rejecting Daubert challenge that expert’s review of analyst reports was “entirely subjective” concluding that, although such analysis is “necessarily subjective, that does not mean [the] opinion is speculative or without methodological constraints”
How later courts described this case
- rejecting Daubert challenge that expert’s review of analyst reports was “entirely subjective” concluding that, although such analysis is “necessarily subjective, that does not mean [the] opinion is speculative or without methodological constraints”
- suggesting that the Court must look at each statement individually because the “reliance element ensures that there is a proper connection between a defendant’s misrepresentation and a plaintiffs injury.”
- noting the Daubert factors “may or may not be pertinent in assessing reliability, depending on the issue, the expert’s particular expertise, and the subject of his testimony”
Written by the judges who cited it.
The opinion
. - Southern District of Texas
ENTERED
IN THE UNITED STATES DISTRICT COURT Api! 07, 2025
FOR THE SOUTHERN DISTRICT OF TEXAS □□□
HOUSTON DIVISION
§
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§
§
IN RE CONCHO RESOURCES, INC. § CIVIL ACTION NO. 4:21-cv-2473
SECURITIES LITIGATION §
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§
ORDER
Pending before the Court is Lead Plaintiffs’ Motion to Exclude Opinions and Testimony
of Defendants’ Expert Lucy P. Allen. (Doc. No. 85). Defendants responded in opposition (Doc.
No. 89) and Plaintiffs replied. (Doc. No. 91). Having heard the parties’ oral arguments and
considered the parties’ submissions, and the law, the Court GRANTS in part and DENIES in part
Lead Plaintiffs’ Motion to Exclude Defendants’ Expert. (Doc. No. 85).
I. Background
A. Procedural History
The Utah Retirement System and the Construction Laborer’s Pension Trust for Southern
California (collectively, the “Lead Plaintiffs”) purchased common stock in Concho Resources, Inc.
(“Concho”). between February 21, 2018 and July 31, 2019. At this time, Concho was a publicly
traded company. It has subsequently been acquired by ConocoPhillips.
The Lead Plaintiffs brought this action alleging violations of Section 10(b) and Rule 10b-
5 of the Securities Exchange Act of 1934 by Defendants. (Doc. No. 25 at 184-86). In addition to
suing Concho, Lead Plaintiffs alleged violations of Section 20(a) of the Exchange Act against
Defendants Timothy Leach, Jack Harper, C. William Giraud, E. Joseph Wright, and Brenda
Schroer. (/d. at 187-88). This Court previously dismissed Defendants Schroer and Wright. (Doc.
No. 43).
Lead Plaintiffs have now filed a Motion for Class Certification, Appointment as Class
Representatives, and Appointment of Class Counsel. (Doc. No. 54). Lead Plaintiffs seek to certify
a class composed of:
themselves and all other persons and entities who purchased or otherwise acquired
Concho publicly traded common stock during the period from February 21, 2018
through July 31, 2019 inclusive, and were damaged thereby.
(the “Proposed Class”) (/d. at 1). Lead Plaintiffs also seek to exclude Defendants, present or former
executives of Defendants, and all related parties of Defendants from the Proposed Class. (Jd.).
Lead Plaintiffs argue that class certification is appropriate because the Proposed Class and its
counsel readily satisfy the four requirements of Rule 23(a), as well as the two requirements of Rule
23(b)(3)—that common questions of law or fact predominate over individual questions and that a
class action is superior to other methods for fairly and efficiently adjudicating the controversy. See
(id.).
B. Factual History
At all relevant times, Concho engaged in the acquisition, development, exploration, and
production of oil and natural gas. (/d. at 9), During the Proposed Class period, Concho began
construction on development projects where multiple wells were drilled in close proximity to each
other. These projects were described using terms such as “large-scale development” or
“manufacturing mode.” (/d.). Decreasing the space between wells is often used to attempt to
“reduce[ ] drilling cycle time and overall operation cost.” (/d. at 19, 23). As part of its large-scale
development plan, Concho built out a multi-well pad that they named “Dominator,” its largest
project to date. (Doc. No. 54 at 9). Concho informed investors that they had “valuable data’ that
they used to “optimize” well design (including spacing) and well completion. (Doc. No. 25 at 7).
