A jury in a Federal Court trial was asked to determine the damages incurred by plaintiff Emerald Investments when defendant Allmerica Financial prevented Emerald from conducting “market timing” transactions in several mutual funds. The jury awarded $1.1 million, even though plaintiffs had asked for damages of $11.6 million, based on a series of transactions that Emerald said it would have conducted during the damage period but-for Allmerica's refusal to process Emerald’s instructions.

During the jury trial on damages, NERA Chairman Dr. Andrew Carron had presented a critique of Emerald’s damage claim, identifying reasons why some of the hypothetical trades would not have occurred, why other trades would not have been as profitable as claimed by Emerald, and why Emerald had failed to take adequate steps to mitigate its losses. The jury apparently accepted most, but not all, of Dr. Carron’s analysis.

Allmerica appealed the verdict to the Seventh Circuit Court of Appeals. In an opinion written by Judge Richard Posner, the Court rejected all but $150,000 of the damage award—the amount of a fee that Emerald had paid Allmerica to terminate its contract, notwithstanding that Allmerica was the party in breach. The opinion cited several of the same factors that Dr. Carron had put forward in his testimony: that new regulations would have prevented the trading even if Allmerica had allowed it to proceed and that plaintiffs’ damage model was based on what Dr. Carron referred to as “speculation” and Judge Posner’s opinion described as “blind extrapolation.”