August 15, 2014

Cornerstone Releases Midyear Report

Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) has released its 2014 midyear report on federal securities class action filings.

The findings for the first half of 2014 include:

(1) There were 78 filings, which closely matches the pace of the first half of 2013. Approximately one in sixty companies listed on a major exchange were sued.

(2) Healthcare, biotechnology, and pharmaceutical companies were the most frequent targets for securities class actions, accounting for 21% of the filings.

(3) The number of filings in the Sixth, Eighth, and Tenth Circuits was up sharply, already equaling or eclipsing the full year totals for 2013.

Quote of note (Professor Grundfest - Stanford): "The most intriguing new trend in the market concerns high-frequency trading and allegations related to Michael Lewis's Flash Boys. There lawsuits are very much in the early stages, and raise issues with a degree of economic complexity that far surpass the challenges encountered in the typical class action securities fraud case as we know it."

Posted by Lyle Roberts at 7:16 PM | TrackBack

April 11, 2014

Cornerstone Releases Report On Settlements

Cornerstone Research has released its annual report on securities class action settlements. The notable findings include:

(1) There were 67 settlements last year, a 17.5% increase from 2012. The report concludes that the increase is likely due to the settling of “credit crisis” cases.

(2) The average settlement value was $71.3 million (significantly higher than historical levels), but the median settlement value was $6.5 million (significantly lower than historical levels). The discrepancy can be explained by the presence of six settlements over $100 million, which increased the average settlement value even as the size of more typical settlements declined.

(3) Overall, 50% of cases since 1996 (post-PSLRA) have settled for between $3.6 million and $20.6 million.

(4) In 2013, the median time to settlement from filing was 3.2 years.

Quote of Note (press release): "This past year’s data also represent the fading echoes of the financial crisis, as some of the largest settlements resolve claims of fraud surrounding transactions in mortgage-backed securities. These lawsuits won’t be around in the coming years to drive aggregate settlement values.”

Posted by Lyle Roberts at 9:08 PM | TrackBack

January 31, 2014

Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2013 annual reports on securities class action filings. As usual, the different methodologies employed by the two organizations have led to different numbers, although they both identify the same general trends.

The findings for 2013 include:

(1) The reports agree that filings have increased by a slight amount. NERA finds that there were 234 filings (compared with 213 filings in 2012), while Cornerstone finds that there were 166 filings (compared with 152 filings in 2012). NERA normally has a higher filings number due to its counting methodology (see footnote 2 of the NERA report).

(2) The reports note that the number of companies listed on U.S. exchanges has declined nearly 50% from 1996 to 2013, but draw different (albeit not contradictory) conclusions from this statistic. NERA states that "the implication of this decline is that an average company listed in the US was 83% more likely to be the target of a securities class action in 2013 than in the first five years after the passage of the PSLRA." Cornerstone, in contrast, points to this decline as "one explanation for the recent relatively low levels of filing activity compared with historical averages."

(3) The Cornerstone report offers a new analysis of class certification trends. It notes that between 2002 and 2010, class certification was denied for reasons based on the merits of the motion (e.g., typicality, predominance, etc.) in less than two dozen cases.

(4) NERA found a sharp increase in the average settlement amount in 2013, reaching a new record of $55 million. The median settlement amount, however, decreased 26% to $9.1 million. NERA concludes that "a few large settlements drove the average up, while many small settlements drove the median down."

The NERA report can be found here. The Cornerstone/Stanford report can be found here.

Posted by Lyle Roberts at 8:54 PM | TrackBack

July 24, 2013

Cornerstone Releases Midyear Report

Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) has released its 2013 midyear report on federal securities class action filings.

The findings for the first half of 2013 include:

(1) There were 74 filings, which was 16 percent higher than the second half of 2012 (but well below the historical average per six-month period). The increase is primarily the result of an increase in filings against technology and energy companies.

(2) Federal filings associated with M&A transactions remained at low levels. These actions now are being pursued primarily in state court.

(3) For filings in the years 2008 through 2010, a larger percentage of cases were dismissed than in prior years, with dismissal rates climbing significantly above 50%. One contributing factor, however, was the higher dismissal rates for M&A filings, which frequently were brought in federal court during this period.

Quote of note (Professor Grundfest - Stanford): "We are observing class certification challenges on the grounds that the fraud on the market doctrine should not apply. If this defense strategy is successful, and if the Supreme Court eventually backs away from the fraud on the market doctrine, then the class action securities fraud litigation market will likely shrink significantly. This potential evolution in legal doctrine likely represents the largest 'risk factor' for anyone trying to predict the future course of the securities fraud litigation market."

Posted by Lyle Roberts at 2:02 PM | TrackBack

April 26, 2013

Cornerstone Report On Accounting Cases

Cornerstone Research has issued a study of 2012 securities class actions involving accounting allegations. The notable findings include:

(1) The number of accounting filings fell from 78 in 2011 to 45 in 2012. Two factors that contributed to this decline were the overall decrease in filings and the specific decrease in Chinese reverse merger cases (which frequently include accounting allegations).

(2) The proportion of accounting filings involving restatements (36%) and internal control weaknesses (67%) remained relatively constant.

(3) Accounting cases are less likely to be dismissed and more likely to settle than non-accounting cases. In 2012, accounting cases were less than 70% of the settled cases, but represented more than 90% of the total value of settlements.

Posted by Lyle Roberts at 3:19 PM | TrackBack

March 21, 2013

Cornerstone Releases Report on Settlements

Cornerstone Research has released its annual report on securities class action settlements. The notable findings include:

(1) There were 53 settlements in 2012, involving $2.9 billion in total settlement funds. While the overall number of settlements represents a 14-year low, the total settlement funds increased by more than 100% from 2011. The increase in total settlement funds was due in large part to an increase in $100m+ settlements (accounting for nearly 75 percent of all settlement funds in 2012).

(2) The average reported settlement amount increased from $21.6 million (2011) to $54.7 million (2012). There also was a sharp increase in the median settlement amount from $5.9 million (2011) to $10.2 million (2012). The key factor identified by Cornerstone as responsible for the increase in settlement values was a spike in the median "estimated damages" associated with the settled cases (a significant portion of which were related to the credit crisis).

(3) More than 50% of the settled cases were accompanied by a derivative action filing, compared with a post-Reform Act average of 30%. The presence of a derivative action historically coincides with a higher settlement value for the related securities class action.

Quote of Note (press release): "Class action securities fraud litigation is, like many other lines of business, ‘hit driven,’ in that a small number of settlements often account for a large percentage of the dollar flow. That fact of life can make annual settlement data quite lumpy. Settlement trends are often best viewed over time periods longer than a year, and by carefully analyzing settlement data to reflect the underlying characteristics of the cases being settled. So, just as a lull in last year’s data suggested a pickup for this year in the aggregate statistics, it is always possible that this year’s bump could cause total settlement dollars to tick downward next year."

Posted by Lyle Roberts at 5:33 PM | TrackBack

February 1, 2013

Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2012 annual reports on securities class action filings. As usual, the different methodologies employed by the two organizations have led to different numbers.

The findings for 2012 include:

(1) NERA finds that there were 207 filings (compared with 225 filings in 2011), while Cornerstone finds that there were 152 filings (compared with 188 filings in 2011). NERA normally has a higher filings number due to its counting methodology (see footnote 2 of the NERA report). A key difference in 2012 is how Cornerstone and NERA counted M&A suits, with NERA reporting 53 M&A filings and Cornerstone reporting 13 M&A filings.