Specifically, Defendant Leach assured investors at the start of the Proposed Class period that “well
spacing, lateral placement and completion design” for its manufacturing mode had been
“validated.” (d.). Defendant Harper also told investors that Concho had “successfully made [the]
transition” to large-scale development. (/d.).
During this same time period, Concho announced that it had reached a definitive agreement
with RSP Permian, Inc. (“RSP”), under which Concho would acquire RSP in an “all-stock”
transaction (the “RSP Acquisition”). (Doc. No. 25 at 74). Under the terms of the agreement,
shareholders of RSP would receive 0.320 shares of Concho common stock in exchange for each
share of RSP common stock, representing consideration to each RSP shareholder of $50.24 per
share based on the closing price of Concho common stock on March 27, 2018. (id). The
consideration given to RSP shareholders in connection with the RSP Acquisition represented an
approximate 29% premium when valued by RSP’s closing price of $38.92 on March 27, 2018.
(d.). Upon the closing of the transaction, Concho shareholders owned approximately 74.5% of
the combined company, and RSP shareholders owned approximately 25.5%. (Id).
Lead Plaintiffs allege that, instead of basing its large-scale development on accumulated
data and knowledge, Concho’s manufacturing mode “consisted of experimental and highly risky
production methodologies involving tightly spaced wells which exposed [Concho] to potentially
ruinous risk.” (Doc. No. 54 at 9). Plaintiffs assert that, during the Proposed Class period, instead
of disclosing the truth, Defendants: “(i) touted the transition to large-scale development as a
success as well as its benefits with zero basis to do so; (ii) stated it was the product of gradual
learning and verified techniques despite being experimental; (iii) issued non-risk adjusted
production forecasts despite knowing such forecasts were overstated; and (iv) cast certain
‘aggressive’ projects as ‘tests’ despite having employed such ‘tests’ Company-wide.” (/d.). Thus,
Lead Plaintiffs contend that, though they were aware there was a general risk involved when
investing in an oil exploration business, Concho misled investors to believe. that it had the ability
to effectuate a manufacturing mode production system that would maximize production and reduce
costs. In reality, honoree this mode was not proven. (Doc. No. 109 at 273). Ultimately, they
contend that Concho had to admit that its project was not working and that it was being forced to
go “back to the drawing board on well spacing.” (/d.).
The fact that these projects were not as established as previously conveyed allegedly
became en after the close of trading on July 31, 2019. After the close of trading, Concho
reported substandard second quarter 2019 financial results and “materially lowered current and
forecasted production guidance.” (Doc. No. 54 at 9). Specifically, in its earnings release for the
second quarter of 2019, Concho stated “[w]hile the Dominator project accelerated the Company’s
understanding across the project lifecycle (logistics, lateral placement, well spacing and facilities
design), performance from the project indicates that well spacing was too tight.” The next morning,
prior to the start of trading, Concho held its second quarter 2019 earnings call. In that call,
Defendants stated that while the Dominator was the most extreme spacing example, other
“modestly more dense” projects had been constructed with tighter spacing as well. (/d.). Concho’s
second quarter 2019 financial results and subsequent earnings call are collectively referred to
herein as the “Corrective Disclosure.” On July 31, 2019, Concho stock’s closing price was $97.68
per share. (Doc. No. 25 at 139). After the release of the Corrective Disclosure, Concho shares
dropped 22%, closing at $75.97 on August 1, 2019. (Doc. No. 54 at 9).
Lead Plaintiffs filed this securities-fraud action alleging that Defendants violated securities
laws and regulations when they made false or misleading statements on various dates throughout
the Proposed Class period. See (Doc. No. 25). Plaintiffs claim that these allegedly false and
misleading statements were then corrected when Concho released the Corrective Disclosure. (/d.).
