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In June 2016, AmSurg Corp. and Envision Healthcare Holdings, Inc. (Envision) announced they have signed a definitive merger agreement pursuant to which the companies will combine in an all-stock transaction. Upon completion of the merger, which is expected to be tax-free to the shareholders of both organizations, the combined company will be named Envision Healthcare Corporation and co-headquartered in Nashville, Tennessee and Greenwood Village, Colorado. The company's common stock is expected to trade on the New York Stock Exchange under the ticker symbol: EVHC. Bass, Berry & Sims served as lead counsel on the transaction, led by Jim Jenkins. Read more.

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Inside the FCA blogInside the FCA blog features ongoing updates related to the False Claims Act (FCA), including insight on the latest legal decisions, regulatory developments and FCA settlements. The blog provides timely updates for corporate boards, directors, compliance managers, general counsel and other parties interested in the organizational impact and legal developments stemming from issues potentially giving rise to FCA liability.

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Chris Lazarini Analyzes Daubert in Securities Fraud Case

Securities Litigation Commentator


June 20, 2016

Bass, Berry & Sims attorney Chris Lazarini analyzed a case in which the court applied Daubert to strike the testimony of an expert witness because the expert was not qualified as an expert in that specific area and her testimony would only confuse jurors.

Chris provided the analysis for Securities Litigation Commentator (SLC). The full text of the analysis is below and used with permission from the publication. If you would like to receive additional content from the SLC, please visit the SLC website to sign up for the newsletter.

Puda Coal Securities Inc. Litigation, In Re: Querub vs. Moore Stephens Hong Kong, No. 15-2100 (2nd Cir., 5/20/16) 

Under the Daubert standard, an expert must be qualified to testify as to a certain issue and her opinion on that issue must be informed by reliable information and methodology and must not be substantially outweighed by the danger of confusing the issues or misleading the jury. 

Plaintiffs are shareholders of Puda Coal, Inc. ("Puda"), a China-based company once traded on the New York Stock Exchange. Puda held, as its sole asset, a 90% stake in Shanxi Coal ("Shanxi"), a China-based coal supplier. In 2009, Puda's chairman transferred Puda's entire stake in Shanxi to himself, leaving Puda a shell company. Puda's 2009 and 2010 financial statements continued to reflect Shanxi's revenue, net income, and other financial information. Defendant, a Hong Kong-based audit firm, issued "clean" audit opinions for Puda's 2009 and 2010 financial statements, purportedly pursuant to Public Company Accounting Oversight Board ("PCAOB") standards. After the Shanxi transfer became public in 2012, Puda's shares collapsed and the company was delisted. At the same time, Defendant resigned as Puda's auditor and announced that its 2009 and 2010 audit opinions could no longer be relied upon. 

Plaintiffs sued, alleging that Defendant violated Section 11 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934. Opposing Defendant's motion for summary judgment, Plaintiffs relied on their expert, who testified that Defendant failed to comply with the auditing standards of Hong Kong and the People's Republic of China ("PRC"). Plaintiffs' expert admitted, however, that she was not an expert on PCAOB and could not opine on whether the audits complied with PCAOB standards. Defendant offered a contra-expert who was qualified to discuss PCAOB standards and opined that the audits fully complied with them. The district court found that Plaintiff's expert did not have expertise in PCAOB audits, struck her testimony, and awarded summary judgment to Defendant. 

The Court reviews the exclusion of expert testimony under the abuse of discretion standard. Applying the Supreme Court's teachings in Daubert v. Merrell Dow Pharmaceuticals, the Court finds that the district court appropriately struck the testimony of Plaintiffs' expert, because she was not qualified on PCAOB, the sole relevant auditing standard, and because allowing her opinions on Hong Kong and PRC audit standards would not aid the jury and risked confusing the issues. The Court also finds that Plaintiffs did not raise triable issues of fact under §10(b) or §11. As to §10(b), the core of the complaint alleges "fraud by hindsight," which is inadequate to support the claim. Similarly, Plaintiffs cannot support their §11 claims, due to a lack of evidence that Defendant did not believe its "clean" audit opinion and that Defendant omitted material facts about the basis for its opinions. The Court affirms summary judgment for Defendant. 

Among the defendants still in the case are two underwriters of a 2010 public stock offering by Puda.

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