(2) The difference in the M&A filings count leads NERA and Cornerstone to markedly different conclusions about what happened last year. NERA finds that filings generally are holding steady, with the key difference being a decline in credit crisis filings (from 13 filings to 4 filings). In contrast, Cornerstone concludes that there has been a sharp decline in filing activity, led by the drop in M&A filings (from 43 filings to 13 filings), and that this decline has resulted in the second-lowest filing level in the past sixteen years.

(3) NERA and Cornerstone agree that filings in the Ninth Circuit were down nearly 50% as compared to 2011. Cornerstone attributes the change "largely" to a decline in M&A and Chinese reverse merger filings.

(4) NERA finds a sharp drop in the number of settlements. Only 93 securities class actions were settled in 2012 -- a record low since 1996 and a 25% reduction as compared to 2011. Settlement values, however, were near their average level from recent years.

The NERA report can be found here. The Cornerstone/Stanford report can be found here.

Quote of note (Professor Grundfest): "Is there a shoe waiting to drop? The SEC claims that the Dodd-Frank bounty program has helped it build a large inventory of high-quality leads as to fraud at publicly traded corporations. But will the Commission be able to transform these leads into quality enforcement actions? And, will private-party plaintiffs be successful in prosecuting “piggyback” claims that copy the Commission’s complaints? The current quiet patch in private securities fraud litigation could certainly be unsettled if the Dodd-Frank bounty program generates a new wave of private claims."

Posted by Lyle Roberts at 6:48 PM

July 27, 2012

Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2012 midyear reports on securities class action filings. As usual, the different methodologies employed by the two organizations have led to different numbers, although they generally agree that the number of filings is holding steady.

The findings for the first half of 2012 include:

(1) NERA counts 116 filings and Cornerstone counts 88 filings (NERA treats actions filed in different circuits, but against the same defendant, as separate filings - see FN 2 of the report). Cornerstone views this as a slight decrease in total filings, down 6 percent from both the first half and second half of 2011, while NERA finds it in line with historical averages.

(2) Both NERA and Cornerstone agree that there has been a decline in M&A-related filings and, correspondingly, an increase in "standard" misstatement cases alleging violations of Rule 10b-5, Section 11, and/or Section 12. According to NERA, there have been 83 "standard" filings in the first half of 2012. If that pace continues, it will lead to the most "standard" filings since 2008.

(3) The number of cases against foreign-domiciled companies is decreasing, largely due to a decline in Chinese reverse merger filings.

(4) NERA's report contains an interesting analysis of the motions practice in securities class actions that were filed and settled between 2000 and 2012. The findings include that in 22% of cases where a motion to dismiss was filed, and in 46% of cases were a motion for class certification was filed, the cases were settled before the court issued a decision on the pending motion.

(5) NERA also examines the settlement activity so far this year and concludes (a) the overall number of settlements is lower than usual (a projected 98 settlements in 2012 vs. 123 settlements in 2011), but (b) the median settlement amount ($7.9 million) is about the same as last year and consistent with pre-credit crisis levels.

The Cornerstone report can be found here. The NERA report can be found here.

Quote of Note (Professor Grundfest - Stanford): "Looking over the horizon, the Libor-litigation industry is clearly a sector to watch for years to come. The magnitude of the potential exposures and the complexity of the underlying damages claims will likely generate large amounts of litigation activity in many geographies."

Posted by Lyle Roberts at 3:12 PM | TrackBack

March 19, 2012

Cornerstone Releases Report on Settlements

Cornerstone Research has released its annual report on securities class action settlements. The notable findings include:

(1) There were 65 settlements in 2011, involving $1.4 billion in total settlement funds. These numbers represent a significant decline as compared to 2010 (86 settlements; $3.2 billion in funds) and are the lowest number of approved settlements and total settlement dollars in more than 10 years.

(2) The average reported settlement amount decreased from $36.3 million in 2010 to $21 million in 2011, substantially below the average of $55.2 million for all post-PSLRA settlements. Among the factors identified by Cornerstone as possibly responsible for the decrease are: (a) the overall drop in filings of traditional securities class actions that began in 2006; (b) a decline in very large settlements (only three over $100 million); (c) a lower average estimated damages in the settled cases; and (d) fewer cases involving accounting allegations or accompanied by SEC actions/derivative actions.

(3) Robbins Geller was the most active firm in 2011, having been involved in 35% of the settled cases.

Quote of Note: "[C]onsidering that the $725 million partial settlement approved in February 2012 in the American International Group, Inc., Securities Litigation matter exceeds 50 percent of the total value of 2011 settlements and that other tentative mega-settlements have settlement approval dates in 2012, it appears likely that the total dollar amount for settlements will return to more typical levels in 2012."

Posted by Lyle Roberts at 6:45 PM | TrackBack

January 20, 2012

Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2011 annual reports on securities class action filings.

The findings for 2011 include:

(1) Cornerstone finds that there were 188 filings (compared with 176 filings in 2010), while NERA finds that there were 232 filings (compared with 241 filings in 2010). (For some insight on why NERA has a larger total, see footnote 2 of the NERA report, which discusses its counting methodology. Also, NERA's report came out in December, requiring it to use a projected number for December's total filings.) Both reports agree that cases against listed Chinese companies and M&A cases have driven a significant portion of the filing activity. Meanwhile, credit crisis cases have dwindled (Cornerstone - 3 filings; NERA - 11 filings).

(2) Cornerstone has an interesting new analysis on the probability of a securities class action advancing through different stages of litigation. The analysis, using filings from 1996 to 2011, finds that prior to the filing of a motion to dismiss, 9% of cases were voluntarily dismissed and 16% were settled. Of the remaining 75% of cases, 32% were dismissed, 35% were settled, and 8% reached a ruling on summary judgment or beyond. The report also breaks down these numbers by circuit and year.

(3) NERA provides some settlement statistics and finds that, even excluding large settlement outliers, there was a substantial decline in average settlement values -- from $40 million in 2010 to $31 million in 2011. The median settlement value was $8.7 million, which was less than the 2010 all-time median settlement value of $11 million, but still the third highest on record.

The NERA report can be found here. The Cornerstone/Stanford report can be found here.

Posted by Lyle Roberts at 11:31 PM | TrackBack

August 5, 2011

Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2011 midyear reports on securities class action filings. The different methodologies employed by the two organizations have led to different numbers, as usual, although this time that difference also has led to competing conclusions about the overall filing trend.

The findings for the first half of 2011 include:

(1) Filings are either up (NERA) or down (Cornerstone), but both agree that there is a general movement away from Ponzi scheme and credit crisis cases and towards Chinese company and merger & acquisition (M&A) cases. NERA counts 130 filings and Cornerstone counts 94 filings (for some insight on why NERA has a larger total, see footnote 1 of the NERA report, which discusses its counting methodology). The "up" or "down" disparity appears to depend entirely on to which prior period the first half of 2011 is being compared. NERA compares it to the first half of 2010 (71 filings) and concludes that filings are up. Cornerstone compares it to the second half of 2010 (104 filings) and concludes that filings are down. If one looks at the overall trend lines, however, the two reports are reasonably consistent: at the present pace 2011 will be either the biggest (NERA) or second biggest (Cornerstone) year since 2004. An important codicil, however, is that there are only so many listed Chinese companies and M&A cases require continued M&A activity, so past filing performance may not be a good indicator of future filing results.

