Ohio Public Employees Retirement System (OPERS) v. Federal Home Loan Mortgage Corporation et al.

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A USDC judge denied plaintiff’s motion for class certification on market efficiency, price impact, and Comcast grounds and excluded opposing expert’s testimony.

Retained by Morgan, Lewis & Bockius

The plaintiff, OPERS, claimed that Freddie Mac concealed certain risks in its mortgage portfolio and that when these risks materialized, its stock price dropped. Counsel for Freddie Mac retained Cornerstone Research and Paul Gompers of Harvard Business School to respond to the opposing expert’s proposed model for measuring damages on a classwide basis and consistent with plaintiff’s theory of liability.

“When a class plaintiff presents a damages model that is vague, indefinite, and unspecific, or simply asserts that there are unspecified ‘tools’ available to measure damages, the model amounts to ‘no damages model at all,’ and the class cannot be certified.”

The plaintiff’s expert opined that the market for Freddie Mac’s stock was efficient and that “valuation tools, which would include event study analysis…and potentially other empirical analyses if necessary” could be used to measure damages on a classwide basis.

In his rebuttal report, Professor Gompers noted various ways in which the opposing expert had failed to identify a common methodology for calculating damages consistent with plaintiff’s theory of liability. In particular, Professor Gompers showed that the opposing expert did not identify any methodology to disentangle the portions of the decline that could be tied to the alleged concealed risks from risks that had already been disclosed, or adjust for shifts in market conditions that occurred during the proposed class period, which included the start of the financial crisis. Professor Gompers further opined that individual inquiry would be required to ensure that certain investors were not overcompensated for economic losses under the opposing expert’s proposed damages model.

The judge agreed. In her order denying class certification, the judge stated that when a plaintiff “presents a damages model that is vague, indefinite, and unspecific, or simply asserts that there are unspecified ‘tools’ available to measure damages, the model amounts to ‘no damages model at all,’ and the class cannot be certified.” She concluded, “OPERS fails to establish that damages can be measured on a classwide basis in a manner consistent with its theories of liability.” In addition, Freddie Mac’s motion to exclude the opposing expert’s testimony was granted.


For more information on this case, please contact David Marcus or Shaama Pandya.

Case Expert

Paul A. Gompers

Eugene Holman Professor of Business Administration,
Harvard Business School,
Harvard University;
Senior Advisor, Cornerstone Research