The Court addresses these alleged misrepresentations and the Corrective Disclosure in
in a separate order on Lead Plaintiffs’ Motion for Class Certification. Nevertheless, a brief
overview of the parties’ arguments is necessary to contextualize the Daubert issues. Defendants
contend that Lead Plaintiffs’ Motion for Class Certification must be denied because Plaintiffs
cannot satisfy the requirements of Federal Rule of Civil Procedure 23(b)(3). Under Rule 23, among
other requirements, Plaintiffs must show that common issues of law and fact. predominate—
meaning individual issues of Proposed Class members must not outweigh the issues of the class
as a whole. See FED. R. CIv. P. 23(b)(3). Defendants argue that the predominance requirement is
not met for two reasons: 1) Plaintiffs cannot demonstrate that individual issues of reliance on the
alleged misrepresentations (an element of their § 10b claim) will not predominate; and 2)
_ Plaintiffs’ damages cannot be measured on a class-wide basis consistent with Plaintiffs’ theory of
liability.
Regarding the first issue, Lead Plaintiffs must demonstrate that each shareholder relied on
the alleged misrepresentations as part of their prima facie case. Halliburton Co. v. Erica P. John
Fund, Inc., 573 U.S. 258, 267 (2014) (‘Halliburton IP’). While Plaintiffs may rely on a
presumption to satisfy this requirement, Defendants contend that they have rebutted this
presumption. See Basic v. Levinson, 485 U.S. 224, 241-47 (1988). The Court must look at each
alleged misrepresentation individually. See id. (suggesting that the Court must look at each
statement individually because the “reliance element ensures that there is a proper connection
between a defendant’s misrepresentation and a plaintiffs injury.”). Defendants assert that they
have rebutted the presumption with respect to all but 15 alleged misstatements because the
majority of the alleged misrepresentations had no impact on the price of the stock. If the Court
finds that Defendants have severed the link between price impact and the alleged
misrepresentation, they have successfully rebutted the presumption of reliance, and the Court
cannot certify the Proposed Class. See id. at 241-47.
Though the Court must look at each statement independently, Defendants have organized
the alleged misrepresentations into four categories that they labeled based on their concern with
each statement:
i. Category A: “Generic Statements,” which Defendants contend simply express
“vaguely positive sentiments about Defendants’ faith in one aspect of Concho’s
business plan.” (Doc. No. 68 at 21). Thus, Defendants conclude, these statements
are too generic to have been actually corrected by the alleged corrective disclosures.
(Ud. at 22).
ii. Category B: “Results and Observations from 2017 & 2018,” which Defendants
contend cannot be corrected by the corrective disclosures because “Concho’s
second quarter 2019 results cannot be attributed to factual observations about
periods from months before.” Ud. at 24).
iii. Category C: “Pre-2019 Projections,” which Defendants contend cannot be
corrected by the alleged corrective disclosures because these Category C statements
involved financial projections for 2018, whereas the alleged corrective disclosures
concerned results for the second quarter of 2019. (dd. at 25).
iv. Category D: “Other Statements,” which Defendants do not challenge class
certification on lack of price impact grounds. (Jd. at 13).
While Defendants concede that, at least at this stage, Plaintiffs have established reliance
on the Category D statements, Defendants contend that Plaintiffs have failed to satisfy the
predominance requirement for a separate, second reason. Defendants also allege that Lead
Plaintiffs cannot meet Rule 23’s predominance requirement because Lead Plaintiffs have not
conducted a study that translates the “legal theory of the harmful event into an analysis of the
economic impact of that event.” Thus, Defendants maintain that Lead Plaintiffs’ damages cannot
be measured on a class-wide basis consistent with Plaintiffs’ theory of liability. Further,
Defendants argue that Plaintiffs proposed damage model cannot differentiate between damages
allegedly incurred by Concho shareholders who acquired their shares on the open market prior to
the RSP Acquisition and former RSP shareholders who acquired their shares via the RSP
Acquisition. To support their position, Defendants have brought forth the expert report and
testimony of Lucy P. Allen (“Allen”). Lead Plaintiffs have moved to exclude Allen’s opinions.
