Section 11 negative causation economist
Expert class library · Securities · Defense side
Carries the defendant's burden under Section 11(e) of the Securities Act, and the parallel Section 12 defense, of proving that some or all of a price decline came from something other than the misstatement in the offering documents. Uses event studies and benchmark comparisons to separate market, industry and company news from the disclosure, and applies the statutory damages formula, which caps recovery at the offering price.
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What this expert is retained to answer
- Did the security fall when the truth came out, and was any movement statistically significant once market and industry moves are removed?
- What portion of the decline from the offering price to the date of suit or sale can be tied to factors other than the misstatement?
- Did the security trade above the offering price on the relevant dates, so that the statutory cap limits or eliminates damages?
- Is a finding of no significant price reaction enough to carry the defendant's burden, or must the expert apportion the loss?
- Does the comparison group actually resemble the issuer and control for the variables that move its price?
- If the misconduct helped cause the market-wide collapse, can that collapse still count as a factor other than the misstatement?
Methods
- Event study of disclosure dates
- Market and industry index comparison
- Disaggregation of non-misstatement price declines
- Statutory damages calculation under Section 11(e)
- Offering-price cap and value-at-suit analysis
- Loan or asset performance benchmarking
How the testimony is attacked
- The burden is the defendant's. Plaintiffs stress that the defendant must prove negative causation, so uncertainty works against the defense. In FHFA v. Nomura the court held that an inability to disentangle the causes of loss, which helps defendants when plaintiffs bear the burden, defeats the defense when the burden is theirs.
- Comparison sets that are not clean. Plaintiffs attack studies that claim to compare affected and unaffected assets without confirming the control group is unaffected. In FHFA v. Nomura three defense benchmarking analyses were excluded under Daubert for failing to compare defective with non-defective loans, and the substitute study was rejected at trial for the same kind of flaw.
- All-or-nothing conclusions. Plaintiffs fault an expert who attributes the whole loss to market forces and makes no attempt to apportion. The FHFA v. Nomura court noted that the defense experts' evidence presented an all-or-nothing proposition and never tried to separate a portion of the losses.
- Uncontrolled peer comparisons. Either side's comparison with an index or a set of contemporaneous offerings can be discounted if it ignores the variables that drive a single stock. In Akerman v. Oryx Communications the Second Circuit found both sides' statistical comparisons lacked credibility on that ground, yet affirmed the defense win because the misstatement was minor and the price did not fall when it was disclosed.
- Event study ill suited to the offering. Plaintiffs argue that an event study is unreliable for a newly public stock and depends on debatable assumptions about when news reached the market. In In re Adams Golf those arguments, backed by a competing expert, were enough to deny the defendants summary judgment on negative causation.
- Market collapse intertwined with the misconduct. Plaintiffs argue that a market-wide decline is not an independent cause if the defendants' own conduct helped produce it. The FHFA v. Nomura court held that an event cannot be intervening when the misrepresentations and the facts they concealed were part of it.
What the public record shows
A deliberately narrow CourtListener search, "negative causation" AND ("Section 11" OR "11(e)") AND ("event study" OR Daubert OR "Rule 702"), returned 4 opinions filed since 2015, as of October 3, 2026; broader searches return more. Three that show how courts handle this class of testimony:
| Outcome | Case | Court | Why |
|---|---|---|---|
| Excluded | Federal Housing Finance Agency v. Nomura Holding America, Inc.104 F. Supp. 3d 441 | S.D.N.Y. 2015 | Deciding the Section 12 loss causation defense, modeled on Section 11(e), after the Section 11 claim was withdrawn, the court recounted its earlier Daubert exclusion of three defense benchmarking analyses and after a bench trial rejected the substitute loan-performance study for three independent failures; the Second Circuit affirmed. |
| Limited | Akerman v. Oryx Communications, Inc.810 F.2d 336 | 2d Cir. 1987 | Affirming summary judgment for the defendants on Section 11(e) negative causation, the court found both sides' statistical comparisons, including the defense comparison with a hundred contemporaneous offerings, too uncontrolled to be credible and rested instead on the minor misstatement and the lack of any adverse price reaction to its disclosure. |
| Admitted | In re Adams Golf, Inc. Securities Litigation618 F. Supp. 2d 343 | D. Del. 2009 | Denying summary judgment on Section 11 negative causation, the court held that the defense expert's finding of no statistically significant reaction to two disclosures did not carry the defendants' burden as a matter of law, because the plaintiffs' expert disputed the method and the disclosure dates, leaving the conflicting expert opinions for a jury. |
Each case links to the free opinion text on CourtListener.
Under amended Rule 702
Since December 1, 2023, Rule 702 says expressly that the party offering an expert must show the court it is more likely than not that the testimony meets each requirement: that it rests on sufficient facts or data, uses reliable methods, and reflects a reliable application of those methods to the case. Questions about the basis of an opinion are no longer automatically matters of weight for the jury. For how the circuits have applied the amendment, see the Rule 702 tracker, which follows each court of appeals; for what that means for preparing or attacking this class of expert, see the guide on amended Rule 702.
Related classes
- Defense event-study econometrician
- Plaintiff event-study and loss-causation econometrician
- Market-efficiency expert
Guides
- Daubert Challenges to Event Studies in Securities Cases
- Price Impact at Class Certification After Goldman
- Amended Rule 702 After Nearly Three Years: What Courts Exclude
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Last reviewed October 3, 2026. How this page is built: rulings are found by searching court opinions on CourtListener, and each one is read in the opinion before it is summarised here; outcomes are labelled by what the court did with the expert's testimony. No individual expert is named. This page summarises public decisions for orientation and is not legal advice; read the opinion before relying on any ruling.