(2) The lag time between the end of the proposed class period and the filing date continues to decrease. NERA finds that the median lag time was 21 days in the first half of 2011, down from 54 days over the previous four years. Cornerstone finds that the median lag time was 8 days in the first half of 2011, down from 28 days over the previous fourteen years.

(3) NERA also examined the mid-year settlement trends. The average settlement was $23 million, down from the 2010 average settlement of $40 million (excluding settlements over $1 billion). The median settlement was $6.3 million, down sharply from the 2010 all-time high median settlement of $11 million. NERA speculates that the declines may be the result of "defendants' reduced ability to pay," resulting in settlements within insurance limits.

The NERA report can be found here. The Cornerstone/Stanford report can be found here.

Quote of note (Professor Grundfest - Stanford): "If one focuses exclusively on traditional fraud claims against U.S.-based companies, then 2011 may well be on track to be the quietest litigation year since Congress passed the Private Securities Litigation Reform Act of 1995."

Posted by Lyle Roberts at 8:07 PM | TrackBack

January 21, 2011

Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2010 annual reports on securities class action filings. The different methodologies employed by the two organizations have led to different numbers, but the trendlines are the same.

The findings for 2010 include:

(1) Filings are up slightly, with a decrease in credit-crisis filings being offset by an increase in regular filings (including a sharp uptick in M&A-related filings). NERA counts 239 filings (estimated total and up from 220 filings in 2009) and Cornerstone counts 176 filings (up from 168 filings in 2009). For some insight on why NERA has a larger total, see footnote 3 of the NERA report, which discusses its counting methodology.

(2) NERA found that the median settlement value was $11.1 million in 2010, over 30% higher than the 2009 median settlement value and the first time ever that the median has exceeded $10 million. Excluding outlier cases, the average settlement value was $42 million, in line with last year's record high.

(3) Cornerstone examined the litigation exposure following initial public offerings (IPOs). The report concludes that the highest risk is in the first few years after an IPO, when the company's stock price continues to be volatile. Indeed, a newly-public company has a 10 percent of being subject to a securities class action in the first three years after its IPO.

The NERA report can be found here. The Cornerstone/Stanford report can be found here.

Quote of note (John Gould - Cornerstone): With the wave of credit-crisis filings behind us, the industry focus for class action filings shifted to Health Care, where more than one out of every seven S&P 500 companies was involved in a class action.

Posted by Lyle Roberts at 10:09 PM | TrackBack

July 30, 2010

Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2010 midyear reports on securities class action filings. The different methodologies employed by the two organizations have led to different numbers, but the trendlines are the same.

The findings for the first half of 2010 include:

(1) Filings have declined, with a decrease in credit crisis cases being one of the key factors. NERA counts 101 filings (for an annualized total of 202 filings, down from 221 filings in 2009) and Cornerstone counts 71 filings (for an annualized total of 142 filings, down from 168 filings in 2009). For some insight into why NERA has a larger total, see footnote 5 in its report.

(2) The lag time between the end of the class period and the filing date has decreased significantly as compared to the second half of 2009. Cornerstone finds that the median lag time was 25 days, as compared to 112 days in the previous period. NERA finds that the average lag time was 231 days, as compared to 272 days in the previous period. Both organizations conclude that this may be the result of the plaintiffs' bar, having focused in recent years on credit crisis cases, clearing out a backlog of older matters in the second half of 2009 after credit crisis cases began to decline.

(3) NERA also examined the mid-year settlement trends. Notably, the median settlement value was $11.8 million, exceeding 2009s value of $9 million by almost one-third. The report concludes that this may be driven by a substantial increase in median investor losses - a variable that correlates strongly with settlement size.

The NERA report can be found here. The Cornerstone/Stanford report can be found here.

Quote of note (Professor Grundfest - Stanford): The securities fraud litigation wave stimulated by the credit crisis now appears to be history. We have an inventory of cases waiting to be dismissed, settled, or tried, but to borrow a phrase from the current Gulf oil spill crisis, it seems that this flow has largely been capped.

Posted by Lyle Roberts at 9:53 PM | TrackBack

March 24, 2010

Cornerstone Releases Report On Settlements

Cornerstone Research has released its annual report on securities class action settlements. The notable findings include:

1) There were 103 settlements in 2009. The aggregate value of those settlements was $3.8 billion (a 35% increase over 2008).

(2) The average settlement amount was $37 million. Although this number is a significant increase over the 2008 average ($28.4 million), it is only slightly higher than the historical average of $34.4 million for cases settled from 1996 through 2008 (excluding the top four settlements).

(3) Since 1996, almost 60% of cases settle for less than $10 million and 80% settle for less than $25 million. The distribution of settlements in 2009 follows this same pattern.

The press release accompanying the report can be found here.

Quote of note (PR - Professor Grundfest): "The classic litigation risk factors continue to run true to form. If a lawsuit is prosecuted by a large pension fund, involves a parallel SEC proceeding, and alleges accounting violations, then defendants can be expected to pay higher amounts."

Posted by Lyle Roberts at 9:49 PM | TrackBack

January 6, 2010

Cornerstone And Stanford Release Report On Filings In 2009

Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse have released a report on federal securities class action filings in 2009. The findings include:

(1) A total of 169 federal securities class actions were filed in 2009, a 24% decrease from the previous year. In particular, filings related to the credit crisis were down sharply (from 100 filings in 2008 to 53 filings in 2009).

(2) The filing activity was more concentrated, with only 114 unique issuers sued (a decrease of 32%, as compared to the overall filing decrease of 24%). The study states that this was the result of a large number of filings against certain groups of mutual and exchange-traded funds.

(3) Despite the decline in credit crisis related filings, the financial sector continued to have the highest level of litigation activity with 84 filings.

(4) Given the long timeline of securities class actions, it takes several years to reach conclusions about the breakdown between settlements and dismissals. The study notes, however, that with more than 90 percent of the 2004 and 2005 filings resolved, there appears to have been an increase in the percentage of dismissed class actions compared to earlier years leading to a nearly 50-50 split. Whether that trend continues remains to be seen.

The joint press release announcing the report can be found here.

Quote of note (Professor Grundfest): "As predicted in last years report, the rate of litigation overall and particularly against financial firms declined from the financial crisis-fueled levels observed in 2008. Plaintiffs simply ran out of financial firms to sue, and the rising stock market made it harder for plaintiffs to assert claims."

Posted by Lyle Roberts at 7:00 PM | TrackBack

December 15, 2009

NERA Releases Study on "Recent Trends in Securities Class Action Litigation"

NERA Economic Consulting has released a study entitled Recent Trends In Shareholder Class Action Litigation: 2009 Year-End Update. The study reaches the following notable conclusions:

(1) NERA predicts that there will be 235 filings by year end (down from 253 filings in 2008). Cases related to the credit crisis have fallen to around 30% of all filings, but the finance industry continues to hard hit with 53% of all filings naming a finance sector defendant.

(2) Only 5% of all filings contained insider trading allegations, which is down significantly from the pre-credit crisis period (e.g., 20% of all filings in 2005 and 2006 contained insider trading allegations).

(3) Excluding the IPO allocation cases, the average settlement value was $42 million. Although this is a signficiant increase over the $31 million average settlement value in 2008, the median settlement value stayed relatively flat at $9 million.

The press release accompanying the study can be found here.