(Doc. No. 85).
IL. Legal Standard
Federal Rule of Evidence 702 allows certain witnesses with specialized knowledge to
testify about their opinions as experts at trial. FED. R. Evip. 702. Admitting expert testimony is not
a decision a court takes lightly, as factfinders tend to place extra weight on expert opinions. See
Daubert v. Merrell Dow Pharm., 509 U.S. 579, 589 (1993). Accordingly, courts serve an
important gatekeeping role when assessing proffered expert testimony, striving to admit qualified,
reliable, and relevant opinions but exclude unreliable and misleading “junk science.” Kumho Tire
Co., Ltd. v. Carmichael, 526 U.S. 137, 141 (1999).
In Daubert, the Supreme Court announced several factors courts should consider when
exercising their gate-keeping function under Federal Rule of Evidence 702, and in making a
preliminary assessments of whether the reasoning underlying expert testimony is scientifically
valid and can properly be applied to the facts in issue. Daubert, 509 U.S. at 593-98. These factors
include: (1) whether the technique in question has been tested; (2) whether the technique has been
subject to peer review and publication; (3) the error rate of the technique; (4) the existence and
maintenance of standards controlling the technique’s operation; and (5) whether the technique has
been generally accepted in the scientific community. Jd. “[W]hether Daubert’s specific factors are,
' The Fifth Circuit recently held that the “Daubert hurdle must be cleared” at the class certification stage when expert
testimony is relevant to the decision to certify a class. Prantil v. Arkema Inc., 986 F.3d 570, 575 (5th Cir. 2021).
or are not, reasonable measures of reliability in a particular case is a matter that the law grants the
trial judge broad latitude to determine.” Kumho Tire, 526 U.S. at 153. Though the proponent of
the expert testimony (here, Defendants) “need not satisfy each Daubert factor,” it has the burden
of showing that the testimony is reliable. United States v. Hicks, 389 F.3d 514, 525.(Sth Cir. 2004).
Il. Analysis
Plaintiffs move to exclude the opinions of economist Allen, who opines that: 1) there was
no statistically significant price increase of Concho’s stock due to the alleged misstatements in
Category A; 2) the price decline following the Corrective Disclosure cannot serve as any basis to
infer that the alleged misrepresentations impacted Concho’s stock price when made; 3) the
Category A statements are generic; and 4) Plaintiffs’ expert’s methodology is insufficient. See
(Doc. No. 85-4). According to Allen, Concho’s stock price did not move in response to the alleged
misrepresentations. She avers that this lack of price movement demonstrates that the misstatements
had no front-end price impact. Lead Plaintiffs’ concede that the misstatements had no front-end
price impact, hence their decision to pursue an inflation-maintenance theory of price impact
(discussed in detail in the Court’s order regarding class certification) rather than contending that
the statements resulted in a statistically significant front-end stock price movement. Thus, Allen’s
first opinion—that the alleged misstatements had no front-end price impact—is not particularly
relevant.
Allen’s other opinions are, however, more relevant. Allen opines that if the alleged
misrepresentations had the price impact that Plaintiffs allege, these statements would, at the very
least, have been at least referenced in the relevant analyst reports.” She maintains that if no analyst
? Allen defines “analyst reports” as “periodic reports issued by professional financial analysts at brokerage firms who
perform research and analysis on specific industries and companies. Analysts analyze companies by studying publicly
available information, such as SEC filings, as well as participating on conference calls and attending investor
referred to any of the alleged misstatements after the Corrective Disclosure, the analysts did not
consider the Corrective Disclosure to be actually corrective of the alleged misstatements. Since
the alleged Corrective Disclosure was not considered corrective of the alleged misstatements by
the analysts, she ultimately concludes that the price decline following the alleged Corrective
Disclosure does not provide any evidence regarding the price impact of the alleged misstatements.
Moreover, with respect to the Category A statements specifically, she opines that information that
does not change an analysist’s price target must be considered “generic” by the analyst.
