Breece v. Under Armour, Inc.

Filing 388

MEMORANDUM OPINION. Signed by Judge Richard D. Bennett on 4/16/2024. (kb3s, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
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IN RE UNDER ARMOUR
SECURITIES LITIGATION

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Civil Action No. RDB-17-0388

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MEMORANDUM OPINION
The instant securities class action against Defendants Under Armour, Inc. (“Under
Armour”) and Kevin Plank (“Plank”) (collectively, “Defendants”) has been ongoing since
February 10, 2017.

(ECF No. 1.)

A twelve-day jury trial is scheduled to begin on

July 15, 2024. (ECF No. 295.)
This matter comes before the Court on the three (3) motions to exclude expert
testimony and opinions filed by Plaintiffs (ECF Nos. 302, 305, 308), and four (4) motions to
exclude expert testimony and opinions filed by Defendants (ECF Nos. 309, 311, 314, 316)
(collectively with ECF Nos. 302, 305, 308, the “Daubert Motions”). The Court heard oral
argument on the Daubert Motions on April 9, 2024. (ECF No. 387.) As the seven pending
Daubert Motions (ECF Nos. 302, 305, 308, 309, 311, 314, 316) are all DENIED by separate
Order, this Memorandum Opinion expounds upon the Court’s reasoning.
BACKGROUND
This securities class action is scheduled for a twelve-day trial beginning on
July 15, 2024. (ECF No. 295.) The parties’ Daubert Motions concern the parties’ disagreement

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as to whether one of the proposed experts may testify at all1 and whether certain of the
proposed experts’ testimony and opinions should be limited. Specifically, Defendants move
to exclude entirely testimony and opinions of Mark A. Cohen (“Cohen”), Plaintiffs’ proffered
experiential expert on the retail and apparel industry, (ECF No. 314); and Plaintiffs move to
exclude certain testimony of Defendant Under Armour’s proffered rebuttal expert to Cohen,
Laurie Wilson (“Wilson”), (ECF No. 308). Defendants seek to limit the testimony and
opinions of Professor M. Todd Henderson (“Henderson”), Plaintiffs’ proffered expert on
Plank’s trading of Under Armour stock and Plank’s Rule 10b5-1 trading plan, (ECF No. 309);
and Plaintiffs seek to limit the testimony and opinions of Defendant Plank’s proffered rebuttal
expert to Henderson, Wayne Guay (“Guay”), (ECF No. 305). Defendants have also moved
to limit the testimony and opinions of Plaintiffs’ proffered accounting expert D. Paul Regan
(“Regan”). (ECF No. 11.) Lastly, Defendants seek to limit the testimony and opinions of Dr.
Matthew Cain, Ph.D. (“Cain”), Plaintiffs’ proffered market efficiency, materiality, loss
causation, and damages expert, (ECF No. 316); and Plaintiffs seek to limit the testimony and
opinions of Defendant Under Armour’s proffered rebuttal expert to Cain, Paul A. Gompers
(“Gompers”), (ECF No. 302).
STANDARD OF REVIEW
Pursuant to Rule 104(a) of the Federal Rules of Evidence, courts are responsible for
determining “preliminary questions concerning the qualifications of a person to be a witness”

While Defendants’ written submissions requested to exclude entirely the testimony and opinions of Professor
M. Todd Henderson (ECF No. 309) and Matthew D. Cain, Ph.D. (ECF No. 316), Defendants clarified on the
record at the April 9, 2024 hearing that they only sought to limit Henderson and Cain’s testimony. Similarly,
while Plaintiffs’ written submissions requested to exclude Laurie Wilson entirely (ECF No. 308), Plaintiffs
clarified on the record at the April 9, 2024 hearing that they only sought to limit Wilson’s testimony.
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and “the admissibility of evidence.” This includes the admissibility of expert testimony under
Rule 702, which provides:
A witness who is qualified as an expert by knowledge, skill, experience, training,
or education may testify in the form of an opinion or otherwise 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. Pursuant to Rule 702, a properly qualified expert witness may testify
regarding technical, scientific, or other specialized knowledge in a given field if the testimony
would assist the trier of fact in understanding the evidence or to determine a fact in issue, and
the testimony is both reliable2 and relevant.3 United States v. Young, 916 F.3d 368, 379 (4th Cir.
2019). The proponent of the expert testimony in question must establish admissibility by a
preponderance of the evidence. Cooper v. Smith & Nephew, Inc., 259 F.3d 194, 199 (4th Cir.
2001) (citing Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589, 592 n.10 (1993)).
A court’s role in applying Rule 702 is to act as a gatekeeper, ensuring that expert
testimony is relevant and reliable. Daubert, 509 U.S. at 592–93; see also Kumho Tire Co. v.
Carmichael, 526 U.S. 137, 141 (1999) (holding that Daubert’s gatekeeping obligation applies not
only to scientific testimony but to all expert testimony); Bresler v. Wilmington Tr. Co., 855 F.3d

