In the following guest post, Larry Fine and John Orr discuss a recent Fourth Circuit decision that could have significant implications for securities class action litigation and D&O insurance. Examining the court’s ruling in the Boeing securities lawsuit, they consider whether heightened judicial scrutiny of plaintiffs’ damages methodologies may make class certification a more contested and less predictable stage of securities litigation. They also explore the potential ramifications for defense strategies, litigation costs, and D&O insurance coverage. Larry Fine and John Orr are with Willis’s Financial and Executive Risks (FINEX), North America. Larry is the Management Liability Coverage Leader, and John is the D&O Liability Product Leader. Our thanks to Larry and John for allowing us to publish their article on our site.
In July 2026, the Fourth Circuit reversed a district court’s certification of a securities class action against The Boeing Company, concluding that the plaintiffs had not provided a sufficiently specific methodology for establishing class-wide damages. In State of Rhode Island Office of the General Treasurer v. The Boeing Company, the court held that the plaintiffs had failed to satisfy the requirements set forth by the U.S. Supreme Court in Comcast Corp. v. Behrend, including its requirement that they provide an adequate damages methodology, and that the district court had failed to conduct the “rigorous analysis” required by Comcast.
Although there have been Supreme Court decisions in the last 12 years which appeared to raise the bar for plaintiffs seeking class certification in securities class actions (such as the Halliburton and Goldman Sachs decisions discussed below), the main effect to date seems to have been increased defense costs as companies oppose certification more frequently despite the fact that success has been infrequent. This recent Fourth Circuit decision, however, has the potential to have more far-reaching effects on certification rates, for certain practical reasons discussed below.
The Evolution of Class Certification
Class certification has never been automatic in securities litigation, although the Supreme Court’s landmark 1988 decision in Basic v. Levinson created a helpful presumption of class-wide reliance on public information. Rule 23 has always required plaintiffs to satisfy specific prerequisites, and courts have long been instructed to conduct a “rigorous analysis” before certifying a class. Nevertheless, for many years certification has been viewed as a relatively predictable step in securities litigation. Once plaintiffs established a common theory of liability and satisfied the basic requirements of Rule 23, certification frequently followed.
In 2013, the U.S. Supreme Court clarified and arguably heightened pleading standards necessary for obtaining class certification in its Comcast decision. In that case, the Court emphasized that plaintiffs seeking certification under Rule 23(b)(3) must support their position with evidence, not assumptions, and that their damages model must measure class-wide damages in a manner consistent with their theory of liability. The Court also made clear that courts cannot avoid questions that overlap with the merits when those questions are necessary to determine whether Rule 23 has been satisfied.
At the time, however, Comcast, an antitrust case, did not immediately reshape securities class actions. Certification continued to be granted in many cases, and courts differed in how broadly they understood Comcast’s requirements in the securities context. Its practical effect on securities litigation, therefore, appeared less significant than its language might have suggested.
Subsequent Supreme Court decisions made the importance of economic evidence at the certification stage clearer. In Halliburton Co. v. Erica P. John Fund, Inc. (2014), the Court held that defendants may introduce evidence of a lack of price impact at the class certification stage to rebut the fraud-on-the-market presumption. As a result, economic evidence and competing expert analyses became increasingly important in certification disputes.
That development continued with Goldman Sachs Group, Inc. v. Arkansas Teacher Retirement System (2021). There, the Court instructed lower courts to consider all relevant evidence bearing on price impact, including the generic nature of the alleged misrepresentations and the extent to which there is a connection between those statements and the claimed corrective disclosures. The decision reinforced the importance of the evidentiary record at the certification stage and confirmed that courts may need to examine substantive issues when deciding whether Rule 23’s requirements have been met.
In In re FirstEnergy Corp. Securities Litigation (2025), the Sixth Circuit originally vacated a class certification order and cited to Comcast in a decision with reasoning which overlapped with the subsequent Fourth Circuit ruling in Boeing. However, on remand the district court recertified the class and subsequently the Sixth Circuits has agreed to another interlocutory appeal of the certification.
What did the Fourth Circuit say in the Boeing decision?
The Fourth Circuit criticized the district court for certifying the class although the plaintiff has not settled on one theory of liability or one theory of damages. The Fourth Circuit basically said that by this stage in the litigation the plaintiffs had to have committed themselves to one theory of liability and damages in order to meet the standards of establishing an “adequate damages methodology”.
It should be noted that plaintiffs and defendants both cited to Comcast; although some courts have disagreed, in the Boeing case there was never any disagreement that Comcast applied, just a disagreement as to what it required (see footnote 15 on page 25 of the decision).
Plaintiffs correctly asserted that “out of pocket” damages is, as it was held by the district court to be, a “well-accepted” common way of measuring securities class action damages and most courts have allowed class certification to sail through on that basis. The fatal flaw in the plaintiff’s briefing, however, seems to have been the failure by their damages expert to pick a method of measuring inflation (a necessary input into the “out of pocket” damages calculation). Plaintiffs’ expert stated that inflation could be measured using a “constant dollar amount”, a “constant percentage”, or in a third more complicated way involving day by day calculations. The Fourth Circuit criticized the plaintiffs and their expert for not picking and supporting one of the three methods.
