United States District Court, S.D. California
LOU BAKER, individually and on behalf of all others similarly situated, Plaintiff,
SEAWORLD ENTERTAINMENT, INC., et al., Defendants.
REDACTED ORDER AFFIRMING TENTATIVE RULINGS RE:
DAUBERT MOTIONS AND DEFENDANTS' MOTION FOR SUMMARY
JUDGMENT [DOC. NOS. 344, 347, 351, 355, 358, 359]
MICHAEL M. ANELLO, UNITED STATES DISTRICT JUDGE.
Plaintiffs Arkansas Public Employees Retirement System
(“APERS”) and Pensionskassen for Børne-Og
Ungdomspædagoger (“PBU”) (collectively,
“Plaintiffs”) and Defendants SeaWorld
Entertainment, Inc. (“SeaWorld”), The Blackstone
Group L.P. (“Blackstone”), James Atchison, James
M. Heaney, and Marc Swanson (collectively,
“Defendants”) appeared before the Court on
Friday, October 11, 2019 at 9:00 a.m. for a hearing on the
parties' Daubert motions and Defendants'
motion for summary judgment. In anticipation of the hearing,
the Court issued tentative rulings on the pending motions.
See Doc. No. 463. For the reasons set forth below,
the Court AFFIRMS its tentative rulings.
bring this securities fraud class action against Defendants
asserting claims pursuant to Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated
under § 10(b). See Doc. No. 123
(“SAC”). Plaintiffs bring this action on behalf
of all individuals and entities who purchased or acquired
common stock of SeaWorld throughout the Class Period (August
29, 2013 to August 12, 2014).
case involves statements and omissions made by Defendants in
the wake of the 2013 documentary Blackfish.
Blackfish tells the story of Tilikum, a 12,
000-pound bull orca implicated in the deaths of three people,
and chronicles the cruelty of killer whale capture methods,
the dangers trainers face performing alongside killer whales
during SeaWorld's popular shows, and the physical and
psychological strains killer whales experience in captivity.
Through interviews with former trainers, spectators,
employees of regulatory agencies, and scientists,
Blackfish makes the case that keeping killer whales
in captivity for human entertainment is cruel, dangerous, and
immoral. Blackfish premiered at the Sundance Film
Festival on January 19, 2013.
is a theme park and entertainment company. During the Class
Period, SeaWorld owned and operated eleven theme parks in the
United States: SeaWorld Orlando, SeaWorld San Diego, SeaWorld
San Antonio, Aquatica Orlando, Aquatica San Diego, Discovery
Cove, Busch Gardens Tampa, Busch Gardens Williamsburg,
Adventure Island, Water Country USA, and Sesame Place.
SeaWorld's brand and reputation are among the
company's most important assets. SeaWorld has been
subjected to criticism related to captivity issues, even
prior to the release of the 2013 documentary
Atchison served as SeaWorld's Chief Executive Officer
(“CEO”), President, and Director from before the
start of the Class Period until January 2015. Mr. Heaney has
served as SeaWorld's Chief Financial Officer from before
the start of the Class Period to present. Mr. Swanson has
served as SeaWorld's Chief Accounting Officer from before
the start of the Class Period to present. Defendants
Atchison, Heaney, and Swanson are collectively referred to as
the “Individual Defendants.”
is a multinational private equity, investment banking,
alternative asset management, and financial services
corporation based in New York, New York.
19, 2013, Blackfish was released in approximately
ninety-nine (99) select theaters across the United States and
the film's theatrical run lasted fourteen weeks. On
October 24, 2013, CNN aired Blackfish for the first
time, where it was broadcast to tens of millions more people
than during the film's theatrical run. “The social
media generated by Blackfish reached a fever pitch
following the CNN premiere of the film.” SAC ¶
136. Blackfish was also made available for viewing
on Netflix and iTunes in late 2013. At this time, Netflix
maintained approximately thirty-one (31) million U.S.
domestic subscribers. See Id. ¶¶ 84,
and throughout the Class Period, social media reaction to
Blackfish remained elevated. Consumers contacted
SeaWorld and vowed to never visit its parks because of
Blackfish. See, e.g., PX 399, PX 385, PX
399. Additionally, Blackfish publicity led partners
and sponsors to end or table partnerships and promotions with
attendance declined in 2013 and 2014. Specifically, as
compared to the prior year, attendance was down 9.5% in 2Q13,
3.6% in 3Q13, and 1.4% in 4Q13. This resulted in a 4.1%
decline in overall attendance for 2013. SeaWorld further
reported a 14% decline in attendance in 1Q14. SeaWorld's
attendance was up 0.3% for 2Q14, [XXXXX].
challenge several statements made by SeaWorld executives as
false and/or misleading during the Class Period. On August
29, 2013, the Los Angeles Times published an article
quoting SeaWorld's Vice President of Communications, Fred
Jacobs, as stating, “Blackfish has had no
attendance impact.” PX 88. Bloomberg also
published an article quoting Jacobs as stating that
“[w]e can attribute no attendance impact at all to the
movie[.]” Id.; see also PX 10 at 183.
Jacobs testified at his deposition that he did not believe
either statement was true when he made it. PX 10 at 183-84,
in July 2013, SeaWorld received survey results from the TNS
omnibus survey (the “Omnibus survey”). The survey
inquired about awareness of the movie Blackfish,
whether respondents had seen, or intended to see the movie,
and whether respondents identified SeaWorld as the company
the movie was about. SeaWorld's Director of Budgeting and
Forecasting, Joshua Powers, [XXXXX]
Further, Powers testified that from August 29, 2013 through
November 13, 2013, [XXXXX].
further challenge three statements made during 4Q13. First,
SeaWorld's earnings release for 3Q13, published on
November 13, 2013, attributed a 3.6% attendance decline in
3Q13 to only “adverse weather” and “planned
strategies that increased revenue but reduced low yielding
and free attendance.” SAC ¶ 213. Second, on
November 14, 2013, SeaWorld's Chief Executive Officer,
James Atchison, was quoted by the Wall Street
Journal as stating, “I scratch my head if
there's any notable impact from this film at all, and I
can't attribute one to it. . . . Ironically, our
attendance has improved since the movie came out.” PX
100. Third, on December 20, 2013, Atchison was quoted by the
Orlando Sentinel as stating, “As much data as
we have and as much as we look, I can't connect anything
really between the attention that the film has gotten and any
effect on our business.” PX 106. From November 14, 2013
through December 20, 2013, [XXXXX].
March 13, 2014, SeaWorld issued its earnings release for 4Q13
and fiscal year 2013. Defendants attributed SeaWorld's
attendance decline for 4Q13 and FY13 to factors other than
Blackfish, including weather and yield management
strategies. Additionally, during the earnings call, Atchison
made the following statements: (a) “As much as
we're asked it, we can see no noticeable impact on our
business;” (b) “But our surveys don't reflect
any shift in sentiment about intent to visit our
parks;” (c) “A matter of fact, the movie in some
ways has actually made perhaps more interest in marine mammal
parks, and actually even about us;” and (d) “But
we have seen no impact on the business.” PX 115. From
December 21, 2013 through March 13, 2014, [XXXXX].
in SeaWorld's May 14, 2014 earnings release for 1Q14,
SeaWorld attributed its 13% attendance decline for the
quarter to weather and the shift in the Easter holiday from
1Q14 to 2Q14. [XXXXX] PX 122 at 141.
reported its 2Q14 results in a Form 8-K filed with the SEC on
August 13, 2014. While attendance was up 0.3% versus the
prior year, SeaWorld explained that this was “offset by
lower attendance at its destination parks due to a
combination of factors.” Doc. No. 359-2 (hereinafter
“Youngwood Decl.”), Ex. 29 at 2. Specifically,
attendance in the second quarter was impacted by factors
including, “a late start to summer for some schools in
the Company's key source markets, new attraction
offerings at competitor destination parks, and a delay in the
opening of one of the Company's new attractions[.]”