Posted by Lyle Roberts at 6:38 PM | TrackBack

July 30, 2009

NERA Releases Study on "Recent Trends in Securities Class Action Litigation"

NERA Economic Consulting has released a study entitled Recent Trends In Shareholder Class Action Litigation: 2009 Mid-Year Update. The study reaches the following notable conclusions:

(1) There have been 127 cases filed in the first half of 2009, on pace for over 250 for the full year. As usual, this is a higher number than reported by Cornerstone, presumably due to differences in counting methodology (see footnote 2 of the NERA report).

(2) The credit crisis continues to dominate the landscape, with approximately 67% of the filings in the first half of 2009 naming at least one financial company as a primary defendant or co-defendant (compared to 50% of filings in 2008).

(3) Median settlement values are holding steady at $8 million.

(4) Following the U.S. Supreme Court's decision in Dura on the pleading of loss causation (April 2005), the dismissal rate for resolved claims appears to have slightly increased.

(5) Securities class actions can take a long time to resolve, making it difficult to accurately assess dismissal rates. Interestingly, the study takes one year's filings - the 238 cases filed in 2000 - and reports on their status. The result: 60% settled, 34% dismissed, 6% pending or abandoned.

The press release accompanying the study can be found here.

Posted by Lyle Roberts at 9:59 PM | TrackBack

July 20, 2009

Cornerstone And Stanford Release Mid-Year Assessment Of Filings In 2009

Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse have released a mid-year assessment of federal securities class action filings in 2009. The findings include:

(1) A total of 87 federal securities class actions were filed in the first half of 2009. At this rate, 174 securities class actions will be filed this year, a 22.3 percent decrease from 2008 and an 11.7 percent decrease from the post-PSLRA annual average.

(2) 42 filings in the first half of 2009 were driven by the credit crisis. 15 filings related to Ponzi schemes, with most of these suits brought by investors in Madoff funds.

(3) In 2008, there were 31 filings (13.8 percent) associated with issuers with non-U.S. headquarters, the highest annual total in the post-PSLRA period. The upward trend has continued in the first half of 2009 with 18 filings against issuers with non-U.S. headquarters, or 20.7 percent of the total.

Posted by Lyle Roberts at 10:38 PM | TrackBack

April 3, 2009

2008 PwC Securities Litigation Study

PricewaterhouseCoopers has released its annual review of securities class actions. The findings include:

(1) A total of 210 securities class actions were filed in 2008, an increase of 29% over the previous year. For the first time, financial services topped the list of industries sued.

(2) The number of filings against foreign companies increased 33% to a total of 36 filings in 2008 (an all-time high).

(3) The number of filings with SEC or DOJ involvement remained relatively constant. In 2008, 36 filings had some form of SEC involvement and 21 filings has some form of DOJ involvement.

Quote of note: "Over the next year, three areas where companies will want to remain especially vigilant are institutional plaintiff activity (particularly activity related to public and union pension funds), internal controls accounting-related allegations, and FCPA enforcement."

Posted by Lyle Roberts at 9:07 PM | TrackBack

March 13, 2009

Cornerstone Releases Report On Settlements

Cornerstone Research has released its annual report on securities class action settlements. The notable findings include:

(1) There were 99 settlements in 2008. The aggregate value of those settlements was $3.1 billion.

(2) The median amount for cases settled in 2008 was $8 million (down from the all-time high of $9 million in 2007). The average settlement amount was $31.2 million - which is in line with the historic average if the top four settlements of all time are removed from the analysis.

(3) Reversing a recent upward trend, the number of settled cases involving companion derivative suits fell from 55% in 2007 to 40% in 2008.

The press release accompanying the report can be found here.

Posted by Lyle Roberts at 10:41 PM | TrackBack

January 7, 2009

Cornerstone And Stanford Release Report On Filings In 2008

Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse have released a report on federal securities class action filings in 2008. The findings include:

(1) There were were 210 filings (through 12/15), a 19% increase over the previous year. As usual, Cornerstone reports a lower number of filings than NERA, presumably due to different counting methodologies.

(2) Almost half of the 2008 litigation activity, or 103 securities class actions, involved firms in the financial services sector. Indeed, nearly a third of all large financial firms were a named defendant in a filing.

(3) For the first time since 2002, companies listed on NYSE or Amex had more securities class action
filings than companies listed on NASDAQ (likely because of the plaintiffs' focus on the financial sector).

(4) Among the resolved class actions filed since 1996, 41 percent were dismissed and 59 percent settled. The majority of cases were resolved after the first ruling on the motion to dismiss but before a ruling on summary judgments, with 71 percent of dismissals and 59 percent of settlements occurring during this stage.

The joint press release announcing the report can be found here.

Quote of note (Professor Grundfest): "The data suggests an intriguing possibility that the pool of major financial services defendants might be getting fished out. Many major financial services firms have already been sued and plaintiffs may be choosing to focus on filing amendments to existing complaints rather than initiating new ones. Litigation activity against the financial sector may decline next year because the supply of new defendants might be drying up, not necessarily because plaintiffs believe there is less fraud."

The D&O Diary has an interesting analysis of the report and predicts another big year for filings in 2009.

Posted by Lyle Roberts at 9:08 PM | TrackBack

December 19, 2008

NERA Releases "2008 Trends In Securities Class Actions"

NERA Economic Consulting has released a study entitled 2008 Trends in Securities Class Actions. The study reaches the following notable conclusions:

(1) There have been 255 securities class action filings this year (through Dec. 14), on pace for a 10-year high for "standard" cases.

(2) Credit crisis-related cases made up approximately 50% of the filings, causing a spike in the number of filings against financial sector companies.

(3) Median and average settlement values have held roughly steady at $7.5 million (median) and $29 million (average, excluding settlements over $1 billion).

The press release accompanying the report can be found here.

Posted by Lyle Roberts at 11:41 PM | TrackBack

July 31, 2008

Adding Up The Numbers

The mid-year numbers are in on securities class action filings and settlements. This week saw the publication of 2008 Trends: Subprime and Auction-Rate Cases Continue to Drive Filings, and Large Settlements Keep Averages High from NERA Economic Consulting and 2008 Mid-Year Assessment from Cornerstone Research.

(1) The reports agree that filings are on the upswing, although they differ on the exact number. Cornerstone finds that there were 110 filings in the first half of 2008, while NERA finds that there were 139 filings in the first half of 2008. Both reports agree that around half of the total filings were related to subprime mortgage/credit crunch problems. On an annualized basis (using either report's total), the number of filings will be up significantly as compared to the past three years.

(2) Overall market volatility is an additional factor driving the increase in filings. NERA reports that nearly one-third of companies whose stock fell by 40% or more in a single day, net-of-market, were confronted with a federal filing within three months.

(3) The market capitalization losses associated with the subprime mortgage/credit crunch filings are significantly higher than usual. NERA concludes that although the average settlement value in the first half of 2008 remained constant at around $30 million, that number is likely to rise as more recent filings reach settlement.

Posted by Lyle Roberts at 6:20 PM | TrackBack

April 11, 2008

2007 PwC Securities Litigation Study

PricewaterhouseCoopers has released its annual review of securities class actions. The findings include:

(1) There were 163 filings in 2007, an increase of nearly 50% over the previous year. Subprime cases accounted for 37 of the filings.

(2) The number of filings associated with financial restatements was relatively small - 39 cases - suggesting that the "market reaction to restatements is declining."

(3) The number of filings with some form of SEC involvement (investigation or enforcement action) fell for the third year in a row to just 24 cases (approximately 15% of total).

(4) There was a sharp increase in the number of filings against foreign private issuers, with 27 cases in 2007 (compared to 14 cases in 2006).