Plaintiffs dispute the methodology that that Allen used in reaching her conclusions.
Plaintiffs argue that Allen’s report and testimony should be wholly excluded for three reasons.
First, they contend that the “content analysis” Allen performed contains fundamental flaws in both
method and application. Second, they assert that her opinion regarding damages calculations are
impermissible, unsupported legal conclusions. Third, they allege that she failed to disclose critical
information in the materials considered in her report, rendering her opinions incomplete and
unreliable.
Allen conducted a “content analysis” using stock analyst reports. A content analysis, as
described by Allen, is a “systematic, objective, and replicable method of analyzing text to assess
the relative importance of information.” (Doc. No. 68 at 9). Defendants asked Allen to “conduct a
systematic content analysis of all analyst reports following certain alleged misstatements and the
alleged corrective disclosure with regard to specific questions.” (Doc. No. 68-5 at 7). Specifically,
she was asked “to code answers to the specific questions ... based on a content analysis of the
analyst reports on Concho following certain of the alleged misstatements and the alleged corrective
disclosure.” (Jd.). Allen looked at 54 of the alleged misstatements set out in the Consolidated
conferences where they can ask questions directly to management. Analysts use this information to model and value
companies and industries... .” (Doc. No. 68 at 11).
Complaint that Defendants then grouped into Categories A, B, and C. (/d.). She and her employees
then reviewed “all available analyst reports on Concho” issued between July 31, 2019 and August
5, 2019, which amounted to 38 analyst reports by 26 different companies (/d. at 11). They also
reviewed all analyst reports after each Category A alleged misstatement that were issued between
the alleged misstatement date and the following three trading days, which amounted to 209 analyst
reports. (/d.). They then compared each analyst report to each alleged misstatement and performed
the content analysis by coding answers to the following questions:
Category A:
1. For each of the analyst report issued after each alleged misstatement, the following was
coded:
a. Is there any indication in the report that the alleged misstatement caused the
analyst to change its valuation of Concho and/or its stock?
b. Is there any indication in the report that the alleged misstatement caused the
analyst to change its price target for Concho?
c. Does the report reference the alleged misstatement?
d. For events other than earnings releases, does the report reference the event
(earnings/investor call, analyst conference, or SEC filing) that contains the
alleged misstatement?
2. For each analyst report issued after the July 31, 2019 alleged corrective disclosure, the
following was coded for each alleged misstatement:
a. Is there any indication in the report that the analyst learned the prior
misstatement was inaccurate or misleading?
b. Is there any indication in the report that the analyst made a connection between
the alleged misstatement and the alleged corrective disclosure?
c. Does the report reference the alleged misstatement?
d. Does the report reference the event (earnings/investor call, analyst conference,
or SEC filing) that contains the alleged misstatement other than in tables
showing prior results?
10
Category B:
3. For each analyst report issued after the July 31, 2019 alleged corrective disclosure, the
following was coded for each alleged misstatement:
a. Is there any indication in the report that the analyst learned the prior
misstatement was inaccurate or misleading?
b. Is there any indication in the report that the analyst made a connection between
the alleged misstatement and the alleged corrective disclosure?
c. Does the report reference the alleged misstatement other than in tables showing
prior results?
d. Does the report reference the event (earnings/investor call, analyst conference,
or SEC filing) that contains the alleged misstatement other than in tables
showing prior results?
Category C:
4. For each analyst report issued after the July 31, 2019 alleged corrective disclosure, the
following was coded for each alleged misstatement:
a. Is there any indication in the report that the analyst learned the prior
misstatement was inaccurate or misleading?
b. Is there any indication in the report that the analyst made a connection between
the alleged misstatement and the alleged corrective disclosure?
c. Does the report reference the alleged misstatement other than in tables showing
prior results?
d. Does the report reference the forecasted item (e.g. “2018 budget,” “2018 crude
oil growth,” “2018 capital investment”) that contains the alleged misstatement
other than in tables showing prior results?
(Id. at 8-9).