Id. Moreover, “the Company believes attendance
in the quarter was impacted by demand pressures related to
recent media attention surrounding proposed legislation in
the state of California.” Id. SeaWorld revised
its earnings estimates downward: “For the full year of
2014, the Company now expects full years 2014 revenue and
Adjusted EBITDA to be down in the range of 6-7% and 14-16%,
respectively, compared to the prior year.” Id.
SeaWorld's common stock price dropped by 33%, or $9.25
per share, following the announcement. Plaintiffs commenced
the instant action on September 9, 2014. See Doc.
move to exclude the testimony of three of Plaintiffs'
experts: Dr. Steven Feinstein (Doc. No. 346), Chad Coffman,
CFA (Doc. No. 349), and Dr. James Gibson (Doc. No. 353).
Plaintiffs move to exclude the testimony of two of
Defendants' experts: Dr. Craig Lewis (Doc. No. 354) and
Dr. Randolph Bucklin (Doc. No. 357).
702 of the Federal Rules of Evidence provides that expert
opinion evidence is admissible if: “(a) the
expert's scientific, technical, or other specialized
knowledge will help the trier of fact to understand the
evidence or to determine a fact in issue; (b) the testimony
is based on sufficient facts or data; (c) the testimony is
the product of reliable principles and methods; and (d) the
expert has reliably applied the principles and methods to the
facts of the case.” Fed.R.Evid. 702. As the Ninth
Under Daubert and its progeny, including
Daubert II, a district court's inquiry into
admissibility is a flexible one. Alaska Rent-A-Car, Inc.
v. Avis Budget Grp., Inc., 738 F.3d 960, 969 (9th Cir.
2013). In evaluating proffered expert testimony, the trial
court is “a gatekeeper, not a fact finder.”
Primiano v. Cook, 598 F.3d 558, 565 (9th Cir. 2010)
(citation and quotation marks omitted).
“[T]he trial court must assure that the expert
testimony ‘both rests on a reliable foundation and is
relevant to the task at hand.'” Id. at 564
(quoting Daubert v. Merrell Dow Pharmaceuticals,
Inc., 509 U.S. 579, 597 (1993)). “Expert opinion
testimony is relevant if the knowledge underlying it has a
valid connection to the pertinent inquiry. And it is reliable
if the knowledge underlying it has a reliable basis in the
knowledge and experience of the relevant discipline.”
Id. at 565 (citation and internal quotation marks
omitted). “Shaky but admissible evidence is to be
attacked by cross examination, contrary evidence, and
attention to the burden of proof, not exclusion.”
Id. at 564 (citation omitted). The judge is
“supposed to screen the jury from unreliable nonsense
opinions, but not exclude opinions merely because they are
impeachable.” Alaska Rent-A-Car, 738 F.3d at
969. Simply put, “[t]he district court is not tasked
with deciding whether the expert is right or wrong, just
whether his testimony has substance such that it would be
helpful to a jury.” Id. at 969-70.
City of Pomona v. SQM N. Am. Corp., 750 F.3d 1036,
1043-44 (9th Cir. 2014). “Challenges that go to the
weight of the evidence are within the province of a fact
finder, not a trial court judge. A district court should not
make credibility determinations that are reserved for the
jury.” Id. at 1044.
Motion to Exclude Expert Opinion and Testimony of Dr. Steven
seek to exclude the testimony of Dr. Steven Feinstein, who
was retained by Plaintiffs to evaluate the conclusions in the
Expert Report of Martin Dirks, dated January 22, 2019, and
Section III of the Expert Report of Dr. Craig M. Lewis, dated
January 22, 2019. See Doc. No. 346. Feinstein is an
Associate Professor of Finance at Babson College, and the
founder and President of Crowninshield Financial Research,
Inc., a financial economics consulting firm. Doc. No. 346-1
(hereinafter “Feinstein Reb. Rpt.”) ¶ 11.
Feinstein has his Ph.D. in Economics from Yale University, a
Master of Philosophy degree in Economics from Yale
University, a Master of Arts in Economics from Yale
University, and a Bachelor of Arts degree in Economics from
Pomona College. See Id. ¶ 12. Additionally,
Feinstein holds the Chartered Financial Analyst
(“CFA”) designation. See Id. Defendants
contend that Feinstein's testimony is inadmissible
because Feinstein's rebuttal report: (a) does not rebut
anything in Defendants' experts' initial reports; and
(b) rests on an erroneous legal standard. See Doc.
No. 346 at 5-6.
Feinstein's Rebuttal Opinions
contend that Feinstein has not submitted a rebuttal report
because he “talks past Mr. Dirks rather than
rebutting his methodologies and conclusions[.]” Doc.
No. 346 at 6 (emphasis in original). Thus, Feinstein's
report “is simply an untimely affirmative report not
submitted by the deadlines set in the Case Management
Order.”Id. In response, Plaintiffs point
out that Defendants “do not address or even mention
Professor Feinstein's testimony concerning the flawed
conclusions in the Lewis Report.” Doc. No. 378 at
Additionally, Plaintiffs maintain that Feinstein's
criticisms of Dirks' opinions render his report
admissible. See id.
to the Scheduling Order entered in this case, January 15,
2019 was the deadline for the parties to designate
affirmative experts, and January 22, 2019 was the deadline to
serve expert reports. See Doc. No. 333. On March 1,
2019, Plaintiffs served Feinstein's rebuttal report.
disclosures of expert testimony are ‘intended solely to
contradict or rebut evidence on the same subject matter
identified by another party' in its expert
disclosures.” In re High-Tech Emp. Antitrust
Litig., No. 11-cv-2509-LHK, 2014 WL 1351040, at *3 (N.D.
Cal. Apr. 4, 2014) (quoting Fed.R.Civ.P. 26(a)(2)(D)(ii)).
Rebuttal expert reports may respond to “new unforeseen
facts brought out in the other side's case.”
Matthew Enter., Inc. v. Chrysler Grp. LLC, No.
13-cv-4236-BLF, 2016 WL 4272430, at *3 (N.D. Cal. Aug. 15,
2016) (citing Columbia Grain, Inc. v. Hinrichs
Trading, LLC, No. 14-cv-115-BLW, 2015 WL 6675538, at *2
(D. Idaho Oct. 30, 2015)). However, “[r]ebuttal
testimony cannot be used to advance new arguments or new
evidence.” Id. at *2 (internal quotation marks
omitted). A rebuttal report “is not the time to change
methodologies to account for noted deficiencies; instead, it
is to respond to criticisms of such methodologies.”
Id. (internal quotation marks omitted).
“[O]ffering a different, purportedly better methodology
is a proper way to rebut the methodology of someone
else.” TCL Commc'ns Tech. Holdings Ltd. v.
Telefonaktenbologet LM Ericsson, No. 14-cv-341-JVS, 2016
WL 7042085, at *4 (C.D. Cal. Aug. 17, 2016). “Rebuttal
testimony is proper as long as it addresses the same subject
matter that the initial experts address.” Perez v.