To be reliable, testimony must be grounded “in the methods and procedures of science,” and it must be
something more than subjective belief or unsupported assumptions. Daubert, 509 U.S. at 589–90.
3 Evidence or testimony must be relevant to the extent that it will “assist the trier of fact to understand the
evidence or to determine a fact in issue.” Daubert, 509 U.S. at 591. An expert’s testimony is relevant if it has
“‘a valid scientific connection to the pertinent inquiry.’” Belville v. Ford Motor Co., 919 F.3d 224, 232 (4th Cir.
2019) (citation omitted).
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178, 195 (4th Cir. 2017) (“Under Rule 702 . . . [c]ourts are required to act as ‘gatekeepers’ to
ensure that expert testimony is relevant and reliable.” (quoting Cooper, 259 F.3d at 199)).
However, the Supreme Court did not intend the gatekeeper role to replace the adversary
system or the role of the jury: “[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.” Daubert, 509 U.S. at 596; see United States
v. Moreland, 437 F. 3d 424, 431 (4th Cir. 2006) (recognizing that “expert testimony is subject
to testing by vigorous cross-examination, presentation of contrary evidence, and careful
instruction on the burden of proof”). “[C]onsequently, the rejection of expert testimony is
the exception rather than the rule.” Lipitor (Atorvastatin Calcium) Mktg. v. Pfizer, Inc., 892 F.3d
624, 631 (4th Cir. 2018) (quoting United States v. Stanley, 533 F. App’x 325, 327 (4th Cir. 2013)).
Although Rule 702 allows for a liberal introduction of expert evidence, “courts must
recognize that due to the difficulty of evaluating their testimony, expert witnesses have the
potential to ‘be both powerful and quite misleading.’” Westberry v. Gislaved Gummi AB, 178
F.3d 257, 261 (4th Cir. 1999) (quoting Daubert, 509 U.S. at 595). In Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579 (1993), the United States Supreme Court set forth several
factors for courts to consider in assessing the admissibility of expert testimony: (1) whether
the particular scientific theory has been or can be tested; (2) whether the theory has been
subjected to peer review and publication; (3) the known or potential rate of error; (4) whether
there are standards controlling the method; and (5) whether the technique has gained general
acceptance in the relevant scientific community. Id. at 593–94; see Belville v. Ford Motor Co., 919
F.3d 224, 233 (4th Cir. 2019). The Daubert factors are “neither definitive, nor exhaustive.”

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Cooper, 259 F.3d at 199 (citing Kumho Tire Co., 526 U.S. at 150). Rather, “[t]he district court
must be granted ‘considerable leeway in deciding in a particular case how to go about
determining whether particular expert testimony is reliable.’” United States v. McLean, 695 F.
App’x 681, 684 (4th Cir. 2017) (quoting United States v. Wilson, 484 F.3d 267, 273 (4th Cir.
2007)).
ANALYSIS
I.

Defendants’ Motion to Exclude the Opinions and Testimony of Plaintiffs’
Proposed Expert Mark A. Cohen (ECF No. 314)
Plaintiffs proffer Mark A. Cohen as an experiential expert on the retail apparel business.