Quote of note: "During hard times, the increased pressure to produce good financial results is more likely to lead to bad behavior, which in turn is likely to result in higher levels of shareholder litigation. If current speculation on the downward direction of the economy is to be believed, then private securities class actions will most likely trend upward over the next few years, above the recent average number of filings since Sarbanes-Oxley."

Posted by Lyle Roberts at 10:57 PM | TrackBack

April 2, 2008

Cornerstone Releases Report On Settlements

Cornerstone Research has released an updated report on post-PSLRA settlements of securities class actions through December 2007. The findings include:

(1) There were 111 settlements in 2007. The aggregate value of those settlements, excluding the enormous Tyco settlement, was $3.8 billion.

(2) The median settlement value was $9 million in 2007, the highest in the post-PSLRA period. The report attributes the increase, in part, to the fact that the percentage of cases settling for $10-20 million increased substantially from prior years (to approximately one-quarter of all settlements).

(3) The number of settled cases involving companion derivative actions is increasing. More than 55 percent of cases settled in 2007 were accompanied by the filing of a derivative action, compared with 45 percent in 2006 and 35 percent in 2005. Settlements for securities class actions accompanied by derivative cases are significantly higher than for cases not involving them.

The press release announcing the report can be found here.

Posted by Lyle Roberts at 9:29 AM | TrackBack

January 8, 2008

Cornerstone And Stanford Release Report On Filings In 2007

Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse have released a report on federal securities class action filings in 2007. The findings include:

(1) There were 166 filings in 2007 (as of 12/17/07). Note that there is a significant difference between the Cornerstone (166) and NERA (198) totals over the same time period. Both numbers, however, represent a large increase over the number of filings in 2006.

(2) The report is skeptical that the increase in filings suggests a trend back to historical filing levels, noting that 32 of the filings were related to the subprime crisis. Increased stock market volatility in the second half of 2007 also may have played a role in the increase.

(3) Because of subprime-related litigation, filing activity in the financial sector nearly quadrupled to 47 filings (as compared to 11 filings in 2006).

(4) The report examines the outcome of post-PSLRA cases in Cornerstone's database (2,646 cases). The report finds that of the resolved cases, 41 percent were dismissed and 59 percent settled.

The press release announcing the issuance of the report can be found here. The D&O Diary has an interesting post breaking down the 2007 statistics and challenging some of the report's conclusions.

Quote of note (press release): "Professor Grundfest commented that 'the JDS trial is an important landmark in modern securities litigation. These cases rarely go to trial, and for the defendants to win a total victory in a case that claimed $20 billion in damages demonstrates that not every case that makes it past summary judgment has merit. The interesting question is how and whether this trial result might cause plaintiffs to modulate their settlement demands or embolden defendants to take cases to trial.'"

Posted by Lyle Roberts at 6:19 PM | TrackBack

December 21, 2007

NERA Releases Study on "Recent Trends In Shareholder Class Action Litigation"

It is not the end of the year, but that has not stopped NERA Economic Consulting from releasing its annual study on securities class actions. The 2007 report is entitled "Recent Trends In Shareholder Class Action Litigation: Filings Return to 2005 Levels as Subprime Cases Take Off; Average Settlements Hit New High."

The study reaches the following notable conclusions:

(1) NERA predicts that there will be 207 filings by year end (a 58% increase as compared to 2006). The increase in filings has been driven in part by subprime-related litigation (38 filings as of Dec. 15).

(2) The value of the average settlement finalized or proposed to be finalized in 2007 (excluding mega-settlements greater than $1 billion) was $33.2 million, a jump up from $22.7 million in 2006.

(3) The post-PSLRA dismissal rates for securities class actions can be difficult to accurately calculate given the long-term nature of these cases, the ability to replead, appeals, etc. Interestingly, the study examines the current status of the 235 securities class actions filed in 2000 and finds that over 90% of these have reached some kind of final resolution. To date, approximately 60% of the cases have reached final settlement and 31.5% of the cases have been dismissed.

Posted by Lyle Roberts at 5:05 PM | TrackBack

September 17, 2007

NERA Releases Study on "Recent Trends In Shareholder Class Action Litigation"

NERA Economic Consulting has released a study entitled "Recent Trends In Shareholder Class Action Litigation: Filings Stay Low and Average Settlements Stay High - But Are Those Trends Reversing?" The study reaches the following notable conclusions:

(1) The number of filings have increased, with 76 new filings through the first half of 2007. The projected annual total of 152 would be a 12% increase over last year.

(2) The average settlement value during the first half of 2007 (excluding settlements over $1 billion) hit a new high of $30 million. There is evidence, however, that this trend may reverse direction based on a decline: (i) in the investor losses associated with recent filings; and (ii) in the prevalence of accounting allegations in recent filings.

(3) Eight of the top ten settlements of all time have resolved in 2006 or 2007, or are pending. Tyco's announced preliminary settlement of $2.975 billion would be the largest amount ever paid by a single settling defendant.

Posted by Lyle Roberts at 7:13 PM | TrackBack

March 6, 2007

Topping The List

Securities Litigation Watch has posted the SCAS 50, which "lists the top 50 plaintiffs' law firms ranked by the total dollar amount of final securities class action settlements occurring in 2006 in which the law firm served as lead or co-lead counsel." At the head of the list this year is Lerach Coughlin. The full list, along with links to reports from previous years, can be found here.

Posted by Lyle Roberts at 8:54 PM | TrackBack

January 4, 2007

Adding Up The Numbers

The race to release annual data on securities class action filings has heated up to the point where the two major players both have decided not to wait for the final numbers to come in. This week saw the publication of "2006: A Year in Review" from Cornerstone Research/Stanford Law School Securities Class Action Clearinghouse and "Recent Trends in Shareholder Class Action Litigation: Filings Plummet, Settlements Soar" from NERA Economic Consulting. The reports use filing data through mid-December 2006.

The findings include:

(1) Filings plunged to a record low since the passage of the PSLRA in 1995. As usual, the reports differed in their calculation of the exact number of filings. Cornerstone found that there were 110 filings (as compared to a post-PSLRA average of 193), while NERA found there were 129 filings (as compared to a post-PSLRA average of 239).

(2) The average settlement, excluding settlements over $1 billion, was $34 million (up 37% over 2005). The increase is driven almost entirely by the growth in settlements over $100 million. (NERA)

(3) There has been a dramatic decrease in the total market capitalization losses associated with filings (44% decline in losses measured as of the last day of the class perod), which is a product of fewer filings and lower market capitalization losses per filing. (Cornerstone)

(4) A significant portion of cases are dismissed within the first two years. The Second and Ninth Circuits, which together receive the most cases, dismiss approximately 20% within this time period. The Fourth Circuit has the highest rate, dismissing 31% of cases within two years, while the Tenth Circuit has the lowest, at 5%. (NERA)

Why the decline in filings this past year? Possible reasons put forward by the reports include better corporate governance (Cornerstone and NERA), a strengthened federal enforcement environment (Cornerstone), a strong stock market combined with lower stock price volatility (Cornerstone), and distraction on the part of the plaintiffs' bar (NERA).

Addition: Point of Law and D&O Diary present some thoughts on the filings decline.

Posted by Lyle Roberts at 10:27 PM | TrackBack

July 26, 2006

Cornerstone and Stanford Release Interim Report On Filings In 2006

Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse have released an interim report on federal securities class action filings in 2006. The findings include:

(1) The number of filings in the first half of 2006 is at the lowest level for any six-month period in the last ten years. There have been 61 filings to date, which would annualize to 123 filings (as compared to a post-PSLRA average of 194 per year).