State Farm Mut. Auto Ins. Co., No. 6-cv-1962-JW, 2011 WL
8601203, at *8 (N.D. Cal. Dec. 7, 2011). Courts “have
permitted additional data to be used in a rebuttal report so
long as it is of the same subject matter.” Kirola
v. City & Cty. of S.F., No. 7-cv-3685-SBA (EMC),
2010 WL 373817, at *2 (N.D. Cal. Jan. 29,
upon review, Feinstein's rebuttal report clearly responds
to the Dirks and Lewis reports. For example, Feinstein
summarizes that “[t]he crux of both the Dirks Report
and the Lewis Report is that the alleged misstatements and
omissions were immaterial to investors.” Feinstein Rpt.
¶ 3. Additionally, contrary to Defendants'
contention, nearly every paragraph in the rebuttal report
challenges the findings of Dirks and Lewis. See Id.
¶¶ 33-46. Feinstein determines that “[t]he
conclusions of both Mr. Dirks and Dr. Lewis on the question
of materiality are at odds with the facts of the case and
generally accepted financial economic principles and
published empirical research.” Id. ¶ 4.
“The misstatements and omissions alleged by Plaintiffs
were clearly material to investors from an economic
perspective.” Id. ¶ 9. Feinstein's
criticisms contradict Dirks' opinion on the same subject
matter-i.e., whether Defendants' misstatements and
omissions were material.
Feinstein properly rebuts the findings of Dirks and Lewis.
See In re REMEC Inc. Sec. Litig., 702 F.Supp.2d
1202, 1220 (S.D. Cal. 2010) (overruling objection to
expert's rebuttal report because “Regan's
analysis contradicts Holder's opinion on the same subject
matter, specifically, whether REMEC used assumptions,
estimates, and forecasts to evaluate goodwill that complied
Feinstein's Materiality Standard
next argue that Feinstein's testimony is irrelevant and
inadmissible because his opinion concerning the materiality
of Defendants' misstatements and omissions “rests
on an erroneous legal standard[.]” Doc. No. 346 at 2.
In opposition, Plaintiffs assert that Feinstein “does
not, under any fair reading of his testimony, adopt, apply,
reject or attempt to analyze any legal definition of
‘materiality.'” Doc. No. 378 at 11.
Specifically, Feinstein “is not offering a
‘legal' opinion and does not offer an opinion on
the application of the legal definition of
materiality.” Id. at 12. Essentially, the
parties' dispute centers on whether Feinstein's
materiality standard is “distinct from” and
“entirely conflict[s]” with the materiality
standard set forth by the Supreme Court and applied by Dirks
and Plaintiffs' expert, Chad Coffman. Doc. No. 346 at 5.
rebuttal report, Feinstein defines economic materiality as
“the importance of information, announcements, and/or
events to investors and the market, such that these items
would affect the valuation of a security.” Feinstein
Reb. Rpt. ¶ 7. As defined by the Supreme Court,
“the materiality requirement is satisfied when there is
‘a substantial likelihood that the disclosure of the
omitted fact would have been viewed by the reasonable
investor as having significantly altered the ‘total
mix' of information made available.'”
Matrixx Initiatives, Inc. v. Siracusano, 563 U.S.
27, 38 (2011).
claim that Feinstein's economic materiality standard
“differs considerably” from the materiality
standard adopted by the Supreme Court because Feinstein
disregards the concepts of “the reasonable
investor” and the “total mix of
information.” Doc. No. 346 at 7.
deposition, Feinstein testified that his “definition is
better” than the one used by Dirks (and Coffman), but
explained that his definition does not contradict, undermine,
or reject the definition of legal materiality. Doc. Nos.
346-2, 378-3 (hereinafter “Feinstein Dep.”) at
107. Feinstein testified that the legal definition and
economic definition are “consistent.”
Id. at 112. “If there's an understanding
that significantly altering the total mix of information
means such that there's a valuation effect, then
they're the same thing.” Id. at 113-14.
Thus, if the phrase “such that value is affected”
was added to the legal definition, the economic and legal
definitions are “synonymous.” Id. at
119. Further, when asked whether he considered Dirks'
definition of materiality in drafting his report, Feinstein
admitted that he “didn't think there was any
significant difference between the two [definitions] that
merited more discussion than I put in my report[.]”
Id. at 122.
Feinstein testified that the concept of the reasonable
investor is “implicit in the term
‘valuation.'” Id. at 114.
“Value - - value is what a reasonable buyer would pay
to a reasonable seller, both provided with necessary
information and neither under any compunction to
transact.” Id. Feinstein also explained that
the “definition of valuation would include mix of
information and reasonableness of the parties
involved.” Id. at 104. Thus, according to
Feinstein, the concepts of “the reasonable
investor” and the “total mix of
information” are subsumed within his analysis.
asked why Feinstein simply did not accept Dirks'
definition of materiality, Feinstein responded,
“[b]ecause I'm an economist and so I use the
economic definition.” Id. at 116. “I
think that there is some vulnerability for an economist to
use the legal definition” and according to Feinstein,
“an economist shouldn't be making - - shouldn't
be drawing legal conclusions. The economist can draw economic
conclusions.” Id. 116-17. Thus, consistent
with Ninth Circuit authority, Feinstein is not offering a
legal conclusion. See Aguilar v. Int'l
Longshoremen's Union Local No. 10, 966 F.2d 443, 447
(9th Cir. 1992) (explaining that it is well-known that
matters of law are generally “inappropriate subjects
for expert testimony.”). Defendants rely on In re
Novatel Wireless Sec. Litig., 846 F.Supp.2d 1104, 1108
(S.D. Cal. 2012) to support their contention that
Feinstein's opinions rest on an erroneous legal standard.
There, the district court excluded the testimony of an expert
economist who opined that with respect to loss causation,
“corrective disclosures have to be made ‘in such
a way that a reasonable investor can reasonably infer that a
fraud has occurred.'” Id. at 1107.
However, the court noted that there is no requirement that a
reasonable investor infer that a fraud has occurred. See
Id. at 1108. The court concluded that the expert's
analysis “is based on a loss causation standard that is
incompatible with that set forth by the Ninth Circuit.”
unlike In re Novatel Wireless Sec. Litig., Feinstein
does not attempt to add any requirements to the definition of
materiality. Rather, Feinstein appropriately opines on the
concept of materiality in the field of economics. See
S.E.C. v. Leslie, No.7-cv-3444, 2010 WL 2991038, at *8,
9 (N.D. Cal. July 29, 2010) (finding expert's materiality
opinions on whether the information was sufficiently
important from an “accounting perspective”
permissible but noting his “opinion with respect to
legal concepts and conclusions of law are
excludable.”). Indeed, a change in stock price (or
valuation) is one factor the trier of fact may consider with
respect to materiality. See Id. at *8.
such, the Court finds that Feinstein's materiality
opinions do not rest on an erroneous legal standard.
Feinstein discusses the concept of economic materiality with
support from economic authorities that Defendants do not
challenge. Thus, exclusion on this basis is improper.
the Court finds that Feinstein responds to and criticizes the
materiality opinions of Dirks and Lewis in his rebuttal
report. Additionally, although Feinstein's materiality
opinions stem from an economic perspective, his opinions do
not rest on an erroneous legal standard. Accordingly, the
Court DENIES Defendants' motion to
exclude the opinions and testimony of Dr. Steven Feinstein.