Cohen has “over three decades” of experience in the apparel industry, including as Chairman
and Chief Executive Officer (“CEO”) of three different companies. (ECF No. 303-22
*SEALED* at 51–54.) He currently is on Columbia University Business School’s faculty as
Director of Retail Studies and an Adjunct Professor of Retailing. (Id.) Cohen submitted one
report dated April 3, 2023 (ECF No. 303-22 *SEALED*) and a reply report responding to
Under Armour’s retail expert Laurie Wilson dated June 30, 2023 (ECF No. 303-23
*SEALED*).
Defendants have moved to exclude Cohen’s opinions and testimony entirely for failure
to meet the admissibility requirements of Rule 702 and Daubert. (ECF No. 314.) First,
Defendants complain that Cohen offers his own interpretation of selective facts, unsupported
by any meaningful expert analysis. (Id. at 4–7.) This challenge, however, does not go to the
reliability of Cohen’s expert testimony. Cohen is offered as an experiential expert, who may
testify on the basis of either “experience alone” or “experience in conjunction with other
knowledge, skill, training or education.” United States v. Wilson, 484 F.3d 267, 274 (4th Cir.
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2007) (quoting Fed. R. Evid. 702 advisory committee’s notes on 2000 amendments). Such
testimony satisfies the reliability requirement where the expert can “explain how [his]
experience leads to the conclusion reached, why [his] experience is a sufficient basis for the
opinion, and how [his] experience is reliably applied to the facts.” Id. (quoting Fed. R. Evid.
702 advisory committee’s notes on 2000 amendments). Applying this standard, this Court
finds that Cohen has sufficiently explained how his experience in the retail apparel industry
informed his testimony in this case. With respect to Defendants’ challenge to Cohen’s
testimony as “his own interpretation of selective facts,” Defendants are free to explore this
issue on cross-examination. With respect to Defendants’ argument that Cohen’s testimony is
unsupported by any meaningful expert analysis, this Court is satisfied that Cohen performed
extensive analysis to prepare his reports. (ECF No. 303-22 *SEALED* at 39–50; 303-23
*SEALED* at 38–39; 303-6 *SEALED*.)
Second, Defendants argue that his opinions are “flawed” and “unreliable,” improperly
speculating about Defendants’ state of mind (ECF No. 314 at 8–11), witness credibility (id. at
11), Defendants’ sales practices (id. at 12–14), and areas outside of his area of expertise—
specifically, disclosures (id. at 14–16). Defendants’ arguments seeking to exclude Cohen on
the bases that he improperly speculates as to witness credibility, Under Armour’s sales
practices, and disclosures mischaracterize Cohen’s proffered testimony. With respect to
Defendants’ argument seeking to exclude Cohen’s testimony and opinions because he
improperly speculates about Defendants’ state of mind and intentions, this Court emphasizes
that care must be taken during trial to avoid crossing boundaries that would amount to
impermissible legal conclusions or opinions about Defendants’ state of mind or intentions.

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With that reservation, Defendants’ Motion to Exclude the Opinions and Testimony of
Plaintiffs’ Proposed Expert Mark A. Cohen (ECF No. 314) is DENIED.
II.

Plaintiffs’ Motion to Exclude the Opinions and Testimony of Defendant
Under Armour, Inc.’s Proposed Expert Laurie Wilson (ECF No. 314)
Defendant Under Armour proffers Laurie Wilson as a rebuttal expert to Cohen.

Wilson has over three decades of professional experience leading strategy and planning at large
retailers, and currently serves as Chief Supply Chain Officer and Head of Planning, Allocation,
and Pricing at JCPenney. (ECF No. 310-1 *SEALED* at 5–7.) Wilson submitted one report
dated May 15, 2023 (ECF No. 310-1 *SEALED*).
In their written submissions, Plaintiffs move to exclude Wilson’s testimony and
opinions entirely. (ECF No. 310 *SEALED* at 4–16.) At oral argument, Plaintiffs clarified
that they do not seek to exclude Wilson’s testimony entirely, limiting their challenge to
Wilson’s general opinions regarding pull forward practices. Specifically, Plaintiffs take issue
with paragraphs 90–96 of Wilson’s report, wherein she offers “an illustrative, but not
exhaustive, list of why a manufacturer-requested pull forward may occur.” (ECF No. 310-1
*SEALED* ¶¶ 90–96.) While Plaintiffs argue that such opinions are irrelevant and do not
satisfy Daubert or Rule 702, this Court is unpersuaded that exclusion of Wilson’s opinions on
pull forwards is necessary or appropriate. As such, Plaintiffs’ Motion to Exclude the Opinions
and Testimony of Defendant Under Armour, Inc.’s Proposed Expert Laurie Wilson (ECF No.
314) is DENIED.
III.

