United States District Court, S.D. New York
IN RE BEAR STEARNS COMPANIES, INC. SECURITIES, DERIVATIVE, AND ERISA LITIGATION
BEAR STEARNS COMPANIES INC., JAMES CAYNE, WARREN SPECTOR AND DELOITTE & TOUCHE LLP, Defendants. This Document Relates To: Securities Action, 08 Civ. 2793 BRUCE S. SHERMAN, Plaintiff,
Counsel for Plaintiff BOIES, SCHILLER & FLEXNER LLP
Richard B. Drubel, Esq.
Counsel for Defendants PAUL, WEISS, RIFKIND, WHARTON &
GARRISON LLP Jessica S. Carey, Esq.
W. SWEET U.S.D.J.
The Bear Stearns Companies Inc. ("Bear Stearns"),
James E. Cayne, and Warren J. Spector (together,
"Defendants") have moved pursuant to Federal Rules
of Civil Procedure 16, 26, and 37, to strike the revised
expert report (the "Revised Report") of Dr. John D.
Finnerty ("Finnerty") served by Plaintiff Bruce S.
Sherman ("Plaintiff") on December 21, 2016. Based
upon the conclusions set forth above, the Revised Report is
procedural history and factual background of the underlying
multidistrict litigation has been detailed in various
opinions by this Court. See, e.g., In re Bear Stearns
Companies, Inc. Sec, Derivative, & ERISA Litig., No.
08 CIV. 2793, 2014 WL 4443458, at *1 (S.D.N.Y. Sept. 9, 2014)
(hereinafter, "In re Bear Stearns"); In re Bear
Stearns, 909 F.Supp.2d 259, 263 (S.D.N.Y. 2012); In
re Bear Stearns, 763 F.Supp.2d 423 (S.D.N.Y. 2011),
on reconsideration, No. 07 CIV. 10453, 2011 WL
4072027 (S.D.N.Y. Sept. 13, 2011), and on
reconsideration, No. 07 CIV. 10453, 2011 WL 4357166
(S.D.N.Y. Sept. 13, 2011).
Plaintiff filed his complaint on September 24, 2009 alleging
securities violations by the Defendants. This and similar
actions were determined to be part of a multidistrict
litigation, 08 Md. 1963 (RWS).
complaint alleges that he purchased a large block of Bear
Stearns common shares between June 25, 2007 and March 13,
2008 at prices ranging from $53.77 to $140.76 per share. He
sold 229, 150 shares of Bear Stearns common stock on March
19, 2008 at the price of $5.23 per share. Sherman alleges
Defendants misrepresented Bear Stearns's financial
condition, including the value of Bear Stearns's mortgage
assets, the nature of its risk management, and the adequacy
of Bear Stearns's capital and liquidity, leading Sherman
to purchase and retain Bear Stearns common stock, ultimately
suffering massive losses.
proffered Finnerty as an expert in loss causation and the
damages Sherman suffered as a result of the conduct alleged.
Finnerty concluded that, on March 14 and March 17, 2008, Bear
Stearns's stock price fell due to corrective disclosures
that revealed alleged fraud at Bear Stearns, and from
December 20, 2007 through March 13, 2008 (the "Leakage
Period"), Bear Stearns's stock price fell because
news of the alleged fraud "leaked" into the market.
According to Finnerty, as a result of the revelation of the
alleged fraud via both corrective disclosures and leakage,
Plaintiff's damages were over $13 million.
April 16, 2015, Defendants served a rebuttal expert report
from Professor Allen Ferrell ("Ferrell"), which
responded to Finnerty's report, cataloguing a number of
significant flaws in Finnerty's loss causation
methodology and calculation of Plaintiff's damages.
Defendants deposed Finnerty on May 14, 2015, and expert
discovery closed on June 22, 2015.
August 17, 2015, Defendants moved to exclude Finnerty's
report and testimony as unreliable under Federal Rule of
Evidence ("FRE") 702.
order of July 5, 2016 (the "July 5 Order"), the
report and testimony of Dr. John D. Finnerty was excluded.
The July 5 Order determined that Finnerty's report and
testimony were inadmissible under FRE 702, because
Finnerty's leakage methodology for estimating loss
causation and damages had not been generally accepted by
courts or the scientific community, or subjected to peer
review, and because Finnerty's methodology failed
adequately to account for the impact of non-fraud related
information and effects on Bear Stearns's stock price.
Plaintiff moved to clarify whether the ruling applied to
"only those portions of Finnerty's report addressing
leakage (as distinct from corrective disclosures)." By
order of December 6, 2016 (the "December 6 Order"),
this Court stated that the July 5 Order "excluded the
entirety of Finnerty's report as it was written, merging
the two damages calculations." On December 21, 2016,
Plaintiff sent an email to Defendants attaching the Revised
Report. No leave to submit a Revised Report was sought by the
case was part of a multidistrict litigation that was settled
by opinion granting the Lead Plaintiff s motion for a
distribution order approving administrative determinations
and directing distribution of reserved settlement funds dated
July 8, 2014. See Docket of Case No. 08 Md. 1963, ECF No.
448. Plaintiff in the instant action opted out of the