Motion to Exclude Expert Opinion and Testimony of Mr. Chad
move to exclude the testimony of Chad Coffman, CFA, who has
been retained by Plaintiffs to offer expert testimony as
evidence of loss causation, materiality, and economic
damages. See Doc. No. 349. Coffman is the President
of Global Economics Group, a Chicago-based consulting firm.
See Doc. No. 349-1 (hereinafter “Coffman
Rpt.”) ¶ 1. Coffman conducted a full event study
regression analysis as the foundation for his loss causation
and damages opinions.
do not challenge Coffman's qualifications or the
relevance of his opinions. Nor do Defendants challenge
Coffman's event study methodology. Rather, Defendants
move to exclude three of Coffman's opinions as
unreliable: (a) that certain information disclosed on August
13, 2014 was “corrective”; (b) that $7.52 of
SeaWorld's stock decline is attributable to the
corrective information; and (c) that damages should be
measured using a constant dollar inflation
(“CDI”) methodology. See Doc. No. 349.
In opposition, Plaintiffs assert that Defendants'
arguments do not warrant exclusion of his testimony under
Daubert. See Doc. No. 375 at 2. Plaintiffs
concede that “[i]f the Court excludes Coffman's
testimony, Plaintiffs cannot prove loss causation and damages
at trial, thereby ending the case.” Id. at 9.
The Court proceeds by reviewing Coffman's event study
before addressing Defendants' arguments for exclusion.
Coffman's Event Study
performed an event study as the foundation for his opinions
in this case. “The use of an event study is often
necessary to provide an evidentiary basis for a reasonable
jury to determine the existence of loss causation and
damages.” Mauss v. NuVasive, Inc., No.
13cv2005-JM (JLB), 2018 WL 656036, at *5 (S.D. Cal. Feb. 1,
event study is conducted by specifying a model of expected
price movements conditioned on outside market factors and
then testing whether the deviation from expected price
movements is sufficiently large such that simple random
movement can be rejected as the cause.” Coffman Rpt.
¶ 59. Coffman explains that a well-accepted method for
performing an event study is to estimate a regression model
over a period of time (referred to as an “estimation
window”) to observe the typical relationship between
the market price of the security at issue and broad market
factors. See Id. ¶ 60. In this case, Coffman
used an estimation window of 120 trading days prior to the
event of interest to evaluate the relationship between
SeaWorld and market factors. See Id. Coffman
controlled for market factors by using a broad market index
(the S&P 500 Total Return Index, or “Market
Index”) and an equal weighted peer index (“Peer
Index”). See id.
including the Market Index in his regression, Coffman
factored out the influence of any news that impacted stock
values generally on the date of interest, which in this case
is August 13, 2014, the date on which Coffman believes
Defendants disclosed certain information that was corrective
of previous statements regarding Blackfish. See
Id. ¶ 61. “This is how the regression
distinguishes, and explicitly removes, the impact of general
market and industry news from observed stock price and allows
the ‘abnormal return' to be interpreted as a
company-specific price movement.” Id.
Common Stock declined by 32.86% on August 13, 2014,
“the largest single-day price drop in SeaWorld's
roughly 16-month trading history.” Id. ¶
63. Coffman opines that the “abnormal return of 33.30%
(the observed -32.86% return minus the expected return of
positive 0.44%) is statistically significant at well beyond
the 95% confidence level, even after controlling for all
factors that may have influenced the broader market or the
industry on August 13, 2014.” Id.
(emphasis in original). Coffman concludes that
“firm-specific information (including the corrective
information) caused SeaWorld's stock price to decline.
This provides further evidence that investors saw the
information regarding whether Blackfish and related
publicity was affecting SeaWorld's business as
important.” Id. ¶ 62. “[T]he sheer
size of this abnormal return strongly supports the conclusion
that the stock price was reacting to a more permanent shift
in demand as opposed to short term factors.”
Id. ¶ 64.
August 13, 2014 Disclosure
August 13, 2014, SeaWorld issued a press release that
announced, among other things, SeaWorld's results for the
second quarter of 2014 and SeaWorld's revised guidance
for the year moving forward. See Doc. No. 347, Ex.
4. Specifically, SeaWorld announced its lower attendance at
its destination parks was due to a combination of factors
a late start to summer for some schools in the Company's
key source markets, new attraction offerings at competitor
destination parks, and a delay in the opening of one of the
Company's new attractions. In addition, the
Company believes attendance in the quarter was impacted by
demand pressures related to recent media attention
surrounding proposed legislation in the state of
Id. at 2 (emphasis added).
opines that the reference to proposed legislation in
California was “understood to reference a negative
impact on SeaWorld's business caused by publicity related
to Blackfish.” Coffman Rpt. ¶ 108.
Coffman explains that “[a]nalyst and media reaction
indicate that the market understood the August 13
Corrective Disclosure to relate to Blackfish and to
be a reversal of Defendants' earlier statements that the
film had not caused any impact to the Company's
business.” Id. ¶ 7. Coffman concludes
that the statement regarding proposed legislation in
California constitutes a corrective disclosure. See
argue that Coffman's opinions regarding the alleged
corrective disclosure should be excluded for three reasons.
See Doc. No. 349. First, the alleged corrective
disclosure relates back only to the second quarter 2014.
See Id. at 7-8. Second, Defendants contend Coffman
improperly bases his opinion on a selective compilation of
analyst and media reports. See Id. at 9. Third,
Defendants assert that Coffman impermissibly fails to
consider the impact of SeaWorld lowering its annual guidance.
See Id. at 11.
Language of the Alleged Corrective Disclosure
preliminary matter, Defendants argue that the alleged
corrective disclosure relates back only to the second quarter
2014 and cannot disclose an impact that occurred in 2013 or
the first quarter of 2014. See Id. at 8.
“can satisfy loss causation by showing that the
defendant misrepresented or omitted the very facts
that were a substantial factor in causing the plaintiff's
economic loss.” Nuveen Mun. High Income Opportunity
Fund v. City of Alameda, 730 F.3d 1111, 1120 (9th Cir.
2013) (emphasis in original) (internal quotation marks
omitted). The fact that the language of the alleged
corrective disclosure refers to the second quarter 2014 does
not render Coffman's opinions unreliable. Coffman opines
that investors viewed SeaWorld's disclosure as an
admission that Blackfish was negatively impacting
its business and would continue to do so going forward.
See Coffman Rpt. ¶¶ 7-9. Defendants assert
that Coffman admitted that the corrective information was
limited to the second quarter of 2014. See Doc. Nos.
349-6, 375-2 (hereinafter “Coffman Dep.”) at 81
(“Within that section, it appears that all the
references to ‘the quarter,' I would interpret as
being the second quarter of 2014.”). Coffman also
testified, however, that the corrective information
“goes beyond that” and encompasses all of the
information described in paragraphs 73-78 of his report.
Id. at 78.
Coffman's testimony regarding the alleged corrective
disclosure will be helpful to a jury and exclusion of his
testimony on this basis is improper. See Alaska
Rent-A-Car, Inc., 738 F.3d at 969-70 (“The
district court is not tasked with deciding whether the expert
is right or wrong, just whether his testimony has substance
such that it would be helpful to a jury.”).
Analyst Reports and News Articles
Defendants contend that Coffman improperly bases his opinion
on a selective compilation of analyst and media reports.
See Doc. No. 349 at 9 (“Mr. Coffman's
‘analysis' is simply a summary of cherry picked
quotes out of a small sample of analyst and media reports
issued on August 13, 2014 and August 14, 2014.”).