Defendants’ Motion to Exclude the Opinions and Testimony of Plaintiffs’
Proposed Expert Professor M. Todd Henderson (ECF No. 309)

Plaintiffs proffer M. Todd Henderson, the Michael J. Marks Professor of Law at the

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University of Chicago Law School, (ECF No. 303-25 *SEALED* at 2–3), as an expert
concerning Plank’s trading of Under Armour stock and Plank’s Rule 10b5-1 trading plan.4
Henderson submitted two reports: one report dated April 3, 2023 (ECF No. 303-25
*SEALED*); and a reply report to Plank’s proposed rebuttal expert Wayne Guay (ECF No.
303-26 *SEALED*).
In their written submissions, Defendants moved to exclude Henderson’s testimony
and opinions entirely. (ECF No. 309 at 9–19.) At oral argument, Defendants clarified that
they do not seek to exclude Henderson’s testimony entirely, limiting their challenge to
Henderson’s opinion on Mr. Plank’s intent, motives, and state of mind, (ECF No. 309-1 at 9–
11; ECF No. 349 at 7–9); Henderson’s “‘hallmarks’ for a legitimate 10b5-1 plan,” (ECF No.
309-1 at 11–17; ECF No. 349 at 9–12); Henderson’s “available-to-sell” metric, (ECF No.
309-1 at 17–19; ECF No. 349 at 13–14); and Henderson’s opinion that 10b5-1 plans are often
abused.
With respect to Henderson’s “available-to-sell” metric, Plaintiffs clarified on the record
that Henderson does not intend to use this metric to compare Plank’s sales to other CEOs’
sales. Rather, Henderson only intends to use this metric to compare Plank to himself.
Defendants concede that Henderson’s “available-to-sell” metric—limited to this context—is
appropriate.5 As such, this Court need not address this issue further.
With respect to Henderson’s hallmarks for a legitimate 10b5-1 plan, Defendants

Under Rule 10b5-1, corporate insiders, such as Plank, can set up trading plans to sell company shares at
predetermined times and amounts to avoid accusations of illegal insider trading. See 17 C.F.R. § 240.10b5-1(c)
(stating that it is an affirmative defense in insider trading cases that the defendant’s purchases or sales were
made pursuant to a “written plan for trading securities”).
5 Defendants’ concern was that Henderson would use this “available-to-sell” metric to compare Plank’s sales
to the sales of other CEOs using CEOs’ total shareholdings.
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concede that Henderson’s hallmarks have been used for background in other cases, see, e.g., In
re Twitter, Inc. Sec. Litig., No. 16-cv-05314-JST, 2020 U.S. Dist. LEXIS 252718, at *20–23 (N.D.
Cal. Apr. 20, 2020); Smilovits v. First Solar, Inc., No. CV12-0555-PHX-DGC, 2019 U.S. Dist.
LEXIS 221424, at *9–17 (D. Ariz. Dec. 27, 2019); In re Novatel Wireless Sec. Litig., No. 08cv1689
AJB (RBB), 2012 U.S. Dist. LEXIS 160555, at *7–14 (S.D. Cal. Nov. 8, 2012), but dispute
Henderson’s application of the hallmarks to the trading activity at issue in this case, contending
that other courts have not allowed Henderson to go that far. While Henderson was not able
to discuss the trading activity at issue in the Twitter case, it does not appear that Smilovits and
Novatel were so limiting. To be sure, Professor Henderson will not be permitted to offer his
legal opinions or conclusions as part of his testimony, and Defendants may object at trial if
they believe Henderson crosses the line into such opinions. The same is true with respect to
any potential testimony and opinions about Plank’s intent, motives, and state of mind. Lastly,
to the extent that Henderson intends to opine that 10b5-1 plans are often abused, Henderson
is precluded from offering this opinion at trial. With those reservations, the Defendants’
Motion to Exclude the Opinions and Testimony of Plaintiffs’ Proposed Expert Professor M.
Todd Henderson (ECF No. 309) is DENIED.
IV.

Plaintiffs’ Motion to Exclude Certain Testimony and Opinions of Defendant
Kevin A. Plank’s Proposed Expert Wayne Guay (ECF No. 305)
Defendant Plank proffers Wayne Guay, a faculty member of the Wharton School of

Business at the University of Pennsylvania for over 25 years, (ECF No. 306-1 *SEALED* at
4), as a rebuttal expert to Henderson (“Henderson”). Guay submitted one report dated
May 15, 2023 (ECF No. 306-1 *SEALED*).
Plaintiffs move to exclude two paragraphs contained in Guay’s report—paragraphs 72
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and 80. (ECF No. 305.) In brief, Plaintiffs complain that Guay purports to set forth “the
three key SEC requirements of 10b5-1 plans,” but he ignores the “good faith” requirement
set forth in Rule 10b5-1(c)(ii), warranting exclusion under Fed. R. Evid. 702. (ECF No. 306
*SEALED* at 3–5.) This Court is unpersuaded. Simply stated, there is nothing in the two
challenged paragraphs which is “patently incorrect,” and Guay does not deny the existence of
a “good faith” requirement under Rule 10b5-1. As such, there is no reason to exclude either
challenged paragraph and Plaintiffs’ Motion to Exclude Certain Testimony and Opinions of
Defendant Kevin A. Plank’s Proposed Expert Wayne Guay (ECF No. 305) is DENIED.
V.

