Counterfactual Keys to Causation and Damages in Shareholder Class Actions
Frederick C. Dunbar
U.S. Securities and Exchange Commission
NERA Economic Consulting
January 15, 2009
Wisconsin Law Review, Vol. 2009, No. 2, 2009
Introducing quantitative rigor into the legal process has been proposed to reduce error and uncertainty in litigation. One area of law that would seem to be a candidate for such formalism would be proving causation. Yet most legal scholars balk at the idea that the legal principles of causation are based on anything as precise as, say, scientific causation. We believe that counterfactual analysis, a relatively recent trend in the philosophy of causation that is being applied in the social sciences, has a role in understanding causation in at least one important area of the law-shareholder class actions. The increasingly strict standards imposed by the Supreme Court over the past twenty years, culminating in the Dura decision, can be understood in the context of counterfactual analysis establishing loss causation. This approach then has important implications for estimating damages in shareholder class actions.
Number of Pages in PDF File: 38
Keywords: securities, causation, event studies, damages, materiality, class actions
JEL Classification: K22
Date posted: February 21, 2009
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