Fourth Circuit panel finds that Comcast standards were not met in In re The Boeing Company Securities Litigation.
Retained by Sullivan & Cromwell
The U.S. Court of Appeals for the Fourth Circuit reversed the district court’s order certifying a class in this matter. The unanimous panel held that the plaintiffs did not provide a damages methodology consistent with their burden under Comcast.
Cornerstone Research was retained to support economist René Stulz of The Ohio State University. Professor Stulz assessed the reports submitted by the plaintiffs’ expert.
The court’s order cites Professor Stulz’s expert report and orders that “the district court’s class-certification order is reversed, and the case is remanded for further proceedings consistent with this opinion.”
Comcast Requirements
The court explained that plaintiffs must satisfy five requirements to meet the Comcast standard:
- A methodology, not a legal description. Plaintiffs must offer a damages methodology explaining how damages will be measured in the specific case — not a generic legal description or list of possibilities.
- Class-wide measurability. The methodology must show damages can be measured class-wide, so the court can assess whether common issues predominate.
- Consistency with liability. The damages methodology must align with the plaintiffs’ liability theory.
- Just and reasonable calculations. The methodology must support a fair inference of damages — calculations need not be exact, but cannot be arbitrary.
- Evidentiary proof. Plaintiffs must prove the methodology satisfies these requirements, even where the analysis overlaps with the merits.
Plaintiffs Failed to Meet Requirements
The court found that “the plaintiffs did not provide a damages methodology consistent with Comcast’s commands.” This was due to several issues with the plaintiffs’ showing:
- A specific theory of liability is necessary. Plaintiffs “had to,” but did not, “identify their theory of liability by the class certification stage.”
- The “out-of-pocket” label was not sufficient. Plaintiffs’ reference to “the ‘out-of-pocket’ methodology” did not provide enough information to explain “how to determine the artificial inflation embedded in Boeing’s stock price on any day of the class period. Comcast demands that missing step.”
- Cataloging possible approaches was not sufficient. “[The plaintiffs’ expert] never identified the actual approach that he would use or how he specifically planned to calculate damages based on that approach. A list of possible methodologies, described in general terms, isn’t a methodology…”
- Merits report also not sufficient. The court found that “even [the plaintiffs’ expert’s] merits report isn’t enough for the plaintiffs to achieve class certification” because the methodology employed in that report was “inconsistent with the plaintiffs’ theory of liability.”
The court’s order cites Professor Stulz’s expert report and orders that “the district court’s class-certification order is reversed, and the case is remanded for further proceedings consistent with this opinion.”