Defendants’ Motion to Exclude Certain Opinions and Testimony of
Plaintiffs’ Proposed Expert D. Paul Regan (ECF No. 311)
Plaintiffs proffer D. Paul Regan, a CPA with over 50 years of accounting and auditing

experience, (ECF No. 303-28 *SEALED* at 9), as an expert on disclosure rules and
regulations issued by the U.S. Securities and Exchange Commission (“SEC”) and U.S.
Generally Accepted Accounting Principles (“GAAP”). Regan submitted an expert report
dated April 3, 2023 (ECF No. 303-28 *SEALED*) and a reply report responding to Under
Armour’s accounting expert Michael F. Maloney dated June 30, 2023 (ECF No. 303-29
*SEALED*).
According to Defendants, several of Regan’s opinions are inadmissible, including his
opinions on pull forwards (ECF No. 313 *SEALED* at 4–11) and “tone at the top” (id. at
11–13.) Defendants further argue that Regan’s “legal opinions regarding Under Armour’s
purported obligations under the terms of its arrangement with Quetico” should be excluded
as Regan—a non-attorney—is unqualified to offer such an opinion. (Id. at 13–14.) Lastly,
Defendants contend that Regan should not be permitted to testify about “unsubstantiated”
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allegations of GAAP violations. (Id. at 14–15.) During oral argument, Plaintiffs confirmed
Regan’s Item 303 materiality opinions and the “unsubstantiated” allegations of GAAP will be
excluded. Thus, this Court need not address these arguments further.
This Court is unpersuaded that Regan’s pull forward quantifications are unreliable and
invade the province of the jury, and further unpersuaded that Regan has offered legal opinions
on the Quetico deal. Considering Regan’s “tone at the top” opinion, this Court agrees that
this opinion invades the authority of the trier of fact to determine for itself the plain meanings
of the evidence presented at trial. As such, Regan is precluded from testifying as to the “tone
at the top.” With that reservation, the Defendants’ Motion to Exclude the Opinions and
Testimony of Plaintiffs’ Proposed Expert D. Paul Regan (ECF No. 311) is DENIED.
VI.

Defendants’ Motion to Exclude the Opinions and Testimony of Plaintiffs’
Proposed Expert Matthew D. Cain, Ph.D. (ECF No. 316)
Plaintiffs proffer Dr. Matthew Cain, Ph.D. as their market efficiency, materiality, loss

causation, and damages expert. Cain is a Senior Fellow at the Berkeley Center for Law and
Business where he teaches courses and conducts research related to finance, economics,
accounting, law, and business. (ECF No. 303-19 *SEALED* at 7.) Cain submitted two
reports relevant to the instant motion—one report dated April 3, 2023 (ECF Nos. 303-19
*SEALED*, 303-20 *SEALED*); and a reply report to Defendant Under Armour’s rebuttal
expert Paul A. Gompers dated June 30, 2023 (ECF No. 303-21 *SEALED*).
According to Defendants, several of Cain’s opinions are inadmissible, including: (1) his
opinions related to loss causation, (ECF No. 316-1 at 5–10); (2) Cain’s inflation estimates and
damages, (id. at 10–14); and (3) his opinions related to economic materiality, (id. at 14–16).
This Court first considers the admissibility of Cain’s opinions related to loss causation.
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To study and opine on the stock price movements for Under Armour over the Class Period
and on relevant days, Cain performed an event study. (ECF No. 303-19 *SEALED* ¶¶ 40–
113.) It is well-established that event studies are a common method of establishing loss
causation:
The tool most often used by experts to isolate the economic losses caused by
the alleged fraud is the “event study.” An event study is a statistical regression
analysis that examines the effect of an event on a dependent variable, such as a
corporation’s stock price. For securities-fraud purposes, the “event” analyzed
is the disclosure of the alleged fraud to the market.
See In re Apollo Grp. Inc. Sec. Litig., 509 F. Supp. 2d 837, 844 (D. Ariz. 2007) (internal citations
omitted); see also City of Cape Coral Mun. Firefighters’ Ret. Plan v. Emergent Biosolutions, Inc., 322 F.
Supp. 3d 676, 688 (D. Md. 2018); SEC v. Jacoby, No. CCB-17-3230, 2022 U.S. Dist. LEXIS
59959, at *5–6 (D. Md. Mar. 30, 2022); Smilovits, 2019 U.S. Dist. LEXIS 221424, at *19; City of
Ann Arbor Emps.’ Ret. Sys. v. Sonoco Prods. Co., 827 F. Supp. 2d 559, 571 (D.S.C. 2011). Cain’s
event study identifies statistically significant movements in Under Armour’s stock price;
identifies the Under Armour-specific news that caused Under Armour’s stock price to change;
quantifies the amount of the daily stock price movement in Under Armour’s stock price caused
by the Under Armour-specific news by controlling for general market and industry factors;
and analyzes the news that caused the stock price movements to determine whether, and if so,
how it related to the alleged fraudulent misstatements and omissions. (ECF No. 303-19
*SEALED* ¶¶ 40–113.)
Defendants do not challenge Cain’s event study; rather, Defendants contend that
Cain’s opinions on loss causation are unreliable because he failed to “conduct[] . . . analysis to
establish the necessary predicate of his conclusions regarding foreseeability—i.e.., what was