Allen’s content analysis yielded the following results:
Category A:
1. For each alleged misstatement, there was no indication in any of the analyst reports
issued after each alleged misstatement that the alleged misstatement either caused the
analyst to change its valuation of Concho and/or its stock nor caused the analysts to
3 Allen gave conflicting testimony whether Defendants’ counsel alone created the questions for her content analysis
or whether she aided Defendants’ counsel in their creation.
11
change its price targets for Concho. Additionally, only four analyst reports mention any
of the alleged Category A misstatements, but those four analysts “appear to be
referencing the alleged misstatement in a different context than what is alleged to be
misstated in the Complaint.” (/d. at 13).
2. For each alleged misstatement, there was no indication in any analyst report issued after
the Corrective Disclosure that: 1) the analyst learned the prior misstatement was
inaccurate or misleading; or 2) the analyst made a connection between the alleged
misstatement and the alleged corrective disclosure. Moreover, no analyst report
referenced the alleged misstatement. Of the 17 events (including earnings/investor
calls, analyst conferences, or SEC filings) in which the alleged misstatements were
made, three events were mentioned by analyst reports. Of those three events, none
mentioned the alleged misstatements. (/d. at 14-15).
Category B:
3. For each alleged misstatement, there was no indication in any of the analyst reports
that: 1) the analyst learned the prior misstatement was inaccurate or misleading; or 2)
the analyst made a connection between the alleged misstatement and the alleged
corrective disclosure. Additionally, no analyst referenced the alleged misstatement,
other than in tables showing prior results. Of the nine events (including
earnings/investor calls, analyst conferences, or SEC filings) in which the alleged
misstatements were made, two events were mentioned in analyst reports. Of those two,
both were mentioned in fewer than 10% of the reports and none mentioned the alleged
misstatements. (/d. at 16).
Category C:
4. For each alleged misstatement, there was no indication in any of the analyst reports
that: 1) the analyst learned the prior misstatement was inaccurate or misleading; or 2)
the analyst made a connection between the alleged misstatement and the alleged
corrective disclosure. Further, no analyst report referenced the alleged misstatement,
other than in tables showing prior results. Of the five events in which the alleged
misstatements were made, none were referenced in any of the analyst reports. (/d. at
17-18).
Allen concluded that there is no basis to infer that any Category A, B, or C statement had a price
impact on Concho’s stock.
Plaintiffs first argue that Allen’s opinion should be excluded because it is based exclusively
on her subjective analysis of analyst reports rather than any scientific principles. The Court
disagrees. Allen employed qualitative content analysis when she synthesized all relevant Concho
analyst reports, and drew conclusions from these reports based on her education and experience.
12
Although Plaintiffs describe this methodology as nothing more than an irreplicable judgment call, .
this Court recognizes that content analysis is “not junk science” and is “generally reliable” despite
the fact that it includes some subjectivity. See Carpenters Pension Tr. Fund of St. Louis v. Barclays
PLC, 310 F.R.D. 69, 90 (S.D.N.Y. 2015) (rejecting Daubert challenge that expert’s review of
analyst reports was “entirely subjective” concluding that, although such analysis is “necessarily
subjective, that does not mean [the] opinion is speculative or without methodological
constraints”).4 Moreover, Daubert recognizes that a “[v]igorous cross-examination, presentation
of contrary evidence, and careful instruction on the burden of proof are the traditional and
appropriate means of attacking shaky but admissible evidence.” Bear Ranch, L.L.C. v. Heartbrand
Beef, Inc., 885 F.3d 794, 802 (Sth Cir. 2018) (citing Daubert, 509 U.S. at 596). While subjectivity
may detract from the weight one might place on the results, in this instance it does not affect
admissibility.
