This is a consolidated action for securities fraud brought by Lead Plaintiff Los Angeles County Employees Retirement Association on behalf of a putative class of investors in the Ohio-based electrical utility company FirstEnergy Corporation. Plaintiffs alleged violations of the Securities Exchange Act of 1934 and the Securities Act of 1933 by FirstEnergy, its named officers and directors, and a group of underwriters, in connection with the Ohio House Bill 6 scandal.
W. Scott Dalrymple was retained as an expert witness on behalf of Plaintiffs, and submitted an expert report in June 2022 analyzing whether FirstEnergy’s common stock traded in an efficient market and addressing whether damages could be calculated using a common methodology. Defendants filed a motion to exclude Dalrymple as an expert.
Defendants did not challenge Dalrymple’s qualifications, nor did they challenge the reliability of an event study methodology generally. Instead, the issue advanced by Defendants is whether Dalrymple has sufficiently explained how he would or could apply his proposed methodology to the facts as alleged in the Complaint.
Plaintiffs argued that Dalrymple has reliably applied his proposed technique to the facts of the case and has offered a reasonable view of constant inflation that could, at any rate, rest on assumptions of liability at this stage in the case.
Economics Expert Witness
William Scott Dalrymple is an economist and a CFA charter holder with extensive experience in economic, financial, and statistical analyses. During his career, he has worked on issues relating to the analysis of economic damages involving securities litigation, business valuation, structured finance, financial derivatives, antitrust, intellectual property, and breach of contract.
Moreover, Dalrymple holds a Master of Science in Economics from the London School of Economics and Political Science and a Bachelor of Business Administration in Finance and Business Honors from the University of Texas at Austin.
Discussion by the Court
To begin with, Defendants did not contest the testing, peer review and publication, or acceptance of event study methodologies generally; instead, they attempt to undermine the possible accuracy of Dalrymple’s proposed methodology in this particular instance. But Defendants advance this argument by misconstruing Dalrymple’s testimony and recharacterizing Plaintiffs’ theory of the case.
Plaintiffs have presented a viable, consistent, and classwide approach to damages. Their theory is that Defendants “concealed corrupt conduct,” causing “FirstEnergy’s stock to trade at an inflated price throughout the Class Period” such that “revelations of Defendants’ corruption, beginning in July 202, caused this inflation to dissipate, damaging investors.” Under Plaintiffs’ theory, it may be the case that inflation is constant, or it may be variable. The Court need not reach that argument, or Defendants’ concern about Plaintiffs’ supposedly new criminal enterprise theory. Even if the inflation is time-varying, the fact that a damages model does not account for such variation is not a reason to discount the damages model at this stage.
In sum, the Court is satisfied by Dalrymple’s testimony that any potential time variation in inflation could be accounted for under his proposed event study (or out-of-pocket) damages methodology. Overall, Defendants’ challenges to the accuracy of Dalrymple’s proposed methodology go to the weight of the evidence, not to its admissibility.
To the extent that Defendants challenge Dalrymple’s testimony as inconsistent with his earlier expert reports or violative of Rules 26 or 37, neither argument is availing.
Rule 26 “contemplates that the expert will supplement, elaborate upon, explain and subject himself to cross-examination upon his report.” That is what Dalrymple did, at Defendants’ request.
Held
The Court denied the Defendants’ motion to exclude the testimony of W. Scott Dalrymple.
Key Takeaway
Experts are permitted wide latitude in their opinions, including those not based on firsthand knowledge, so long as the expert’s opinion has a reliable basis in the knowledge and experience of the discipline.
Case Details:
| Case Caption: | In re Firstenergy Corp. Securities Litigation |
| Docket Number: | 2:20cv3785 |
| Court Name: | United States District Court for the Southern District of Ohio, Eastern Division |
| Order Date: | April 30, 2026 |