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the specific information that should have been disclosed earlier and how would that
information have impacted the ‘timing, level, and risk of expected future cash flows’ at
different points in the Class Period.” (ECF No. 316-1 at 7.) While Defendants critique Cain’s
opinions as “rest[ing] on the flawed opinion that the specific dollar amount of investor losses
was foreseeable at the start of the Class Period,” 6 Defendants have not provided a basis for
excluding Cain’s opinions on loss causation. Cain is well-qualified and applies a generally
accepted methodology for determining loss causation. Such procedural critiques of Cain’s
methodology—which, to be clear, do not concern reliability—are more appropriately explored
during cross-examination.
Briefly considering Defendants’ argument that Cain relies on unsupported
assumptions, suggesting “the assumptions [he] ascribes to Plaintiffs are neither present in the
[Third Amended Complaint] nor consistent with Plaintiffs’ theory of the case,” (ECF No.
316-1 at 8–10), “the Court must look to Plaintiffs, not Defendants, for the nature of their
liability case.” Smilovits, 2019 U.S. Dist. LEXIS 221424, at *30. Plaintiffs claim they can prove
their case and support Cain’s opinion that the full amount of the fraud-related inflation was in
the stock from the start of the Class Period. As such, the jury must assess the validity of Cain’s
conclusions.
Turning to Cain’s inflation estimates and damages, Defendants contend that Cain “fails
to reliably apply the constant dollar method because he offers no reliable basis for his opinion
that the allegedly concealed information had the same value to investors as the corrective

This Court finds it prudent to note that Cain merely opines that if Plaintiff proves their fraud allegations, then
it was foreseeable at the time of the alleged misstatements that when the relevant truth became known through
partial disclosures, the market values of Under Armour’s stock would fall. (See ECF No. 303-19 ¶¶ 44–45.)
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disclosures and remained constant throughout the Class Period . . . assum[ing] that the ‘nature
of the misrepresented and/or omitted information did not change during the Class Period’
insofar as ‘Plaintiffs expect to prove that Defendants knew, or recklessly disregarded, that both
prior to and during the Class Period Under Armour’s customer demand was declining and
revenue growth deteriorating.’”

(ECF No. 316-1 at 11–12 (quoting ECF No. 303-19

*SEALED* ¶ 116).) According to Defendants, Cain was required to assess “whether the
magnitude of the alleged decline in demand that was allegedly known at the beginning of the
Class Period was the same as the magnitude of the alleged decline in demand that was
ultimately revealed on the alleged corrective disclosure dates,” and because he did not, his
assumption that the nature of the misrepresented and/or omitted information did not change
during the Class Period is unreasonable and unsupported. (Id. at 12.)
To evaluate the level of artificial inflation in the stock price attributable to the fraud on
each day of the Class Period, Cain applied the “constant dollar” method. (ECF No. 303-19
*SEALED* ¶ 115.) According to Cain, this method is “commonly relied upon” and “used by
a wide variety of experts in matters such as this, and in [his] experience, is often advocated by
defense experts.” (Id. (citing Jeff G. Hammel & B. John Casey, Sizing Securities Fraud Damages:
“Constant Percentage” on Way Out?, NEW YORK L.J. (2009))); see also Baker v. SeaWorld Ent., Inc.,
423 F. Supp. 3d 878, 908 (S.D. Cal. 2019).

