The Securities Litigation Expert Blog

The Art of Complex Securities Litigation

Posted by Jack Duval

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May 20, 2014 7:27:39 AM

“Therefore a victorious army first wins and then seeks battle; a defeated army first battles and then seeks victory.” – Sun Tzu from The Art of War[1]
This blog post begins a series on the effective use of experts in large and complex securities litigations.  The suggestions here are equally applicable for defendants, plaintiffs, or regulators.

In complex securities litigations, Sun Tsu’s quote is ever applicable – they are won or lost before they are fought. But how to win the battle first, before fighting?  When using an expert, here are some ways: 

  • Bring the expert in early;
  • Craft as thorough a Claim/Answer as possible;
  • Analyze the data early and bring them into the center of the litigation team, instead of keeping them on the periphery, with the expert;
  • Work up your mediation like it was a hearing;
  • Analyze the opposing experts reports and exhibits.

Bring the Expert in Early

This is the most important factor to winning the battle before it is fought.  By bringing in an expert early, they can help you draft a substantial Claim/Answer, calculate damages; draft detailed and specific discovery requests (and respond to discovery-related motion practice), analyze data, and help clarify important issues that will save your team many hours.

Craft as Thorough a Claim/Answer as Possible

A well crafted and thorough Claim/Answer can help set the tone of the litigation.  Skeletal Claims with few specifics are ripe for attack and do not focus the trier of fact. Likewise, cursory Answers that offer vague denials don’t advance the defense and encourage plaintiffs.

Analyze the Data Early and Bring it to the Center of the Litigation Team

Traditionally, the data get shipped off to the expert for analysis and what comes back are snapshots in PDF form. This is suboptimal. The data should go through an extract, transform, and load process that makes them useable by everyone on the litigation team, regardless of analytical talent.

If this is done, everyone from the lead attorney to the youngest associate can ask questions of the data and get meaningful answers. 

Work up Your Mediation Like it was a Hearing

A well-prepared and organized mediation sends a signal to the other side:  we are ready for the hearing.  The mediator will know it instantly and will communicate it to the other side. This fact alone alters the dynamics of the mediation.  If you are ready for the hearing a month early, then you are perceived as being serious about going to the hearing (and thus more willing to walk away from a bad settlement offer).

Furthermore, if the other side is not as prepared as you, you will have raised the stakes (and the costs) for them to prepare for a hearing.  This raises the likelihood of settlement.

Analyze the Opposing Experts Reports and Exhibits

An expert can help you understand the nuances of an opposing experts report and exhibits.  While most attorneys will ask for a review of computations, more important are the assumptions that underlie the analyses.  These assumptions, especially those that are hidden, can be profitably explored in cross-examination.

An expert who was helped work up the case from inception will have a much more subtle understanding of the case and will perform better on direct and cross because of it.  While it is incrementally more expensive to bring an expert in early, there is tremendous leverage created.

Indeed, by bringing in the expert early, a hearing may be avoided altogether, which would be the highest form of the art of war. As Sun Tzu wrote:[2]

"Therefore those who win every battle are not really skillful – those who render others’ armies helpless without fighting are the best of all."

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[1]                 Sun Tzu, The Art of War; trans. Thomas Cleary.  (Shambhala Publications, Inc., Boston; 1988); 91.

[2]                 Id. at 67.


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