However, upon his review of hundreds of reports and
articles, Coffman formed the opinion that even though
Defendants did not mention Blackfish by name,
“the market immediately understood the August 13, 2014
disclosure as an admission that Blackfish had
impacted the Company.” Doc. No. 375 at 13; see
also Coffman Rpt. ¶ 7. Contrary to Defendants'
assertion that Coffman simply lists and summarizes these
reports and articles, Coffman's opinion of how
the market interpreted SeaWorld's statements from the
August 13, 2014 press release will assist the trier of fact
in determining loss causation. See In re Novatel Wireless
Sec. Litig., No. 8cv1689-AJB (RBB), 2013 WL 12144150, at
*7 (S.D. Cal. Oct. 25, 2013) (denying Daubert motion
where the expert's review of press releases and analyst
reports established “the requisite link between those
disclosures and earlier alleged misrepresentations”);
cf. In re Nuveen Funds/City of Alameda Sec. Litig.,
Nos. C 08-4575 SI, C 09-1437 SI, 2011 WL 1842819, at *8 (N.D.
Cal. May 16, 2011) (excluding expert's opinion on loss
causation “because he did not perform any investigation
or analysis to support his conclusion that plaintiffs'
losses were caused by defendants' fraud.”).
further contend that Coffman's report lacks any reliable
principles and methods because it disregards reports, or
portions of reports, that contradict his position.
See Doc. No. 349 at 10. For example, Defendants
submit as exhibits three reports issued after the August 13,
2014 press release that either do not attribute declining
attendance to Blackfish or limit the impact of the
film to only attendance in the second quarter. See
id., Exs. 7, 8, 9.
Appendix A to his report, Coffman lists more than one hundred
analyst reports and news articles he considered in forming
his opinions in this case. See Coffman Rpt., Ex. A
at 11, 16. Specifically, Coffman considered “SEAS
analyst reports supplied by Investext via Thomson Reuters for
the period August 13, 2013 to December 30, 2014, and
“[o]ther analyst reports, including but not limited
to” the more than one hundred analyst reports and news
articles he identifies by name. See Coffman Rpt.,
Ex. A at 11. Coffman also testified at his deposition that he
did not recall any analyst reports that did not mention
“what I refer to as the Blackfish Effect in one way or
another.” Coffman Dep. at 155.
assert that “[c]ourts have expressly rejected expert
analyses, like Mr. Coffman's, that highlight favorable
studies while ignoring contradictory evidence.” Doc.
No. 349 at 10. Defendants further cite In re Bextra and
Celebrex Mktg. Sales Practices and Prod. Liab. Litig., a
Multi-District Litigation proceeding, where more than 3, 000
plaintiffs alleged that they or their loved ones suffered a
heart attack, stroke, or other adverse cardiovascular event
as a result of taking a medication called Celebrex. 524
F.Supp.2d 1166, 1169 (N.D. Cal. 2007). The district court
excluded the testimony of Dr. Neil Doherty, the
plaintiffs' cardiology expert, because he
“reject[ed] or ignor[ed] the great weight of the
evidence that contradicts his conclusion.” Id.
at 1176. The court further noted that Dr. Doherty
“lack[ed] . . . relevant experience and training”
and his opinion that rejected the weight of authority on the
topic “is not a scientifically valid
unlike In re Bextra and Celebrex Sales Practices and
Prod. Liab. Litig., Defendants do not challenge
Coffman's experience and training. Nor do Defendants
submit any evidence that Coffman rejected or ignored the
“great weight of evidence that contradicts his
conclusion.” Id. Rather, Defendants point to a
handful of analyst reports that Coffman did not explicitly
identify in his non-exhaustive list of reports he
considered. Coffman's analysis of the
market's reaction to the August 13, 2014 statements is
not subject to exclusion under Daubert on this
basis. See In re REMEC Inc. Sec. Litig., 702
F.Supp.2d at 1219 (S.D. Cal. 2010) (noting that the
determination of weight and sufficiency of expert evidence is
the sole province of the jury); Odyssey Wireless, Inc. v.
Apple Inc., Nos. 15-cv-1735-H-RBB, 15-cv-1738-H-RBB,
15-cv-1743-H-RBB, 2016 WL 7644790, at *15 (S.D. Cal. Sept.
14, 2016) (declining to exclude expert's testimony
because the defendant's “disagreement with the
facts underlying that opinion go to the weight to be afforded
the testimony and not its admissibility.”).
Lowered Annual Guidance
Defendants assert that Coffman fails to consider the impact
of SeaWorld lowering its annual guidance. “[A]ll that
supports Mr. Coffman's opinion that the August 13
Statement constituted a corrective disclosure is his claim
(first raised on rebuttal) that the stock drop was too large
to be explained solely by the second quarter
results.” Doc. No. 349 at 11. Defendants maintain
that Coffman's opinion excludes without analysis the most
likely explanation, i.e., the market's reaction
to the announcement of lowered revenue and guidance for the
year, and simply assumes that the market interpreted these
disclosures as backward-looking and corrective, rather than
forward-looking. See Id. Thus, because Coffman
“omitted a critical factor from his analysis, [his]
opinion is per se unreliable.” Id. at
arguments are unpersuasive, as Coffman considered
SeaWorld's lowered earnings guidance and determined that
it was part of the corrective information. In his report,
Coffman describes that on the date of the corrective
SeaWorld issued a press release which, in effect,
acknowledged for the first time the adverse impact that
Blackfish-related public reaction was having on
SeaWorld's business. The press release summarized
financial results for 2nd Quarter 2014 and the first half of
2014 that were well below consensus expectations, lowered
guidance for future financial performance, and clearly stated
that Blackfish-related public reaction was
contributing to such underperformance.
Coffman Rpt. ¶ 7. Coffman further explains that
“[i]n addition to announcing worse than expected
performance for 2Q 2014, the Company also lowered its revenue
and EBITDA guidance for the full year, thus signaling one or
more negative impacts were not temporary.” Id.
¶ 75. Coffman observes that the market viewed the
disclosure as involving two potential structural issues that
would lower expectations and guidance going forward: (1)
Blackfish; and (2) competition. See Id.
¶¶ 88-100. As Plaintiffs point out, to the extent
that the lowered annual guidance reflected both corrective
information and competition, Coffman disaggregated the
price-impact of confounding information related to
competition. See Id. ¶¶ 108-09.
Coffman did not omit from consideration SeaWorld's
lowered annual guidance and exclusion of Coffman's
testimony on this basis is improper. See In re REMEC Inc.
Sec. Litig., 702 F.Supp.2d at 1273 (“When a study
accounts for the ‘major factors' but not ‘all
measurable variables,' it is admissible.”) (quoting
Bazemore v. Friday, 478 U.S. 385, 400 (1986));
cf. In re DVI, Inc. Sec. Litig., No. 3-cv-5336, 2010
WL 3522090, at *11 (E.D. Pa. Sept. 3, 2010) (rejecting
Coffman's “insolvency theory” because it
“does not require any form of corrective disclosure and
does not exclude non-fraud factors”).
next argue that Coffman's opinion apportioning the stock
drop should be excluded as unreliable and flawed because
Coffman improperly relies on non-public data to apportion the
market's reaction to public information and that his
apportionment methodology is inherently arbitrary.
See Doc. No. 349 at 13, 15.