This method is calculated by working

chronologically backward from the disclosures of the relevant truth and cumulating the
artificial inflation in the stock price on each day. (ECF No. 303-19 *SEALED* ¶¶ 114–126.)
At bottom, this Court is satisfied that Cain’s constant dollar inflation method is
sufficiently reliable. As Defendants concede, (ECF No. 356 at 2), courts commonly accept

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the constant dollar inflation method. See, e.g., Baker, 423 F. Supp. 3d at 908 (“[T]he constant
dollar inflation method is commonly used to calculate 10b-5 damages.”). And, as in Baker,
because “the jury is ultimately responsible for deciding whether [constant dollar inflation], or
another calculation, is a reasonable measurement of damages,” Cain’s “decision to use the
[constant dollar inflation] method in this case is sufficiently reliable for purposes of Daubert.”
Id. To the extent that Defendants contend that there is evidence in the record to show that
the magnitude of the fraud fluctuated throughout the Class Period, the remedy is not
exclusion, but “[v]igorous cross-examination, presentation of contrary evidence, and careful
instruction on the burden of proof.” Daubert, 509 U.S. at 596.
Lastly, Defendants argue that Cain’s opinions on economic materiality should be
excluded because it usurps the role of the judge and the jury and will confuse and mislead the
jury. (ECF No. 316-1 at 14–16.) Plaintiffs note that it is permissible for experts to opine “on
the concept of materiality in the field of economics,” as Cain does here. (ECF No. 332
*SEALED* at 21–22 (citing Baker v. SeaWorld, Ent., Inc., 423 F. Supp. 3d 878, 898–99 (S.D.
Cal. 2019)).) Plaintiffs ask that if the Court finds that the phrase “economic materiality” risks
confusion, the Court should simply instruct Cain to describe his opinion as “economic
importance.” (Id.) While this Court sees no reason to exclude Cain’s opinions on economic
materiality, this Court agrees that, to avoid confusion, Cain should describe his opinions as
relating to economic “importance” as opposed to economic “materiality.”

With that

reservation, the Defendants’ Motion to Exclude the Opinions and Testimony of Plaintiffs’
Proposed Expert Matthew D. Cain, Ph.D. (ECF No. 316) is DENIED.

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VII.

Plaintiffs’ Motion to Exclude Certain Opinions and Testimony of Defendant
Under Armour, Inc.’s Proposed Expert Paul A. Gompers (ECF No. 302)

