Summary Judgment Victory in Barclays Securities Litigation


A judge dismissed this U.S. class action brought against Barclays Plc by investors who purchased stock months before the 2008 global financial crisis.

Note: In November 2018, the Second U.S. Circuit Court of Appeals affirmed the U.S. district court’s decision and denied plaintiffs’ Daubert motion to exclude Dr. Allan Kleidon’s testimony. Barclays relied on Dr. Kleidon’s analysis in support of its negative loss causation defense.

Citing Dr. Kleidon’s testimony numerous times, the judges concluded that “Dr. Kleidon’s report and event study are based on ‘reliable principles and methods’ and would ‘help the trier of fact to understand the evidence or to determine a fact in issue.’ We therefore rule that the District Court did not err by admitting Dr. Kleidon’s report and relying on it, in part, in its award of summary judgment.”

Retained by Sullivan & Cromwell

A U.S. District judge granted the defendants’ motion for summary judgment in In re Barclays Plc Securities Litigation, a Section 11 case involving a $2.5 billion offering of preferred American Depository Shares (ADS) in April 2008. Plaintiffs alleged that, in the offering documents, Barclays failed to disclose its exposure to various risky credit market assets and misrepresented its ability to manage the accompanying credit risk. ‎The shares lost 80 percent of their value during the year following the offering and plaintiffs claimed that all of those price declines were recoverable as damages caused by the alleged misrepresentations.

Barclays’ counsel retained Cornerstone Research and Dr. Allan Kleidon, a senior vice president of the firm, along with five other experts: Professor John Coates of Harvard Law School; John Dolan of Second Order Strategies Inc.; Professor Gary Lawrence of The Center for Advanced Due Diligence Studies; Patricia O’Malley, a founding member of the International Accounting Standards Board (IASB); and Professor René Stulz of the Ohio State University.

Judge Crotty fully accepted Dr. Kleidon’s findings on negative loss causation based on event study analysis in this Section 11 case.

Dr. Kleidon conducted an event study to determine whether any declines in the price of the ADS were attributable to the misrepresentations alleged by the plaintiffs. His analysis supported a finding of negative loss causation—that is, no correction of any of the alleged misrepresentations was associated with a stock price decline, and that all statistically significant stock price declines occurred on days when no corrective information was released.

In his opinion, Judge Paul Crotty of the Southern District of New York explicitly rejected all of the plaintiffs’ criticisms of Dr. Kleidon’s opinions, stating that their arguments “are speculative and insufficient to exclude Dr. Kleidon’s testimony.” Further, in granting Barclays’ motion for summary judgment, Judge Crotty found “the results of Dr. Kleidon’s event study persuasive,” concluding that, “the alleged misrepresentations in the Series 5 Offering did not cause the Series 5 ADS price declines.”

Cornerstone Research also worked with five other experts who opined on various aspects of the plaintiffs’ allegations. Professor Stulz examined the economics of preference shares and assessed aspects of Barclays’ risk management policies and procedures. His analysis showed that these were consistent with industry standards and best practices.

Ms. O’Malley evaluated alleged material misstatements and omissions in Barclays’ financial statements regarding asset impairments and related losses. Her analysis demonstrated that Barclays’ disclosures complied with relevant accounting standards and SEC regulations.

Mr. Dolan concluded that Barclays’ valuations of its credit market assets were reasonable based on what was known at the time they were conducted. Professor Lawrence examined issues related to due diligence and Professor Coates opined on SEC disclosure issues.

For additional information on this case, please contact Ravi Sinha.

Case Experts

John C. Coates

John F. Cogan Jr. Professor of Law and Economics,
Research Director, Center on the Legal Profession,
Harvard Law School;
Former General Counsel and Acting Director,
Division of Corporation Finance,
Securities and Exchange Commission;
Senior Advisor, Cornerstone Research

John H. Dolan

Independent Consultant,
Second Order Strategies Inc.

Allan W. Kleidon

Senior Advisor

Gary M. Lawrence

Executive Director, Center for Advanced Due Diligence Studies;
Adjunct Faculty, Dedman School of Law,
Southern Methodist University;
Executive Chairman and Chief Investment Officer, Pacific Financial Group

René M. Stulz

Everett D. Reese Chair of Banking and Monetary Economics,
Director, Dice Center for Research in Financial Economics,
Fisher College of Business,
The Ohio State University