(2) The filings that have been made in 2006 are associated with significantly lower market capitalization losses as compared to 2005 and historical averages.

(3) Options backdating suits have not contributed significantly to the number of filings, with most of the litigation activity in that area focused on derivative actions. (Securities Litigation Watch is keeping a running total on the number of options backdating securities class actions, which currently stands at eleven.)

Posted by Lyle Roberts at 9:56 PM | TrackBack

May 2, 2006

2005 PWC Securities Litigation Study

Hard on the heels of the NERA study, PricewaterhouseCoopers has released its own review (free regist. req'd) of the year in securities class actions. A few highlights:

(1) The average settlement value, excluding the Enron and WorldCom settlements, increased dramatically to $71.1 million in 2005. (Note that there is a significant discrepancy between PwC and NERA on this point, with NERA reporting a much lower number.)

(2) The number of filings was down significantly last year (from 203 cases to 168 cases), but PwC finds that a "seesaw pattern has occurred somewhat regularly during the period from 1996 through 2005, and it is likely that 2005's drop in filings of private securities litigation cases is only a respite."

(3) For the first time since 1996, the number of cases alleging accounting violations dropped below 50%. PwC suggests that two factors may be at work: (a) improved internal accounting and financial reporting controls; and (b) the continued growth of "product-efficacy" cases, especially against pharmaceutical and healthcare companies, which made up 10% of all cases in 2005.

(4) The study finds little correlation between financial restatements and filings, noting that "many restatements do not result in significant stock-price drops." (For more on this topic, see this recent post.)

Posted by Lyle Roberts at 7:58 PM | TrackBack

April 27, 2006

NERA Releases Study on "Recent Trends In Shareholder Class Action Litigation"

NERA Economic Consulting has released a study entitled "Recent Trends In Shareholder Class Action Litigation: Beyond the Mega-Settlements, is Stabilization Ahead?" The study reaches the following notable conclusions:

(1) The average settlement value hit a new high in 2005 (even excluding WorldCom and Enron) of $24.3 million. Nevertheless, NERA believes that "average settlements will not rise further over the next two or three years and, instead, could even fall" given that most of the cases associated with the stock market crash of 2000-2002 have been resolved.

(2) The study examines various factors that can raise settlement values - e.g., presence of accounting allegations (+20%), related official investigation (+25%), and lead plaintiff is an institutional investor (+33%).

(3) There were 209 filings in 2005. Although this is the lowest number since 1997, most of the difference is due to a sharp fall in filings in the 9th Circuit and "it is far too early to conclude there is a downward trend."

Posted by Lyle Roberts at 7:43 PM | TrackBack

February 7, 2006

Cornerstone Releases Report On Settlements

Cornerstone Research has released an updated report on post-PSLRA settlements of securities class actions through December 2005. The findings include:

(1) Excluding the Enron and WorldCom settlements, the value of securities class action settlements was $3.5 billion in 2005, up from $2.9 billion in 2004.

(2) The settlement value increase is attributable to a 10% increase in the number of settlements (124 in 2005 vs. 113 in 2004), a $2.1 million increase in average settlement value ($28.5 million in 2005 vs. $26.4 million in 2004), and an increase in the number of settlements over $100 million (9 in 2005 vs. 7 in 2004).

(3) The median value of settlements increased 19% to $7.5 million in 2005.

The press release announcing the report can be found here.

Quote of Note (press release): "[W]hile the Cornerstone study finds a significant increase in settlement amounts in 2005, a report recently issued by the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research found decreases in 2005 in both the number of case filings, as well as the amount of investor losses associated with case filings. Since there is a delay between case filings and case resolutions, these results suggest - along with the effects of the Dura decision - potential lower settlement values in the future."

Posted by Lyle Roberts at 11:34 PM | TrackBack

February 3, 2006

The Filing Debate

The Cornerstone/Stanford report on securities class actions filings in 2005 has been the subject of press commentary, primarily focused on the "sharp decline" in cases. The New York Times has a Legal Beat column discussing the report in today's edition.

There are two interesting questions that arise out of the report's findings.

First, is the decline actually significant? Securities Litigation Watch has done a great job of pointing out that commentators are ignoring the actual statistical trend - perhaps because they are merely relying on the press release that accompanied the report. In the context of post-PSLRA filings (i.e., since 1996), last year's 175 filings is entirely consistent with the normal up-and-down pattern.

Second, and perhaps more interestingly, why was there no rise in the number of securities class action filings last year given the astonishing increase in financial restatements? There were an estimated 1200 financial restatements in 2005, nearly twice as many as in 2004. Although not every financial restatement brings a lawsuit, there is little doubt that the correlation is significant. The Cornerstone/Stanford report found that 89% of securities class actions filed in 2005 alleged misrepresentations in financial documents.

The New York Times column states that restatements are becoming more commonplace and may not indicate misconduct, but then quotes some experts suggesting that the real reason for the decline in filings is a combination of the PSLRA and judicial decisions (including Dura) that have made it more difficult for investors to bring cases. One missing link, however, is the relationship between restatements and stock price declines. The announcement of a restatement that is not accompanied by a significant stock price decline is unlikely to engender a securities class action (not enough damages). So it would appear that we need at least one more piece of the statistical puzzle: how many of last year's restatements led to a significant stock price decline?

Posted by Lyle Roberts at 11:07 AM | TrackBack

January 3, 2006

Cornerstone And Stanford Release Report On Filings In 2005

Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse have released a report on federal securities class action filings in 2005. The findings include:

(1) The overall number of securities class actions filed in 2005 decreased more than 17%, falling from 213 filings to 176 filings. This year's filing rate is nearly 10% below the post-PSLRA historic average. Moreover, the alleged investor losses associated with the cases decreased significantly.

(2) Filing activity declined in the technology and communications sectors (down 32% from 2004). The consumer non-cyclical sector (e.g., biotechnology, commercial services, cosmetics, food, healthcare products) gave rise to the most securities class action litigation.

(3) There was a substantial increase in the number of securities class actions alleging misrepresentations in financial reporting (from 78% in 2004 to 89% in 2005) and false forward-looking statements (from 67% in 2004 to 82% in 2005).

The authors of the report suggest that the decrease in overall filings may be the result of the large majority of suits related to the boom-and-bust cycle of the late 1990s-early 2000s having already been filed, improvements in corporate governance, and less stock market volatility.

The joint press release announcing the report can be found here.

Posted by Lyle Roberts at 9:07 PM | TrackBack

July 18, 2005

NERA Releases Study On "Recent Trends In Shareholder Class Litigation"

NERA Economic Consulting has released a study entitled "Recent Trends In Shareholder Class Action Litigation: Are WorldCom and Enron the New Standard?" The study reaches the following notable conclusions:

(1) In the first half of 2005, the median settlement value of securities class action cases jumped nearly 30% to $6.8 million from $5.3 million last year. The study states that the driving factor behind this increase is a sharp reduction in "nuisance" settlements of under $3 million.

(2) While bigger settlements have yielded lower percentage fees for plaintiffs' counsel, the average settlement in 2005 will result in over $6 million in fees (as compared to $3.6 million five years ago).

(3) Securities class action filings are down by 17 percent in the first half of 2005. The study finds that the slowdown is attributable to a drop in filings in the 9th Circuit, where plaintiffs' firms may have delayed filing cases pending the Dura decision.

