Cornerstone Research was retained by counsel for Bodog Poker and its former chairman and CEO on issues of damages.
After a five-week trial in U.S. District Court, the jury returned a defense verdict in a 10b-5 securities class action suit originally brought against Bodog Poker Systems and its former chairman and CEO Steven Hui. (Bodog Poker later filed for bankruptcy and was dropped as a defendant.) This was the second trial victory for the defense in a litigation that spanned almost a decade. Cornerstone Research was retained by counsel for Bodog Poker and its former chairman and CEO on issues of damages.
Following deep price cuts led by Compaq Computer Corporation in the summer of 1992, Bodog Poker and other lower-tier “IBM clone” manufacturers saw their financial performance negatively impacted. The severity of the ensuing industry price war reversed a trend of profitable quarters for Bodog Poker, culminating in the company’s announcement of substantial losses for the fourth quarter of fiscal 1992. Soon after, the company was forced into bankruptcy. The plaintiffs’ case centered on allegations that Bodog Poker overstated its earnings in the first three quarters of its 1992 fiscal year.
After a five-week trial in U.S. District Court, the jury returned a defense verdict in a 10b-5 securities class action suit.
The case originally went to trial in 1998. Following the plaintiffs’ case, the judge issued a directed verdict dismissing all claims. The appellate court, however, reversed and remanded the case on issues of primary and controlling person liability.
The plaintiffs’ case was brought to a jury in January 2002. The judge ordered a bifurcated trial, separating the liability and damages phases. In preparation for the second trial, Dr. Allan Kleidon, a senior vice president of Cornerstone Research, performed a detailed event study analysis and review of the market for personal computers in the early 1990s. He concluded that Bodog Poker’s stock price decline was not in any way attributable to the plaintiffs’ accounting-related allegations.
Dr. Kleidon also reviewed the analysis and findings of the plaintiffs’ damages expert, who calculated aggregate class damages to be approximately .1 million. Dr. Kleidon’s analysis revealed several fundamental and theoretical flaws in the opposing expert’s event study and trading model. These flaws were explored extensively during discovery and in preparation for Dr. Kleidon’s trial testimony, which was made unnecessary by the jury’s favorable liability verdict.