Jury rejects $90 million disgorgement claim in a first-of-its-kind trial.
Retained by the joint defense group
Allegations
The plaintiff brought a Section 16(b) claim against eight investors that participated in a private investment in public equity (PIPE) transaction in 2020. Section 16(b), commonly known as the “short-swing profit rule,” requires 10% beneficial owners of a company to disgorge profits made from buying and selling company stock within a six-month period. While none of the defendants were 10% holders on their own, the plaintiff claimed the investors formed a “group” that triggered section 16(b) liability and sought disgorgement of alleged short-swing profits.
Expert Report and Trial Testimony
Defense counsel retained David Marcus of Cornerstone Research to analyze the trading behavior of the joint defendants, whom plaintiffs alleged had formed a “group.” Dr. Marcus demonstrated that the defendants utilized distinct trading strategies during the relevant period. He also evaluated the plaintiff’s short-swing profit calculations, identifying the financial impact of excluding certain transactions.
At trial, Dr. Marcus testified to the defendants’ distinct trading strategies, providing specific examples of how their trading behavior differed.
Complete Defense Victory
After a two week trial, the jury returned a complete verdict for the defense, finding that the defendants did not enter into a Section 16(b) group.
Boston
