Disclosure

Cornerstone Research was retained by a law firm representing a computer maker in a decade-long securities class-action suit. Shareholders alleged that the company had overstated its earnings shortly before large losses led to bankruptcy. Cornerstone Research addressed the issue of damages by performing a detailed event study and reviewing the personal computer market. We concluded that the company's stock price decline was not in any way attributable to the accounting-related allegations. We also found fundamental flaws in the analysis and findings of the plaintiffs' damages expert, which were explored extensively during discovery. The jury ruled in favor of our client on liability.

Accounting Restatement / Market Efficiency

After a computer software company announced that it was restating its 1997, 1998, and 1999 financial results, the company and its auditor were named in a class-action lawsuit alleging that the announcement had caused a one-day $11 billion drop in market capitalization. Counsel for the auditor retained Cornerstone Research. Our accounting expert conducted an event study and determined that changes in market capitalization were largely unrelated to the reported financials. Our finance expert performed an assessment of the efficiency of the market for the company's stock and found that the stock was traded at a value that diverged significantly from its fundamental value over a long time period. The case settled shortly after defense counsel moved to decertify the class based on these findings.

Bond Default

In the largest municipal bond default case ever litigated, Cornerstone Research staff supported and coordinated the work of five experts on a variety of liability and damages issues. Working closely with the experts, we constructed a model to predict the creditworthiness of each of the municipalities involved and proved that the municipalities would likely have defaulted on their debt obligations. We also developed damage models and analyzed proof of claim data to assist our client in evaluating the damage models of opposing experts. The case settled during trial.

Valuation

In a breach of contract case involving a national restaurant chain, Cornerstone Research assisted counsel for plaintiffs, two potential franchisees, in valuing damages based on their claimed contractual share of the franchise. Cornerstone Research assessed the value of a regional restaurant franchise by performing discounted cash flow and comparable transaction analyses. We also analyzed defense experts' damages calculations, showing them to contain fundamental errors that substantially understated damages. The case went to arbitration, where our clients were awarded substantial damages.

Trading Behavior / Class Certification

In a putative class action involving an online brokerage company, plaintiffs alleged that they had experienced delays in using an online brokerage system. Plaintiffs claimed that their experts could determine on a class-wide basis what damages these alleged delays had caused. Cornerstone Research analyzed the claim and concluded that it would be impossible to determine on a class-wide basis whether plaintiffs had suffered damages or to determine damages without having information on each individual's trading intentions at the time of delay. The court found that individual issues predominated and denied certification of the proposed class. This case was followed by two other claims, and class certification was denied in each case based on our analysis.

Derivatives

In this mutual fund litigation, defense counsel for a fund's auditor retained Cornerstone Research. Plaintiffs claimed that the risk of the fund's investments, including mortgage-backed derivative securities, was not disclosed and that allegedly illiquid securities held by the fund were misvalued. Working with the expert, we analyzed the sales prices of the allegedly illiquid securities and demonstrated that the securities in the fund's portfolio were properly valued. The expert also found that the fund's disclosures informed investors of the risk of its investments and were consistent with the disclosure practices of other funds during the relevant time period. The case settled shortly before trial.