A class of borrowers sued Lehman Brothers and others for aiding and abetting a fraudulent subprime mortgage lending scheme by First Alliance Mortgage Company.

Lehman Brothers retained NERA to determine the damages. At trial in 2004, NERA Chairman Dr. Andrew Carron presented an analysis demonstrating maximum out-of-pocket damages of $15,920,862. Plaintiffs’ expert presented damages of $85,906,994 under a benefit-of-the-bargain theory. After several days of deliberation, the jury found total damages of $50,913,928, or exactly the average of the figures provided by each party’s damages expert. (The jury accepted Dr. Carron’s conclusion that Lehman was responsible for no more than 10 percent of total damages.)

In December 2006, The Ninth Circuit Court of Appeals took the rare step of reversing a jury verdict on damages in a class action suit against multiple defendants, including NERA’s client Lehman Brothers. In its opinion, the appeals court stated that “a jury's award of damages is entitled to great deference, and should be upheld unless it is clearly not supported by the evidence or only based on speculation or guesswork. This, however, appears to be the rare case in which it is sufficiently certain that the jury award was not based on proper consideration of the evidence” because plaintiffs’ expert used a damage theory that was inappropriate under the circumstances. The damage decision was remanded for further proceedings on the proper calculation of damages.