United States District Court, D. New Jersey
BING LI, Individually and On Behalf of All others Similarly Situated, Plaintiffs,
AETERNA ZENTARIS, INC., et al. Defendants.
MEMORANDUM AND ORDER
G. SHERIDAN, U.S.D.J.
matter returns to the Court on Defendant Aeterna Zentaris,
Inc.'s motion to strike in part the declaration and
opinions of Plaintiffs' expert, Dr. Adam Werner. (ECF No.
113). Plaintiffs respond, contending that, at this stage, the
motion is premature. For the reasons discussed herein,
Defendants' motion is denied.
For purposes of this motion, the Court relies on the facts
discussed in its February 28, 2018 Opinion granting
Plaintiffs' motion for class certification. (ECF No.
144). The Court only adds that this case involves allegations
of securities fraud based on certain public disclosures made
by Aeterna beginning in August 30, 2011. In support of their
motion for class certification, Plaintiffs attached the
expert report of Dr. Adam Werner, who opines that, at all
relevant times, Aeterna was traded in an open and efficient
market. (ECF No. 104-4, "Werner Report" at
¶¶ 24-138). Although not asked to calculate
damages, Werner also offers a method for which he would
calculate damages suffered by the Class. Defendants now seek
to strike that portion of the report, since it fails to
consider alternative factors, which may have affected stock
price. (ECF No. 113).
the Federal Rules of Evidence, a trial judge acts as a
'gatekeeper' to ensure that 'any and all expert
testimony or evidence is not only relevant, but also
reliable.'" Pineda v. Ford Motor Co., 520
F.3d 237, 243 (3d Cir. 2008) (quoting Kannankeril v.
Terminix Int'l, Inc., 128 F.3d 802, 806 (3d Cir.
1997)). When faced with a proffer of expert testimony under
Federal Rule of Evidence 702, "the trial judge must
determine at the outset... whether the expert is proposing to
testify to (1) scientific knowledge that (2) will assist the
trier of fact to understand or determine a fact in
issue." Daubert v. Merrell-Dow Pharms., Inc.,
509 U.S. 579, 592 (1993). "Rule 702 has three major
requirements: (1) the proffered witness must be an expert,
i.e., must be qualified; (2) the expert must testify about
matters requiring scientific, technical or specialized
knowledge; and (3) the expert's testimony must assist the
trier of fact." Pineda, 520 F.3d at 244.
refers to the requirement that the witness possess
specialized expertise." Schneider v. Fried, 320
F.3d 396, 404 (3d Cir. 2003). Rule 702's qualification
requirements have been treated liberally and courts have held
that "a broad range of knowledge, skills, and training
qualify an expert as such." In re Paoli R.R. Yard
PCB Litig., 35 F.3d 717, 741 (3d Cir. 1994).
the proffered testimony must be reliable; that is, "the
expert's opinion must be based on the 'methods and
procedures of science' rather than on 'subjective
belief or unsupported speculation'; the expert must have
'good grounds' for his or her belief."
Id. at 742 (quoting Daubert, 509 U.S. at
590. "[S]o long as the process or technique the expert
used in formulating the opinion is reliable, " such
testimony will be deemed admissible. Id.
Nevertheless, the Third Circuit has set forth a
non-exhaustive list of factors for the court to consider when
determining the reliability of the proffered testimony.
See Pineda, 520 F.3d at 247-48.
Rule 702 requires that the expert testimony must fit the
issues in the case;" that is, "the expert's
testimony must be relevant for the purposes of the case and
must assist the trier of fact." Schneider, 320
F.3d at 404. "In assessing whether an expert's
proposed testimony 'fits, ' we are asking
'whether [the] expert testimony proffered ... is
sufficiently tied to the facts of the case that it will aid
the jury in resolving a factual dispute.'"
United States v. Schiff, 602 F.3d 152, 173 (3d Cir.
2010) (citing Daubert, 509 U.S. at 591).
contend that Dr. Werner's opinion, as it pertains to
damages, should be stricken since it is neither reliable nor
fit. The crux of their argument is since Dr. Werner's
proffered methodology does not isolate Aeterna's
purported misrepresentations from other factors that affected
Aeterna's price, it is unreliable. Plaintiffs respond
that, at this stage of litigation, a detailed damages model
is not required. The Court agrees.
report, Dr. Werner generally explains that out-of-pocket
damages can be calculated on a per share basis for the entire
class. (Werner Report at ¶ 141). However, at his
deposition, Dr. Werner conceded that his damages report was
essentially "cut and pasted" from a report prepared
for another matter, and that he had yet to prepare either a
damages or loss causation analysis. (ECF No. 105-7,
"Werner Deposition" at 92-94). This being said, as
Dr. Werner acknowledged in his report, to conduct such
analyses "requires the full development of the record,
" which was not available to him. (Id.). As
such, Dr. Werner's report provides a methodological
framework for how he would assess damages. (Id.).
First, Dr. Werner would perform an event study that assessed
Aeterna's stock prior before and after Aterna's
corrective disclosure on November 6, 2014, when it announced
that the FDA denied their NDA. The use of an event study to
assess the materiality of damages has been generally accepted
by courts. See In re Cendant Corp. Sec. Litig., 109
F.Supp.2d 235, 254 (D.N.J. 2000). Second, after completing
the event study, Dr. Werner proposes constructing an
inflation ribbon, which would indicate how much artificial
inflation, caused by the alleged misrepresentations and
omissions, was reflected in the price of Aeterna Stock.
(Werner Report at ¶ 142). To do this, Dr. Werner would
work chronologically backwards from the final corrective
disclosure to the beginning of the Class Period.
(Id.). Finally, the "per share damages would be
calculated as the difference between the inflation on the
date shares were purchased and the inflation on the date
those same shares were subsequently sold."
(Id.). The use of a "back-casting"
methodology within a related case study has also been
generally accepted. See Ludlow v. BP, PLC, 800 F.3d
674, 684 (5th Cir. 2015).
the Court finds Defendants' motion premature. At this
stage of litigation, Plaintiffs are not required to produce a
detailed damages model. See Roach v. T.L. Cannon
Corp., 778 F.3d 401, 405 (2d Cir. 2015)); see also
City of Sterling Heights Gen. Employee's Ret. Sys. v.
Prudential Fin., Inc., No. 12-5275, 2015 U.S. Dist.
LEXIS 115287, at *20, 34-36 (D.N.J. Aug. 31, 2015) (citing
Neale v. Volvo Cars of N. Am., LLC, 794 F.3d 353,
373-75 (3d Cir. 2015)). Nevertheless, the Court notes that
the exact methodology proffered by Dr. Werner was recently
approved in In re Silver Wheaton Corp. Sec. Litig,
No. 15-5146, 2017 U.S. Dist. LEXIS 72787, at *39-44 (CD. Ca.
May 11, 2017). As such, for the foregoing reasons,
Defendants' motion is denied without prejudice and may be
reasserted after discovery has ended and an amended report is
on this 28 day of February 2018, ORDERED that Defendants'
Motion to Strike in part the declarations and opinions of Dr.