Coffman's Disaggregation Opinion
opines that based upon his event study analysis, “there
was a statistically significant abnormal decline in the
market price of SEAS Common Stock on August 13, 2014 of $9.37
per share after controlling for market and industry effects
on that day.” Coffman Rpt. ¶ 10. Experts must also
“separate the loss caused by the disclosure of
corrective information . . . from loss caused by the
disclosure of other company-specific information.”
In re REMEC Inc. Sec. Litig., 702 F.Supp.2d at
1273-74. In his report, Coffman explains the steps he took to
disaggregate other company-specific information (which he
refers to as transitory factors) that was included in the
August 13, 2014 alleged corrective disclosure. See
Coffman Rpt. ¶¶ 100-29. These transitory factors
include, among other things, weather patterns and school
schedules. See id., Ex. 2. Coffman determined that
“the most that the transitory items could reasonably
contribute to the abnormal stock price decline on August 13,
2014 was $0.25 per share (the full EBITDA miss in the current
quarter).” Id. ¶ 107. “Notably,
neither the Company nor analysts cited any of these items as
substantially contributing to the lowered earnings guidance
going forward.” Id. “[N]o less than
$9.12 per share of the stock price decline on August 13, 2014
is due to the more permanent information disclosed that
from these transitory factors, SeaWorld's disclosure
identified two factors driving SeaWorld's
underperformance: (1) demand pressures related to
legislation; and (2) competitive issues relating to new
attraction offerings at competitor destination parks. See
Id. ¶¶ 108-09. Coffman attributes an
additional $1.60 to competitive forces. See Id.
¶ 129. Coffman ultimately concludes that the
remaining $7.52 of the drop is attributable to
Blackfish. See id.
Reliance on Non-Public Data
Defendants argue that “Coffman's apportionment
analysis improperly relies on non-public information to which
the market did not have access.” Doc. No. 349 at 13.
Defendants contend that Coffman's use of non-public data
contradicts opinions he rendered earlier in this case. In
opposition, Plaintiffs maintain that Coffman properly
considers internal documents as one factor in his
disaggregation opinions, as Defendants “cite no
economic or legal authority to support this bizarre
contention.” Doc. No. 375 at 16-17.
class certification stage, Coffman concluded that SeaWorld
traded in a semi-strong efficient market, whereby “all
widely available public information is . . . reflected in a
security's current market price.” Coffman Dep. at
45. At his deposition, Coffman confirmed that he still
believes this to be the case. In his expert report, Coffman
determines, upon review of attendance data produced in
discovery, that the impact of competition as a confounding
factor is reasonably isolated to be a concern of SeaWorld
Orlando. Coffman Rpt. ¶ 111.
As shown in Exhibit 3, [XXXXX] As a
result, it is reasonable to assume that the remaining 64.9%
of the attendance decline cannot be explained by some
unidentified competitive pressure in those markets that is
not acknowledged by the Company or analysts. For that reason,
I find that, at a minimum, 64.9% of the remaining price
decline of $9.12 (or $5.92 per share) is attributable to
Blackfish and related publicity.
Coffman's consideration of non-public data as one factor
in forming his loss causation opinions does not contradict
opinions he previously rendered. Notably, Coffman does not
opine that all privately available information is
reflected in SeaWorld's stock price. Moreover, courts
have approved loss causation analysis premised in part on
internal company documents. See Smilovits v. First Solar
Inc., 119 F.Supp.3d 978, 995 (D. Ariz. 2015),
aff'd Mineworkers' Pension Scheme v. First Solar
Inc., 881 F.3d 750, 754 (9th Cir. 2018); In re Xerox
Corp. Sec. Litig., 746 F.Supp.2d 402, 413 (D. Conn.
2010) (finding the expert's disaggregation analysis
proper where he also considered public statements and an
further contend that Coffman's use of non-public data is
unsound “because he uses it to draw conclusions that
are inconsistent with public information available to the
market.” Doc. No. 349 at 14. Defendants rely on
statements made by SeaWorld's then-CEO Jim Atchison in
the earnings call. Specifically, Atchison explained that he
thinks “the competitive stakes and a bit of the arms
race in Southern California and Orlando, in particular, those
two markets, is not going to wane.” Doc. No. 347, Ex.
10 at 7. He further indicated, “[w]e've
talked a little bit about the legislation in California that
affected our San Diego park.” Id. Defendants
claim that Coffman ignored these statements and arbitrarily
allocated half of the attendance declines in Orlando and the
entirety of attendance declines in the San Antonio and San
Diego parks to Blackfish. See Doc. No. 349
report, Coffman cites to a several statements made by
Atchison from the earnings call transcript. See
Coffman Rpt. ¶¶ 109-10. Upon review of all
statements made on August 13, 2014, Coffman observed:
I am not aware of a rationale for a sudden structural shift
in competition in the California market in the 2nd Quarter
2014 and the first half of 2014. While the Company cited to
competitive pressure from Disney's new Fantasyland in
Orlando and Universal's opening of Harry Potter at its
Orlando park, there was no mention of a fundamental change in
competition in the San Diego market (or the San Antonio
market where it has a third orca park). Analysts did not
discuss specific competitive forces outside of Orlando in
their post-release reports, either.
Id. ¶ 110.
contrary to Defendants' contention, Coffman did not
ignore Atchison's statements. Rather, Coffman observed
that the market interpreted Atchison's statements in a
different way than Defendants. “Whether [Coffman] chose
the correct factors and gave them the correct weight is for
the jury.” S.E.C. v. Moshayedi, No.
SACV1201179JVSMLGX, 2013 WL 12129282, at *6 (C.D. Cal. Nov.
Coffman's use of internal information, as one factor in
his analysis, does not justify exclusion of his testimony.
See In re REMEC Inc. Sec. Litig., 702 F.Supp.2d at
1220 (finding that the defendants can test the weight of an
expert's opinion by vigorous cross examination and
presentation of contrary evidence at trial).
Defendants argue that Coffman's methodology apportioning
only $1.60 of SeaWorld's August 13, 2014 stock price drop
to competition is “impermissibly arbitrary.” Doc.
No. 349 at 15. Defendants contend that Coffman
assumes-without support-that attendance at three SeaWorld
parks is the only factor that can explain SeaWorld's
stock price decline on August 13, 2014. See id.
reaching his conclusion that $1.60 of the price drop is
attributable to competition, Coffman notes that in the press
release or earnings call transcript, SeaWorld “did not
ascribe any specific measure of attendance impact to
competitive pressures or identify a new competitive pressure
that was not previously disclosed.” Id. ¶
112. Coffman concludes that the impact of competition as a
confounding factor is reasonably isolated to be a concern for
SeaWorld Orlando. Id. ¶ 111. [XXXXX] See Id. “As a result, it is
reasonable to assume that the remaining 64.9% of the
attendance decline cannot be explained by some unidentified
competitive pressure in those markets that is not
acknowledged by the Company or analysts.” Id.
