adverse facts about the business. They allege that the defendants did not disclose that NuVasive improperly submitted false claims to Medicare & Medicaid, made illegal kickbacks to physicians, and engaged in off-label promotion of their products and services. The plaintiffs hired Zachary Nye, Ph.D (Finance Expert Witness) to provide testimony in this case. The defendants have filed a motion to exclude the testimony of Dr. Nye.
Discussion: The defendants allege that Dr. Nye’s loss causation and damages opinions are not reliable, lack foundation, contradict Ninth Circuit Law because he does not rely on actual evidence that the market learned that fraudulent conduct actually occurred. The court states that the defendants are using the motion to exclude testimony as another method to argue for the revelation of fraud standard.
The plaintiffs argue that event studies assist the trier of fact by assessing whether the release of certain information caused a stock price to fall. The court rules that an event study is often used to provide an evidentiary basis to determine the existence of loss causation and damages. In Dr. Nye’s event study, he not only looked at the effect that the disclosures had on the NuVasice stock price, but measured the relationship between NuVasive’s stock returns and changes in marketwide and industrywide factors.
The court thus rules that the revelation of fraud standard for which the defendant’s argue is too limiting and not required by the Ninth Circuit. Thus, Dr. Nye’s purported failure to determine that the defendants’ alleged fraud was revealed to the market does not make his testimony inadmissible.
Conclusion: The motion to exclude the expert witness testimony of Zachary Nye, Ph.D is denied.