IBEW Local 90 Pension Fund et al. v. Deutsche Bank AG et al.


The judge in this multibillion dollar securities class action granted our client’s Daubert motion and denied the opposing side’s motion for class certification.

Retained by Cahill Gordon & Reindel

Defense counsel retained Cornerstone Research, Professor Joseph Grundfest of the Stanford Law School, and Professor Paul Gompers of the Harvard Business School to respond to the report of the plaintiffs’ expert in this Rule 10b-5 securities class action. U.S. District Judge Katherine Forrest of the Southern District of New York granted the defendants’ Daubert motion and denied the plaintiffs’ motion for class certification. The ruling followed an evidentiary hearing at which experts from both sides testified and were cross-examined.

The judge concluded that the plaintiffs did not meet their burden to demonstrate market efficiency and credited Professors Grundfest and Gompers for being consistent, articulate, and credible.

The plaintiffs alleged that Deutsche Bank fraudulently profited from originating and acquiring defective mortgages that were packaged into risky residential mortgage-backed securities (RMBS) and collateralized debt obligations (CDO). The price of Deutsche Bank’s Global Registered Shares (GRS), which are listed on Deutsche Börse and the New York Stock Exchange, dropped more than 80 percent from January 2007 through January 2009, the end of the putative class period.

The plaintiffs’ expert filed multiple reports purportedly demonstrating that Deutsche Bank’s GRS traded in an efficient market in the United States. Professor Grundfest noted the opposing expert’s failure to examine the German equities market, the leading venue for price discovery of Deutsche Bank’s GRS.

Professor Gompers testified that the plaintiffs’ expert failed to account for academic research on limits to arbitrage, as well as how market efficiency could be affected by the financial crisis and bans on short selling. He also demonstrated that the opposing expert’s so-called “cause-and-effect” Cammer factor analysis suffered from serious conceptual and methodological flaws.

Judge Forrest concluded that the plaintiffs did not meet their burden to demonstrate market efficiency and credited the defendants’ experts for being consistent, articulate, and credible. She repeatedly cited the analyses and testimony of Professors Grundfest and Gompers:

In any area in which Grundfest and [the plaintiffs’ expert] conflicted, the Court found Grundfest’s analysis to be the more reasoned and persuasive.

Case Experts

Paul A. Gompers

Eugene Holman Professor of Business Administration,
Harvard Business School,
Harvard University

Joseph A. Grundfest

Former Commissioner, Securities and Exchange Commission;
W. A. Franke Professor of Law and Business,
Stanford Law School,
Senior Faculty, Rock Center for Corporate Governance,
Stanford University