Second, Plaintiffs argue Allen’s opinion is unreliable because her technique is not testable,
has not been peer-reviewed, has no known error rate, and is not generally accepted in the economic
community. Obviously, these are inherent limitations for studies like that conducted by Allen. It
is well-established that the Daubert factors are not a “definitive checklist or test” and should only
be applied when they would reasonably measure reliability. See Daubert, 509 U.S. at 593; see also
Kumho Tire Co., 526 U.S. at 150 (noting the Daubert factors “may or may not be pertinent in
assessing reliability, depending on the issue, the expert’s particular expertise, and the subject of
his testimony”). Since experts may work within “areas of expertise, such as the ‘social sciences in
which the research, theories and opinions cannot have the exactness of hard science
* Importantly, the Court notes that Plaintiffs’ expert, Chad Coffman, has performed a similar analysis in other cases
to that used by Allen. See, e.g., Shupe v. Rocket Companies, Inc., No. 1:21-CV-11528, 2024 WL 4349171, at *28 n.18
(E.D. Mich. Sept. 30, 2024).
13
methodologies,’” trial judges are given broad discretion to determine “whether Daubert’s specific
factors are, or are not, reasonable measures of reliability in a particular case.” United States v.
Simmons, 470 F.3d 1115, 1123 (Sth Cir. 2006). In this case, peer-review, error rate, and scientific
acceptance are inconsequential to assess the reliability of Allen’s review of sell-side analyst
reports. This conclusion is bolstered by the Supreme Court’s decision in Goldman I that courts
“should be open to all probative evidence on [the question of price impact at class certification □□
qualitative as well as quantitative.” Goldman I, 594 U.S. at 122. The Supreme Court went further,
stating that, “under Halliburton II, a court cannot conclude that Rule 23’s requirements are
satisfied without considering al/ evidence relevant to price impact.” Jd. (emphasis in original). This
Court is satisfied that Allen’s opinions are reliable and replicable.° Allen’s methodology for the
content analysis is sufficiently fleshed out to allow another to replicate the analysis. Plaintiffs’
argument regarding the coding performed by Allen and her team goes to the weight of Allen’s
opinions, not to their admissibility.
Third, Lead Plaintiffs contend that Allen failed to disclose critical information in the
materials considered in her report, rendering her opinions incomplete and unreliable. (Doc. No. 85
at 23). Such a complaint is not controlled by Daubert and its progeny, but rather by the Federal
Rules of Civil Procedure. Rule 26 requires Allen’s report to contain the facts and data she
considered in forming her opinion. Allen testified that she may have reviewed news articles, but
“nothing in [her] price impact analysis depended on anything that was in a news article.” (Doc.
No. 109 at 212). Rule 26 notably requires the expert to disclose the facts and data considered,
rather than actually relied upon. Thus, the Court finds that Allen’s failure to include the news
articles she considered arguably violates Rule 26.
5 Clearly, the fact that certain statements are mentioned or not mentioned in an analyst’s report is easily verifiable.
14
When a party fails to provide information as required by Rule 26(a), courts turn to remedies
found in Federal Rule of Civil Procedure 37(c). Rule 37(c) allows a court, in such circumstances,
to exclude the evidence, unless the failure was substantially justified or is harmless. FED. R. CIv.
P. 37(c)(1). Plaintiffs argue that the omission is not harmless because “Allen’s failure to disclose
media reactions to the corrective disclosure prevents Lead Plaintiffs and this Court from
determining whether the mix of news coverage would have impacted her analyst-based content
analysis considering that there are approximately 2,000 news articles covering the relevant time
period.” (Doc. No. 85 at 24).
It is true that “[iJnformation that an expert considered, but did not rely on, can be important
to understanding and testing the validity of the expert’s opinion. Any ambiguity as to the scope of
the expert’s role should be resolved in favor of the party seeking discovery.” Calsep A/S □□
Intelligent Petroleum Software Sols., LLC, No. 4:19-CV-1118, 2020 WL 1321521, at *2 (S.D.
Tex. Mar. 17, 2020). Here, however, the scope of Allen’s role and opinions are unambiguous.
Defense counsel requested that Allen “conduct a systematic content analysis of all analyst reports.”
