Stadium Capital (“Stadium”), the Lead Plaintiff in this class action lawsuit, has sued Co-Diagnostics (“CoDx”), its CEO Dwight Egan, and its CFO Brian Brown, for allegedly making false or misleading statements in violation of the Securities Exchange Act of 1934.
Defendants filed a motion to exclude the testimony of Stadium’s expert witness, Chad W. Coffman under Rule 702 and Daubert standards.
Finance Expert Witness
Chad William Coffman is the President of Peregrine Economics, a Chicago based firm that specializes in the application of economics, finance, statistics, and valuation principles to questions that arise in a variety of contexts, including, as here, litigation.
He holds a Bachelor’s Degree in Economics with Honors from Knox College and a Master’s of Public Policy from the University of Chicago. He is also a CFA charter-holder.
Discussion by the Court
Defendants filed a motion to exclude Coffman’s testimony because he allegedly failed to analyze and account for confounding factors essential to determining loss causation.
Defendants argued that Coffman’s expert opinion is inadmissible because it fails to account for the “axiomatic” requirement of “adequately accounting for obvious alternative explanations.” They then argued that expert testimony on loss causation requires an accounting of confounding factors that Coffman did not provide.
They pointed to three confounding issues that Coffman allegedly failed to disaggregate in his testimony on loss causation: (1) the financial results for the second half of the second quarter of 2022, (2) forward-looking statements about uncertain future sales and demand, and (3) the announcement of delays for the initial clinical trial of an at-home, point-of-care PCR test.
Analysis
The Court held that Coffman’s testimony is reliable and thus admissible. First, he used the common and accepted method of an event study, which determined that the corrective disclosure caused a “statistically significant negative price movement in [CoDx’s] Common Stock beyond the 95% confidence level (as well as beyond the 99% confidence level).” That was after “controlling for market and industry factors,” as required. Second, Coffman stated in his report that he “also considered and analyzed the degree to which information arguably unrelated to the corrective information (i.e., confounding information) potentially impacted the stock price over the two-day trading period.” He noted that he “did not identify any confounding information.” Indeed, the most obvious cause of the over-30% price drop was the news about substantially decreased Logix Test sales and what that fact implied about future sales, not information about those low sales remaining stable for the second half of the quarter, another announcement about continued uncertainty surrounding future demand, or another announcement that the at-home PCR test wasn’t quite ready yet.
Coffman testified at his deposition that the “confounding” information was either already baked into the market (or would have been if defendants had told the truth on their May call), or it was immaterial. So there wouldn’t be any material “confounding” information to consider.
Held
The Court denied Defendants’ motion to exclude Chad Coffman’s expert testimony.
Key Takeaway
The Defendants can try to rebut Coffman’s testimony or otherwise mitigate potential damages by showing that their “confounding” information contributed materially to the price drop. But the Court determined that Coffman’s testimony “can be helpful to the jury” as it evaluates those arguments. It is not required that an expert categorically exclude each and every possible alternative cause in order to render the proffered testimony admissible.
Case Details:
| Case Caption: | Stadium Capital Llc V. Co-Diagnostics, Inc. |
| Docket Number: | 1:22cv6978 |
| Court Name: | United States District Court, New York Southern |
| Order Date: | January 14, 2026 |
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