“For that reason, I find that, at a minimum, 64.9% of
the remaining price decline of $9.12 or ($5.92 per share) is
attributable to Blackfish and related
remaining 35.1% (or $3.20 per share of the $9.12 price
decline), “there is the potential for the price
movement to be confounded by competitive effects, ” but
any confounding impact “is far from certain, and may
not exist at all[.]” Id. ¶ 112. For
example, Wells Fargo published a report after the August 13
statement indicating that “[w]hile competitive
pressures appear modestly greater than thought (Orlando),
media fallout from extreme animal rights activists in CA
appear to have materially impacted June San Diego
attendance/admission results.”). Coffman Rpt. ¶
112 n.110. Moreover, internal records and deposition
testimony revealed that demand pressures related to
Blackfish were also observed as causing some measure
of 2014 performance decline. See Id. ¶ 113.
explains that “[b]ecause the Company recognized impact
from negative publicity at Orlando in the first half of 2014,
it is appropriate to apportion some of the negative Orlando
performance to that factor, as opposed to apportioning it
entirely to competition.” Id. at 114. However,
“to ensure that I am not overstating the artificial
inflation, I attribute 50% (or $1.60) of the stock price
decline that is specifically attributable to Orlando ($3.20
per share) to the corrective information about
Blackfish and the remainder to competitive
forces.” Id. ¶ 127. Notably, Coffman
acknowledges that “[t]he finder of fact, based on the
totality of the evidence, could select an alternative
percentage . . . and attribute the entire decline in Orlando
to competitive pressures (which I believe is far too
conservative and inconsistent with the facts)[.]”
Id. ¶ 128. As a result, “the artificial
inflation per share dissipated on August 13, 2014 would be
$5.92 per share” as opposed to $7.52 per share.
point to several weaknesses in Coffman's analysis.
[XXXXX] See Doc. No. 349 at
17-18. However, “Defendants may explore these perceived
deficiencies through cross examination.” In re
REMEC Inc. Sec. Litig., 702 F.Supp.2d at 1219; see
also Primiano, 598 F.3d at 564 (“Shaky but
admissible evidence is to be attacked by cross examination,
contrary evidence, and attention to the burden of proof, not
exclusion.”). Coffman supports his conclusions with
facts from the Company's statements made on August 13,
2014, analyst reports, attendance data, and economic
principles. As such, Coffman's disaggregation opinions
are admissible. See In re REMEC Inc. Sec. Litig.,
702 F.Supp.2d at 1218 (concluding that the expert
“explains the steps of his analysis and justifies the
numbers he used; consequently, his expert opinion is
Constant Dollar Inflation Methodology
Defendants assert that Coffman's Constant Dollar
Inflation (“CDI”) methodology used to calculate
Plaintiffs' damages is unreliable. See Doc. No.
349 at 19. Defendants challenge Coffman's decision to
apply the CDI method and contend that application of the CDI
method in this case is illogical because inflation of
SeaWorld's stock could not have been constant during the
Class Period. See Id. at 20-25.
Coffman's Explanation of the CDI Methodology
indicates that in his experience, “the most commonly
used and accepted methodology for quantifying artificial
inflation throughout a class period attributable to fraud is
the Constant Dollar Inflation method.” Coffman Rpt.
¶ 130. The CDI method “assumes that the per share
artificial inflation that is dissipated in response to a
corrective disclosure should be carried back in time to the
actionable misstatements and/or omissions.”
Id. This methodology implies “that the
artificial inflation per share was $7.52 throughout the Class
explains that “no method of back-casting inflation is
perfect” but he carefully considered whether using the
CDI method in this case is reasonable, compared to the
“constant percentage” inflation approach. See
Id. ¶ 130 n.120. Coffman selected the CDI method
because “the general nature and substance of what
Plaintiffs allege was misrepresented to the market did not
change over the Class Period.” Id. ¶ 131.
Plaintiffs allege that Blackfish and its related
publicity negatively impacted SeaWorld's brand and
reputation with the public and as a result, impacted
SeaWorld's business. See Id. Plaintiffs claim
that Defendants made statements to the market that such
impacts were not occurring and were in fact, contradicted by
information Defendants possessed. See id.
Plaintiffs' allegations as true, the most reliable method
available to determine the impact this information would have
on the stock price at any time during the Class Period is to
observe the impact it actually had when it was ultimately
disclosed-namely August 13, 2014.” Id. ¶
132. “At any point in time during the Class period, the
corrective information would have signaled to investors, as
it did on August 13, 2014, an impairment to SeaWorld's
brand and reputation and therefore a structural issue . . .
in value and demand for the Company's premier parks and
products.” Id. ¶ 135. “If the
market came to understand that SeaWorld's business . . .
was negatively impacted by Blackfish, it is a
reasonable expectation that the Company's stock price
would suffer significantly.” Id. ¶ 136.
Coffman opines that the CDI method “may be overly
conservative if the trier of fact accepts that SeaWorld's
business was being impacted by Blackfish and related
publicity at the start of the Class Period.”
Id. ¶ 137. “An earlier acknowledgement by
Defendants at a time when public awareness of
Blackfish was relatively less than the date of the
Corrective Disclosure may have caused a more significant
decline in the Company's stock price.” Id.
Reliability of CDI
first argue that “Coffman's use of constant dollar
inflation to conclude that SeaWorld's stock was inflated
by the same amount at all times during the Class Period is
based on untenable assumptions and is the product of a
flimsy, unsupported methodology.” Doc. No. 349 at 21.
In opposition, Plaintiffs assert that Defendants misstate
Coffman's testimony and have failed to demonstrate that
Coffman's testimony is unreliable. See Doc. No.
375 at 21-23.
Coffman identifies facts to support his decision to utilize
CDI in this case, notes that analysts were focused on whether
Blackfish was impacting SeaWorld even prior to the
first day of the Class Period, and explains why CDI would be
more reliable under the facts of this case than constant
percentage inflation, another commonly utilized theory in
securities fraud cases. See Coffman Rpt.
¶¶ 130-136. Moreover, the constant dollar inflation
method is commonly used to calculate 10b-5 damages. See
In re Novatel Wireless Sec. Litig., 2013 WL 12247558, at
*3 n.3. Additionally, the jury is ultimately responsible for
deciding whether CDI, or another calculation, is a reasonable
measurement of damages. See id.; cf. In re
Nuveen Funds/City of Alameda Sec. Litig., 2011 WL
1842819, at *7 (excluding expert's loss causation opinion
utilizing the constant dollar inflation method because expert
conceded “he did not perform any computations or
statistical analysis to determine whether there was a causal
relationship between the corrective disclosure and the
supposed decline in the value of the Notes.”). As such,
Coffman's decision to use the CDI method in this case is
sufficiently reliable for purposes of Daubert.
See In re REMEC Inc. Sec. Litig., 702 F.Supp.2d at
1218 (finding that an expert's explanation of the steps
of his analysis and justification for his conclusions render
his testimony admissible under Daubert).
Inflation During Class Period
Defendants maintain that Coffman offers no explanation as to
why a disclosure that Blackfish was impacting
SeaWorld at any point during the Class would result in a
$7.52 stock drop. See Doc. No. 349 at 19. Coffman,
however, explains that “[i]nherent in any Company
acknowledgement of a Blackfish impact would be that
SeaWorld's corporate brand and corporate reputation had
been harmed. Damage to a corporate brand or a company's
reputation constitutes a structural change in value and
demand for the company's products or services, rather
than a one-time temporary setback.” Coffman Rpt. ¶
136. In response to disclosure of harm to its reputation,
“the market would understand that SeaWorld faced a
structural change in demand and therefore reasonably
anticipate that SeaWorld's financial results would be
negatively impacted” for a longer period of time.
further assert that Coffman's CDI method fails to take
into account that any impact from Blackfish on
SeaWorld could not have affected SeaWorld's business in
exactly the same magnitude each day of the Class Period.