(4) Dismissal rates have nearly doubled after the passage of the PSLRA and account for 39.3% of dispositions of securities class actions filed 1996-2002. This increase offsets the increased likelihood that a public company will be sued in a securities class action. As a result, the annual probability of a company facing a suit that survives a motion to dismiss has remained roughly constant at 1.2%.

The statistics on dismissal rates are surprising, especially since an earlier NERA study found that the PSLRA had not significantly increased the likelihood of a securities class action being dismissed.

Posted by Lyle Roberts at 8:32 PM | TrackBack

May 24, 2005

2004 PWC Securities Litigation Study

The 2004 Securities Litigation Study from PricewaterhouseCoopers contains a number of interesting statistics. A few highlights:

(1) Securities class actions were filed against 29 foreign companies listed on U.S. exchanges. This is the highest number of cases against foreign companies ever filed in one year.

(2) Securities class actions alleging accounting-related securities fraud versus securities class actions alleging non-accounting-related securities fraud divided roughly 60/40 percent. This has been a relatively constant statistic since the passage of the PSLRA.

(3) Public retirement and investment funds and other institutional entities comprised 47 percent of the lead plaintiffs in all securities class actions filed through June 30, 2004. This compares to 41 percent of all cases with such lead plaintiffs in 2003 and 51 percent in 2002.

Quote of note: "Exactly what 2004 securities litigation statistics, trends and events are telling us is that the future will be more challenging. Look for steady, or somewhat increasing, trends in the number of private securities litigation class actions and regulatory enforcement actions on average over the next several years. Expect continuing significant increases in the dollar-values of private securities class action settlements of the average, median, and 'high-dollar' values of settled cases for years to come. Contemplate the knock-on effects of Sarbanes-Oxley, increased regulatory enforcement actions, and enhanced vigilance by independent auditors (regarding accounting irregularities and financial frauds), and expect a significant increase in 'Section 10A' matters, SEC (and other regulators) investigations, and internal corporate investigations leading to more restatements, more regulatory enforcement actions, and more private securities litigation. And, assume that a few bad management of a number of some publicly-listed companies will continue to try to game the system and securities markets."

Posted by Lyle Roberts at 9:43 PM | TrackBack

March 2, 2005

Cornerstone Releases Report On Settlements

Cornerstone Research has released an updated report on post-Reform Act settlements of securities class actions through December 2004. The findings include:

(1) The value of securities class action settlements in 2004 was a record $5.5 billion (the previous record was $4.5 billion in 2000). Even excluding Citigroup's $2.6 billion settlement of WorldCom-related claims, the year-to-year increase was substantial.

(2) For cases settled in 2004 (as compared to 2003), there was a 40% increase in the length of the class period and larger market capitalization losses. Cornerstone attributes this development to the fact that many cases settling in 2004 were originally filed during the bear market that began in 2000.

(3) Despite the increase in overall settlement values, more than 65% of all settlements in 2004 were for less than $10 million and approximately 80% were for less than $30 million.

Cornerstone's press release on the study can be found here.

Posted by Lyle Roberts at 7:30 PM | TrackBack

February 14, 2005

NERA Releases Study On "Recent Trends In Shareholder Class Litigation"

NERA Economic Consulting has released a study entitled "Recent Trends In Shareholder Class Action Litigation: Bear Market Cases Bring Big Settlements." The study reaches the following notable conclusions:

(1) There was a 33% increase in the mean settlement value of securities class actions in 2004 ($27.1 million in 2004, up from $20.3 million in 2003). NERA found that this increase was fueled by cases dealing with higher investor losses and is likely to continue for the next several years.

(2) On average, a 1% increase in investor losses results in a .4% increase in the size of an expected settlement.

(3) Although a number of very large settlements caused the increase in the mean settlement value, the dollar value of the typical settlement is actually falling. Over 70% of the settlements in 2004 were valued at $10 million or less.

(4) Over a five-year period, a public corporation faces a 10% probability of facing a securities class action. This probability has risen since the passage of the PSLRA.

(5) The Sarbanes-Oxley Act of 2002 does not appear to have had an impact on the number of securities class action filings or the size of settlements.

NERA's press release on the study can be found here.

Posted by Lyle Roberts at 6:12 PM | TrackBack

January 4, 2005

Cornerstone And Stanford Release Report On Filings In 2004

Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse have released a report on federal securities class action filings in 2004. The findings include:

(1) Securities class action filings increased by 17% from 2003 to 2004, rising from 181 companies sued to 212 companies sued (the post-PSLRA annual average is 190 filings).

(2) The total decline in market capitalization from the beginning to the end of the purported class periods nearly tripled from $58 billion to in 2003 to $169 billion in 2004. This increase is attributable to a small number of cases with unusually large market capitalization declines.

(3) The top three circuits in terms of number of filings in 2004 were the Ninth Circuit (64 filings), the Second Circuit (45 filings), and the Eleventh Circuit (20 filings).

(4) The number of issuers sued in the technology sector nearly doubled, fueling the rise in the number of filings in the Ninth Circuit (primarily California).

The joint press release announcing the report can be found here.

Posted by Lyle Roberts at 6:53 PM | TrackBack

December 31, 2004

Impact of Sarbanes-Oxley

A study by Deloitte & Touche and a law firm has found that companies who have reported internal control weaknesses related to financial reporting have not been disproportionately hit with securities litigation. WebCPA has an article on the study, which found that only 6 percent of the nearly 300 companies analyzed were served with a class action securities complaint related to the disclosed deficiencies. It is not clear from the article, however, whether the study considered the impact of stock price movements related to the disclosures. The release of the study comes as companies prepare to meet the internal control disclosure deadlines of Sarbanes-Oxley Section 404.

Quote of note: "The disclosures in the study ranged from simple and significant deficiencies, to reportable conditions and material weaknesses. Material weaknesses represented 52 percent of the disclosures."

Posted by Lyle Roberts at 9:31 AM | TrackBack

August 3, 2004

2003 PwC Securities Litigation Study

PricewaterhouseCoopers has released its 2003 Securities Litigation Study, which contains a number of interesting statistics. A few highlights:

(1) Of the 175 securities class actions filed in 2003, 107 were accounting-related. The primary allegation in accounting-related cases continues to be revenue recognition issues, alleged in over 50% of these cases.

(2) The percentage of cases with union/public pension funds as lead plaintiffs has grown steadily from 1996 (less than 3% of cases) to 2003 (28% of cases).

(3) Average settlement values for all cases settled in 2003 was $23.2 million, up 20% from 2002. There were an increasing number of large settlements, including 6 settlements of more than $100 million.

(4) PwC has begun to track "triple jeopardy" cases, where companies are subject to securities class actions along with SEC and DOJ investigations. There was an all-time high of over 40 of these cases in 2002, but last year saw this number fall to 8 cases (closer to historic norms).

Posted by Lyle Roberts at 9:30 PM | TrackBack

May 14, 2004

Cornerstone And Stanford Release Report On Filings In 2003

Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse have released a report on federal securities class action filings in 2003. The findings include:

(1) Securities class actions (not including IPO allocation, analyst research, or mutual fund trading practices cases) declined by 22% between 2002 and 2003, falling from 225 to 175 filings.

(2) Companies sued in 2003 lost more than $540 billion in market capitalization, down from $1.9 trillion in 2002.

(3) There were fewer huge cases. In 2003, there were 14 filings in which the defendant companies lost more than $10 billion in market capitalization. In 2002, there were 40 filings with this type of market capitalization loss.