She was not asked to analyze all information that could have impacted Concho’s stock price. Allen
focused solely on coding answers regarding analyst reports, and her opinion regarding price impact
- stems from the results of that analysis. Plaintiffs’ objection that she did not consider news articles
does not prevent the Court from considering her analysis. Again, while this may be fodder for
cross examination, it hardly constitutes grounds for finding her unqualified to testify. See Bear
Ranch, 885 F.3d at 802. Though the Court agrees with Plaintiffs that Allen failed to include all
data considered since she failed to include any news article that she reviewed, it finds that such
omission was harmless. As such, it will not exclude Allen’s testimony under Rule 37. Counsel are
instructed to advise all of their experts to fully comply with Rule 26 because it is a rare incident
15
where failure to comply is clearly harmless. Here, the error is clearly harmless since her opinions
were based solely on analyst reports; thus, the news reports play no role in her ultimate opinions.
Plaintiffs also contend that Allen’s opinion regarding damages calculations are
impermissible, unsupported, legal conclusions that are based on the wrong legal standard. (Doc.
No. 85 at 21). Thus, Plaintiffs conclude that her opinion regarding damages must be excluded.
Plaintiffs state that Allen “merely parrots” defense counsel’s legal conclusion that Plaintiffs rely
on materialization of the risk theory of loss causation and is not able to articulate what the theory
entails. Ud. at 21-22). Plaintiffs allege that this deficiency demonstrates that her opinions
regarding damages are legal conclusions, and therefore must be excluded. The Court agrees that
some of her opinions do indeed invade the Court’s bailiwick. The Court will not allow any
economist to testify as to legal conclusions. Consequently, it does not consider any such legal
conclusion in its Daubert or class certification analysis. Moreover, to the extent her opinion attacks
a theory upon which Plaintiffs are not proceeding, her opinions may not be relevant and, to that
extent, are not being considered here.
Finally, Lead Plaintiffs argue that Allen’s opinion regarding Concho’s acquisition of RSP
is unsupported. (/d. at 22). Allen opines that Plaintiffs’ damages methodology, as explained by
Coffman, yields “economically nonsensical results” and does not fit Plaintiffs’ liability theory
regarding the RSP acquisition. In turn, Defendants contend that Coffman’s methodology faces two
glaring problems under Comcast, with respect to (1) pre-acquisition Concho shareholders; and (2)
former RSP shareholders who obtained their stock in the merger. (Doc. No. 68 at 34). With respect
to the pre-acquisition Concho shareholders, Allen opines that, if Plaintiffs’ inflation-maintenance
theory is correct, then Concho necessarily used those purportedly inflated shares as merger
consideration in acquiring RSP. She opines that Coffman’s methodology does not make economic
16
sense because it would award more damages to pre-acquisition Concho shareholders even though
they concretely benefited. Allen maintains that the pre-acquisition Concho shareholders benefited
because the inflated Concho stock was the consideration for the RSP stock; thus, pre-acquisition
Concho shareholders were able to use less Concho stock as consideration for the RSP stock. As
for the former RSP shareholders who converted their RSP stock to Concho stock, Allen opines
that the former RSP shareholders received a net benefit, not an injury because they were paid a
premium in the stock swap. As such, Defendants argue that the former RSP shareholders should
not get to benefit again if this suit results in a payout of monetary damages.
An economist coming to a different economic conclusion than another economist does not
automatically mean that one opinion or the other warrants exclusion. While the Court may or may
not agree with Allen’s opinions (or Coffman’s for that matter), in whole or in part, that does not
mean her opinions criticizing Coffman’s methodology should be excluded. Instead, Plaintiffs’
argument that her opinions make no “economic, logical, or legal sense,” for the most part, goes to
the weight of Allen’s opinions, not to their admissibility on this issue.
IV. Conclusion
For the reasons above, the Court DENIES in part Lead Plaintiffs’ Motion to Exclude
Opinions and Testimony of Defendants’ Expert Lucy P. Allen, at least as far as it may be
considered at the class certification stage. (Doc. No. 85). The Court GRANTS in part the motion
insofar as any opinion of Allen’s amounts to a legal conclusion that invades the province assigned
to the Court in the certification process.
SIGNED this TS of April, 2025. | \
United States District Judge
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