Furthermore, based on the plaintiff’s purported theory of liability, it seemed that the third, least-described method of measuring inflation was the most potentially appropriate. The Court stated:
“Boeing also argued Coffman’s report didn’t demonstrate how his proposed damages methodology was consistent with the plaintiffs’ liability theory. Id. at 19–21. According to Boeing, to overcome the materiality problems with their alleged misstatements, the plaintiffs advanced a materiality-by-repetition theory—the materiality of the allegedly false and misleading statements crept in over time and, with it, so did artificial inflation. Id. at 4, 19–21. But Boeing argued that using a constant measure of inflation, like constant dollar inflation or constant-percentage inflation, is inconsistent with a liability theory premised on the evolution of inflation over time. See id. at 19–21. Plus, Boeing pointed out that Coffman provided no details on a third approach to measuring inflation which might attempt to accommodate that evolution. Id. at 21.12” (pages 18 and 19 of the decision).
Consequently, it seems that if the theory of liability had been more conducive to a constant measure of inflation, the plaintiffs would have had a better chance of certification. On the other hand, a methodology which required calculating different amounts of inflation on each day of a purported class period was less certain and precise and more likely to create conflicts within the purported class.
The Likely Effect on Securities Class Action Certification in the Future
As a practical matter, the main reason why this decision may have far-reaching implications is the identity of the plaintiffs’ damage expert. The plaintiff’s economist, Chad Coffman, is often employed by various plaintiff’s firms (see, e.g., https://law.justia.com/cases/federal/district-courts/new-york/nysdce/1:2022cv06978/584859/134/, https://www.blbglaw.com/cases-investigations/energy-transfer-lp, https://www.wolfpopper.com/news/class-certification-granted-in-treehouse-foods-inc.) The fact that Mr. Coffman is a go-to expert for plaintiffs is a reason to expect the Boeing decision to be influential (if only in forcing Mr. Coffman to provide more detail and take more of a definitive stand in future reports).
Note that in the Treehouse Foods case defendants evidently made the exact same arguments against class certification and were unsuccessful due to the lack of favorable precedent existing at the time:
“The Court also found that Lead Plaintiff’s financial expert (Chad Coffman) properly found that damages were subject to common proof. The Court recognized that the “out of pocket” calculation method based on an event study has been widely adopted, and that Mr. Coffman’s reports in particular have been accepted on class certification dozens of times. The Court also rejected Defendants’ argument that Mr. Coffman inadequately addressed the level of inflation in the price of common stock during the class period, noting that Defendants “do not cite a single case where class certification was denied because of limitations in the proposed inflation formula.””
(Incidentally, after the court granted class certification, the Treehouse case settled for $27 million.)
Going forward, judges may not be able to rely on the lack of pro-defendant precedent questioning the sufficiency of the “out of pocket” damage model to excuse granting class certification in the face of underwhelming damage expert reports. If and to the extent that Mr. Coffman (or any lesser known plaintiff damage expert) has been delivering or in the future continues to deliver similar noncommittal reports, courts may be increasingly likely to find them deficient (not sufficient under Comcast).
Implications for D&O Insurance
These developments also have implications for D&O insurance.
If Boeing contributes to a broader trend toward more rigorous challenges to class certification, and if certification is denied in more cases, D&O claim losses could decline. But the effect on the cases that do survive those stages is less clear. Will cases that do get past these hurdles become more expensive to settle? Moreover, even if certification rates do not materially change, more intensive disputes over class certification could increase defense costs through greater use of experts, economic analyses, and other evidentiary challenges.
To be clear, the costs of defending securities class actions, including the costs of opposing class certification, are generally covered under traditionally worded D&O policies, subject to the terms and conditions of the particular policy. This includes the costs of retaining experts to conduct price-impact event studies in support of an effort to oppose class certification. The precise wording of the policy, however, matters.
For example, some policies may cover at least some of the costs of developing price-impact studies without applying the policy’s retention. In other policies, the no-retention benefit may be subject to qualifications, such as successfully opposing class certification, or else the applicable retention may apply in all cases. These differences can become particularly important if challenges to class certification become a more significant part of the defense strategy in securities litigation.
In all cases, companies should work closely with their D&O insurance brokers and product and claims specialists to review the coverage available to them and, where possible, seek favorable policy wording addressing these costs.
Conclusion
It is too soon to say that the era of predictable securities class certification is coming to an end, but it seems at a minimum that plaintiff firms and their damage experts may have to regroup and refine their playbook strategies. Boeing does not establish a new standard for class certification, and it remains to be seen whether other courts will take a similar approach. What the decision does demonstrate is that the requirements of Rule 23, including the requirement for a sufficiently supported damages methodology tied to a sufficiently defined theory of liability, can provide a meaningful basis for challenging certification.
If other courts follow the Fourth Circuit’s example (and if the Sixth Circuit follows the Fourth Circuit to once again vacate class certification in the FirstEnergy case), class certification could become a more consequential battleground in securities litigation than it has been historically, especially in cases where constant-ribbon damages may not match up with liability theories.
As a practical matter, in the face of the potential roadmap that the Boeing decision has provided for defendants, plaintiffs (and Mr. Coffman) are likely to feel pressure to beef up their damage-related arguments.
* This article first appeared in Willis’s FINEX Observer publication (here).