Daniel S. Drosman

The investors, who bought Twitter stock between February 6 and July 28, 2015, alleged that the company had concealed stagnant user growth and declining user engagement, keeping its stock at artificially inflated levels until the truth was revealed and the price dropped 20 percent. The National Elevator Industry Pension Fund and KBC Asset Management NV led the class before Judge Jon S. Tigar, who certified it on July 17, 2018. Drosman was lead trial counsel.

He led a Robbins Geller team that included Tor Gronborg, Luke Olts, J. Marco Janoski Gray, Heather Schlesier and Christopher Kinnon, with forensic accountant Terry Koelbl and co-counsel Lance Oliver of Motley Rice. The parties signed the stipulation of settlement on January 5, 2022, and on November 21, 2022 Judge Tigar entered final judgment, finding the settlement "fair, reasonable, and adequate and in the best interest of the Class."

Fourteen Years

Jaffe v. Household International, filed in federal court in Chicago on August 19, 2002, lasted fourteen years, and Drosman was its lead trial counsel. With his partners Michael Dowd, Spencer Burkholz and Luke Brooks, he tried the case for the investor class before Judge Ronald A. Guzmán from March 30, 2009 until May 7, when the jury returned its verdict.

Household, the Illinois consumer lender, had announced that it would restate eight years of financial results because it had overstated its net income by $386 million in its accounting for co-branded and affinity credit-card relationships and a credit-card marketing agreement. The investors alleged that the company, its chief executive William Aldinger, its chief financial officer David Schoenholz and Gary Gilmer, who ran its consumer-lending group, had misled them about its lending practices, the quality of its loan portfolio and its financial results. The jury found that the defendants had collectively made seventeen false and misleading statements.

In June 2016 HSBC Finance Corporation, Household's successor, agreed to pay $1.575 billion. Judge Jorge L. Alonso approved the settlement on October 20, 2016, calling it "a spectacular result for the class."

Proximate Cause

In Smilovits v. First Solar, filed in federal court in Phoenix in 2012, Drosman was lead counsel with Mark Solomon and Luke Brooks. Two British pension funds, the Mineworkers' Pension Scheme and the British Coal Staff Superannuation Scheme, led a class of investors who bought First Solar stock between April 30, 2008 and February 28, 2012. They alleged that the company concealed manufacturing and design defects that caused faster power loss in its solar modules, misrepresented the cost and scope of the defects, and reported false financial results.

One defect came from a manufacturing process, discontinued in June 2009, that produced a small subpopulation of modules that could lose 15 percent or more of their rated power within the first several months of installation. In April 2010, First Solar scientists found data suggesting that modules installed in hot climates lost power faster than previously understood.

The litigation produced a ruling on loss causation, the connection between a misstatement and an investor's loss. The question was whether investors had to identify a revelation of the fraud itself, or could prove that the concealed conditions caused their losses when those conditions surfaced through their consequences. On August 11, 2015, Judge David G. Campbell held that the Ninth Circuit decisions allowing the second showing stated "the better rule" and certified the question for immediate appeal. On January 31, 2018, the Ninth Circuit affirmed: loss causation "requires no more than the familiar test for proximate cause," and "Disclosure of the fraud is not a sine qua non of loss causation."

The court ruled on motions in limine and expert challenges in December 2019, with trial set for January 2020. On January 6, 2020, First Solar announced that it would pay $350 million. The agreement came the day before jury selection was scheduled to begin, and Judge Campbell approved the settlement on June 30, 2020.

Loan Files and Sampling

Drosman helped obtain a $388 million recovery in Fort Worth Employees' Retirement Fund v. J.P. Morgan Chase & Co., a residential mortgage-backed securities action in federal court in Manhattan before Judge J. Paul Oetken, where he led the Robbins Geller team with Luke Brooks, Lucas Olts, Nathan Lindell and Darryl Alvarado.

The securities were certificates backed by pools of home loans. The investors alleged that the offering documents misrepresented and omitted critical information about the credit quality of those loans: whether they met the stated underwriting standards, how the properties had been valued, and their loan-to-value and debt-to-income ratios.

No one reviews every loan in a pool of thousands. The proof proceeds through samples designed to support inferences about the whole, and then through reconstruction of who was responsible for what: the record addressed sampling, underwriting standards, certificate-specific offering histories and deal documents, and the separate roles of originators, sponsors, depositors, underwriters and trustees, each with a different relationship to the representations investors relied on.

On September 30, 2014, Judge Oetken certified a class of investors who bought certificates in nine offerings, and on December 4, 2015 he granted final approval of the $388 million settlement.

A Select Group of Investors

The Cheyne and Rhinebridge cases concerned ratings assigned to structured investment vehicles, highly leveraged funds that issued short-term paper to buy longer-term assets and depended on top-tier ratings to raise money. In Abu Dhabi Commercial Bank v. Morgan Stanley & Co., the Cheyne case, fourteen institutional investors, among them Abu Dhabi Commercial Bank, Gulf International Bank, Commerzbank AG and King County, Washington, sued Morgan Stanley, Moody's and Standard & Poor's in federal court in Manhattan. King County was also the first-named plaintiff in the Rhinebridge case, King County, Washington v. IKB Deutsche Industriebank AG. In both, Drosman led the lawyers prosecuting the fraud claims against the rating agencies.

The rating agencies argued that their ratings were opinions protected by the First Amendment and could not support a fraud claim, a defense built on the analogy of a newspaper publishing an editorial to the world. On September 2, 2009, Judge Shira A. Scheindlin rejected broad First Amendment protection for the Cheyne ratings on a specific ground: they had been distributed to a select group of investors rather than to the public at large. The same approach was later applied in Rhinebridge.

The claims went on through merits discovery and summary-judgment rulings, and the Cheyne case was set for trial in federal court in New York on May 13, 2013. In April 2013, before that date, the claims were settled. McGraw-Hill, then the parent of Standard & Poor's, reported that it had settled the Cheyne and Rhinebridge cases for a total of about $77 million, without any admission of liability.

From the Manhattan DA to the Border

Drosman is a partner in the San Diego office of Robbins Geller Rudman & Dowd and a member of the firm's Management Committee. He received a B.A. in political science with honors from Reed College in 1990, where he was elected to Phi Beta Kappa, and his J.D. from Harvard Law School in 1993. He has taught trial advocacy, appellate advocacy, legal writing and securities regulation at the University of San Diego School of Law and Thomas Jefferson School of Law.

He spent three years in the Manhattan District Attorney's Office. In its appellate section he briefed and argued more than twenty-five cases in the New York appellate courts; in its trial section he prosecuted street crime. "It was Manhattan in the 1990s, and I had a docket of very serious cases – domestic violence, shootings, homicide," he has said. Juries in those cases, he said, "will hold the prosecutor's feet to the fire. They will listen intently, ask great questions and really test your case."

After practicing civil litigation and white-collar criminal defense as an associate at Weil, Gotshal & Manges in New York, he became an Assistant United States Attorney in the Southern District of California. There he tried cases in federal district court, briefed and argued appeals in the Ninth Circuit and received the Department of Justice Special Achievement Award, and as a member of the border crimes unit he investigated violations of the federal narcotics and immigration laws and official corruption cases.