Defendant Under Armour proffers Paul A. Gompers, the Eugene Holman Professor
of Business Administration at Harvard Business School, as rebuttal expert to Cain. Gompers
submitted one report dated May 15, 2023 (ECF No. 304-1 *SEALED*).
Plaintiffs move to exclude two paragraphs contained in Gompers’ report—paragraphs
8 and 46. (ECF No. 305.) In brief, Plaintiffs complain that Gompers’ report “contains
inaccurate statements of law with respect to loss causation[,] set[ting] forth a standard for loss
causation that conflicts with the standard articulated in controlling Fourth Circuit precedent.”
(ECF No. 304 *SEALED* at 2 (citing ECF No. 304-1 *SEALED* ¶¶ 8, 46)). “Because
Gompers’s opinion, by introducing an incorrect loss causation standard, would (i) usurp the
role of the Court and fail to help the jury, and (ii) mislead the jury, confuse the issues, and
unfairly prejudice Plaintiffs—without any countervailing probative value—the Court should
exclude ¶¶ 8 and 46 of the Gompers [r]eport and order [Defendants] not to elicit similar
testimony from Gompers at trial.” (Id. at 2.)
Considering whether Gompers sets forth an incorrect legal standard, to prove a
violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Plaintiffs must
establish: (1) a material misrepresentation (or omission); (2) scienter (i.e., a wrongful state of
mind; (3) a connection with the purchase or sale of a security; (4) reliance, often referred to in
cases involving public securities markets (fraud-on-the-market cases) as “transaction
causation;” (5) economic loss; and (6) loss causation (i.e., a causal connection between the
material misrepresentation and the loss). Dura Pharms., Inc. v. Broudo, 544 U.S. 336, 341–42
(2005) (internal citations omitted). The parties’ dispute over paragraphs 8 and 46 of the
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Gompers’ Report (ECF No. 304-1 *SEALED*) involves the sixth element, loss causation.
According to Plaintiffs, Gompers’ Report is inconsistent with the Fourth Circuit’s loss
causation standard.7 According to Defendants, the Gompers’ challenged opinions relate to
damages, not liability.
As the Fourth Circuit explained in Singer v. Reali, 883 F.3d 425 (4th Cir. 2018),
[T]he ultimate loss causation inquiry under either the corrective disclosure
theory or the materialization of a concealed risk theory is the same: whether a
“misstatement or omission concealed something from the market that, when
disclosed, negatively affected the value of the security.” That is, pursuant to
each theory, the plaintiff must show “that the loss caused by the alleged fraud
results from the ‘relevant truth . . . leak[ing] out.’”
Id. at 446 (quoting In re Vivendi, S.A. Sec. Litig., 838 F.3d 223, 261–62 (2d Cir. 2016)). “[T]o
establish 10b-5 liability, a plaintiff need only prove that defendant’s misrepresentation was a
substantial cause of the loss by showing ‘[a] direct or proximate relationship between the loss
and the misrepresentation.’ ” Miller v. Asensio & Co., 364 F.3d 223, 232 (4th Cir. 2004) (quoting
Gasner v. Bd. of Supervisors, 103 F.3d 351, 360 (4th Cir. 1996)). “On the other hand, recovering
out-of-pocket damages based on the market price of a security . . . ‘require[s] elimination of
that portion of the price decline that is the result of forces unrelated to the wrong,’ so as to
limit recovery to ‘actual damages on account of the act complained of.’” Id. (quoting In re
Exec. Telecard, Ltd. Sec. Litig., 979 F. Supp. 1021, 1025 (S.D.N.Y. 1997); 15 U.S.C. § 78bb(a)).
Plaintiffs’ arguments mischaracterize Gompers’ opinions as relating to establishing the

Plaintiffs are mainly concerned with that Gompers “sets forth his own purported standard for establishing
loss causation that would incorrectly burden Plaintiffs with identifying some ‘but-for disclosure’ that
Defendants should have made to investors during the class period. (ECF No. 304 *SEALED* at 4.) Plaintiffs
criticize paragraphs 8 and 46 as “seek[ing] not only to set forth a legal standard for loss causation, but also to
narrowly prescribe what a plaintiff must do to meet that standard[,] . . . [which] is inconsistent with the Fourth
Circuit’s approach to loss causation.” (Id. at 4–5.)
7

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legal element of loss causation. According to Gompers, he has not opined, and does not
intend to opine at trial, that identification of but-for disclosures is a necessary component for
establishing the loss causation element of a Rule 10b-5 claim. (ECF No. 331-1 at 16–17, 19–
20.) Because paragraphs 8 and 46 are appropriately limited to the issue of assessing damages,
Gompers’ opinions do not conflict with Fourth Circuit law. Accordingly, Plaintiffs’ Motion
to Exclude Certain Testimony and Opinions of Defendant Under Armour, Inc.’s Proposed
Expert Paul A. Gompers (ECF No. 302) is DENIED.

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CONCLUSION
For the reasons stated above as well as on the record at this Court’s April 9, 2024
hearing, Defendants’ Motion to Exclude the Opinions and Testimony of Professor Mark A.
Cohen (ECF No. 314) is DENIED; Plaintiffs’ Motion to Exclude the Testimony and
Opinions of Defendant Under Armour, Inc.’s Proposed Expert Laurie Wilson (ECF No. 308)
is DENIED; Defendants’ Motion to Exclude the Opinions and Testimony of Professor M.
Todd Henderson (ECF No. 309) is DENIED; Plaintiffs’ Motion to Exclude Certain
Testimony and Opinions of Defendant Kevin A. Plank’s Proposed Expert Wayne Guay (ECF
No. 305) is DENIED; Defendants’ Motion to Exclude Certain Opinions and Testimony of
D. Paul Regan (ECF No. 311) is DENIED; Defendants’ Motion to Exclude the Opinions and
Testimony of Matthew D. Cain, Ph.D. (ECF No. 316) is DENIED; and Plaintiffs’ Motion to
Exclude Certain Testimony and Opinions of Defendant Under Armour, Inc.’s Proposed
Expert Paul A. Gompers (ECF No. 302) is DENIED. A separate Order follows.

Dated: April 16, 2024

/s/
Richard D. Bennett
United States Senior District Judge

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