See Id. at 22. Plaintiffs, however, point out that
this argument “confuses viewership with market
reaction[.]” Doc. No. 375 at 23. There is no evidence
in the record that SeaWorld's stock price reaction to an
admission of Blackfish impact would track viewership
levels by consumers. Additionally, Coffman explains that the
market may have reacted more adversely to an admission of a
Blackfish impact earlier in the Class Period when
public awareness of Blackfish was relatively less
than on August 13, 2014. See Coffman Rpt. ¶
the Court finds that Defendants' challenges to
Coffman's CDI method do not support exclusion under
Daubert. These challenges can be addressed on cross
examination. See In re REMEC Inc. Sec. Litig., 702
F.Supp.2d at 1220 (finding that the defendants can test the
weight of an expert's opinion by vigorous cross
examination and presentation of contrary evidence at trial).
Additionally, whether CDI best approximates damages is a
decision best left to the jury. See In re Novatel
Wireless Sec. Litig., 2013 WL 12247558, at *7.
Coffman explains the steps of his analysis and applies
accepted methodologies in reaching his conclusions.
Accordingly, the Court DENIES
Defendants' motion to exclude the opinions and testimony
of Chad Coffman. See Alaska Rent-A-Car, Inc., 738
F.3d at 969-70 (“The district court is not tasked with
deciding whether the expert is right or wrong, just whether
his testimony has substance such that it would be helpful to
Motion to Exclude Expert Opinion and Testimony of Dr. James
move to exclude the testimony of Dr. James L. Gibson, who was
retained by Plaintiffs to provide expert testimony on: (1)
whether the empirical data possessed and analyses performed
by SeaWorld support Defendants' public statements
regarding Blackfish and its related publicity; and
(2) whether the attendance variance analyses and
goodwill-related analyses of operation impact conducted by
SeaWorld were methodologically sound and support
Defendants' public statements regarding
Blackfish and its related publicity. See
Doc. No. 353.
is the President of Research Services International and a
political science professor at Washington University in St.
Louis. Doc. No. 353-2 (hereinafter “Gibson Rpt.”)
¶ 2. Gibson has forty (40) years of experience in
analyzing empirical data. See Id. ¶ 3. Gibson
received his Ph.D. in Political Science from the University
of Iowa, a Master of Arts in Political Science from the
University of Iowa, and a Bachelor of Arts degree in
Political Science, with highest honors, from Emory
University. See Gibson Rpt., Appx. B. Defendants do
not challenge Gibson's qualifications.
divides his report into two sections. In Section II.A, Gibson
lists the alleged false or misleading statements made by
Defendants, summarizes empirical data in SeaWorld's
possession from January 2013 through May 2014, and then
triangulates this information with events at SeaWorld
and its internal communications. See Gibson Rpt.
¶¶ 19-201. [XXXXX] See
Id. ¶ 9. [XXXXX] See
Id. ¶¶ 202-311. [XXXXX] See Id. ¶ 10.
also submitted an Expert Rebuttal Report on March 1, 2019.
See Doc. No. 353-3 (hereinafter “Gibson Reb.
Rpt.”). In his rebuttal report, Gibson responds to the
opinions set forth in Randolph Bucklin's expert report.
See Id. ¶ 2. Gibson employs the same
methodology as his affirmative report and concludes that the
expert report of Randolph Bucklin, dated January 22, 2019,
does not “lead [Gibson] to question or change”
the analyses or conclusions in his affirmative report.
Id. ¶ 2.
contend that Gibson's opinions are inadmissible under
Daubert because: (a) he did not conduct any
quantitative or econometric analyses and his opinions are not
based on a reliable objective method; (b) Gibson's report
consists of improper summary testimony that requires no
expertise to interpret; and (c) Gibson's opinions
regarding attendance analyses fail Daubert's
“fit” requirement because they answer a factually
or legally irrelevant question. Doc. No. 353 at 2. The Court
addresses Defendants' arguments in turn.
first assert that Gibson's triangulation method
“involves nothing more than assembling summary
narratives based on materials selected for him by
counsel” and is unreliable. Doc. No. 353 at 7. In
opposition, Plaintiffs assert that Gibson's conclusions
are “based on the methodology of empirical
analysis.” Doc. No. 372 at 7. Plaintiffs further
contend that after Gibson summarized his conclusions based on
empirical analysis, he applied triangulation to support his
conclusions. See Id. at 13. In reply, Defendants
argue that Gibson's empirical analysis “does not
describe a reliable methodology whose application would turn
[his] opinions into something other than argumentative
evidentiary summaries.” Doc. No. 413 at 4.
preliminary matter, Plaintiffs assert that “Defendants
do not challenge” Gibson's empirical analysis
methodology. Doc. No. 372 at 7. Contrary to Plaintiffs'
contention, Defendants challenge Gibson's alleged failure
to employ any valid underlying methodology. That Defendants
do not use the specific phrase “empirical
analysis” in the underlying motion is not dispositive.
Moreover, Gibson's report seldom uses the phrase
“empirical analysis” or “empirical
analyses.” Additionally, Gibson does not define this
methodology in his report. Rather, in their opposition brief,
Plaintiffs explain that “[e]mpirical analysis is the
systematic and rigorous analysis of empirically observable
information.” Doc. No. 372 at 7. As such, Defendants
neither ignore nor have waived any objection to this
to the heart of Gibson's empirical analysis, Plaintiffs
assert that “Gibson analyzed empirical evidence
SeaWorld possessed during the Class Period and determined
whether it did or could have supported Defendants' causal
statements regarding Blackfish and its related
publicity.” Doc. No. 372 at 12. Specifically, Gibson
reviewed statements made during the Class Period, deposition
transcripts, and documents produced in discovery in reaching
his conclusions. See Gibson Rpt. ¶¶
12-311. Defendants contend “[i]t cannot be that Dr.
Gibson's review of the evidentiary record becomes
reliable expert testimony simply because as a political
scientist Dr. Gibson might conduct a similar qualitative
review of a body of facts or data in the course of his
academic research.” Doc. No. 413 at 5.
claim that the court in Hsingching Hsu v. Puma
Biotechnology, Inc., No. SACV 15-00865 AG (JCGx), 2018
WL 4945703 (C.D. Cal. Oct. 5, 2018), relied on
“precisely the [same] type of expert testimony”
as that offered by Gibson. Id. at 12 n.17. In
Hsingching Hsu, the court denied the defendants'
motion to exclude the expert testimony of Dr. Lavin, a
biostatistician, who opined on: (1) whether the
“Kaplan-Meier curves-a graphical depiction of the
effectiveness of a drug compared to a placebo”- were
narrowing or separating; (2) whether there is a record that
the defendants ever assessed the Kaplan-Meier curves beyond
two years before the investor call; and (3) whether
biostatisticians generally keep “audit trails” of
reports they run. 2018 WL 4945703, at *7.
reliance on Hsingching Hsu, however, is misplaced.
Most importantly, unlike Gibson, Dr. Lavin did not apply an
empirical analysis methodology. Rather, Dr. Lavin applied his
own biostatistical analysis of the shape and movement of the
Kaplan-Meier curves over a two-year period. See
Hsingching Hsu v. Puma Biotechnology, Inc., No. SACV
15-00865 AG (JCGx) (Doc. No. 408-1, Ex. 1). While Dr.
Lavin's opinion that the Kaplan-Meier curves were
actually narrowing over time related to whether the
defendants' statements were false or misleading, Dr.
Lavin performed multiples analyses of the two-year
Kaplan-Meier curves and then formed his conclusion. See
Id. Gibson, however, performs no such technical analysis
in reaching his conclusions. Unlike Dr. Lavin, whose
testimony was necessary to assist the trier of ...