(4) The top three circuits in number of filings in 2003 were the Second Circuit (37 filings), the Ninth Circuit (34 filings), and the Eleventh Circuit (21 filings).

(5) Insider trading by corporate defendants was alleged in 33% of the 2003 filings (as compared to 26% in 2002).

(6) Auditors and underwriters were named as defendants in a very small percentage of all filings both in 2002 and 2003.

The joint press release announcing the report can be found here.

Posted by Lyle Roberts at 8:30 PM | TrackBack

May 12, 2004

Cornerstone Releases Report On Settlements

Cornerstone Research has released an updated report on post-Reform Act settlements of securities class actions through 2003. The findings include:

(1) Of the 96 settlements in 2003, almost 85% were for less than $20 million. Five cases settled for more than $100 million.

(2) 20% of post-Reform Act settlements have involved Section 11 or 12(a)(2) claims and median settlements as a percentage of "estimated damages" are significantly higher for these cases.

(3) Approximately 30% of post-Reform Act settlements have involved institutions serving as lead plaintiffs (as compared to approximately 15% before the Reform Act). After controlling for various factors, the report finds that settlement amounts are higher in these cases.

(4) Less than 15% of post-Reform Act cases have been accompanied by the filing of a derivative action.

Cornerstone's press release can be found here. The company also announced that its report on securities class action filings for 2003 (done jointly with Stanford Law School's Securities Class Action Clearinghouse) will be released shortly.

Addition: The New York Law Journal (via law.com - regist. req'd) has an article on the report.

Posted by Lyle Roberts at 7:24 AM | TrackBack

May 4, 2004

The Top 50

ISS's Securities Class Action Services ("SCAS") has issued a list of the top 50 plaintiffs' law firms ranked by the total dollar amount of final securities class action settlements occurring in 2003 in which the law firms served as lead or co-lead counsel.

The full report can be found here. Securities Litigation Watch, the blog authored by Bruce Carton of SCAS, also has a post summarizing the results.

Posted by Lyle Roberts at 12:17 PM | TrackBack

February 10, 2004

NERA Releases Study On "Recent Trends In Securities Class Action Litigation"

NERA Economic Consulting has released a study entitled "Recent Trends In Securities Class Action Litigation: 2003 Early Update." The study reaches the following notable conclusions:

(1) Although three of the six largest securities class action settlements of all time were in 2003 (Lucent, DiamlerChrysler, and Oxford Health Plans), the average settlement amount fell 15% to $19.8 million as compared to last year. Two-thirds of all settlements in 2003 were for less than $10 million.

(2) There were 210 securities class action filings in 2003. This is consistent, excluding laddering and analyst cases, with the post-PSLRA average of 212 filings a year.

(3) Over a five-year period, the average public corporation faces a 9% probability that it will face at least one securities class action suit.

(4) Following the passage of Sarbanes-Oxley in 2002, there have been one-third fewer dismissals of securities class actions. According to NERA, the "lower rate of dismissal suggests that either cases are proceeding more slowly or that judges are being more generous at the margins in evaluating the merits of cases."

Posted by Lyle Roberts at 11:47 PM | TrackBack

January 14, 2004

The Public Pension Fund Factor

PricewaterhouseCoopers has released a study on the role of public pension funds in securities class actions. Notable results:

(1) The number of cases with public pension funds as lead plaintiff has steadily increased since the passage of the PSLRA in 1995 - from 4 cases filed in 1996 to 56 cases filed in 2002.

(2) Of the more than 100 active cases where a public pension fund is acting as lead plaintiff, 80% allege accounting issues.

(3) In 2003, 15 settlements averaging over $120 million were reached in cases where a public pension fund served as lead plaintiff -- sixteen times the average value of the remaining 85 cases settled last year.

There are a lot of conclusions that could be drawn from this data, but it is certainly clear that public pension funds are taking the lead in large accounting fraud cases.

Posted by Lyle Roberts at 6:01 PM | TrackBack

November 5, 2003

Filings Against Foreign Companies On The Rise

The number of foreign companies listed on U.S. stock exchanges has grown over the past few years. In 2002, there were over 1300 foreign registrants. With access to the U.S. capital markets, however, also comes the possibility of securities litigation brought by U.S. investors.

According to a study by PricewaterhouseCoopers, filings against foreign companies have been on the rise. In 2002, 22 foreign companies were names in securities class actions. This total is an increase of 47% over the 15 cases filed in 2001 and 29% higher than the previous record of 17 cases filed in 1998.

In a press release issued yesterday, PWC announced some additional findings, including:

1) Thus far in 2003, 13 foreign companies have been sued in securities class actions.

2) The average post-PSLRA settlement in cases against foreign companies is nearly $23 million.

3) More than 77% of the cases against foreign companies contained accounting allegations in 2002, and more than half of the 2003 cases contain accounting allegations.

Posted by Lyle Roberts at 8:48 PM | TrackBack

August 21, 2003

PricewaterhouseCoopers 2002 Securities Litigation Study

PricewaterhouseCoopers LLP has issued a study on private securities litigation trends in 2002 and the first part of 2003. Notable findings for the period from January 1, 2003 to July 31, 2003 include:

(1) 60 securities class actions were settled with a total settlement value of $1.5 billion ($25.1 million average).

(2) The total number of securities class action filings in 2003 is on track to be approximately 190 (down from 217 in 2002).

(3) The number of securities class actions involving health services and pharmaceutical companies is rising, while the number of cases against telecommunications and utlilities companies has dropped dramatically.

Quote of note (from the related press release): "In 2002, approximately one out of every five shareholder class actions involved either a Department of Justice investigation, or a federal indictment, conviction or guilty plea/conviction, a 200 percent increase over 2001, and a 290 percent increase over the average for the years 1996 through 2000."

Posted by Lyle Roberts at 7:10 PM | TrackBack

August 15, 2003

Q2 2003 Review of Securities Class Actions

Veritas, an Atlanta corporation that provides securities litigation data and services, has released some of the results from its review of class action activity from April 1, 2003 to June 30, 2003. Notable findings include:

(1) 59 securities class actions were filed during the second quarter of 2003, a slight decline from the 65 securities class actions filed during the first quarter of 2003.

(2) Milberg Weiss was bumped out of its historically commanding position for lead counsel appointments by Schiffrin & Barroway, who garnered 27% of lead counsel appointments in the second quarter (Milberg came in second with 23% of the appointments).

(3) Milberg Weiss continued to dominate the settlement arena, with 30% of the settlements that were approved in the second quarter for a total of 68% of the total funds recovered.

Posted by Lyle Roberts at 11:34 AM | TrackBack

July 16, 2003

The PSLRA: Much Ado About Nothing?

NERA, an economics consulting firm, has released its latest study on securities class actions entitled "Recent Trends in Securities Class Action Litigation: Will Enron and Sarbanes-Oxley Change The Tides?" The study reached the following conclusions about the trends in securities litigation since the passage of Sarbanes-Oxley in June 2002:

1) Securities class action filings have not increased dramatically (annual rate of 214 filings, compared to average annual rate of 208 filings from 1996-2001).

2) Dismissals have fallen sharply (half as many dismissals as in the previous 11 month period).

3) Average settlement values have fallen modestly ($22.7 million per settled case, compared to $25.5 million from 1996-2002).

These short-term trends are not nearly as interesting, however, as NERA's findings suggesting that the PSLRA (enacted in 1995) has not achieved Congress' goal of reducing meritless securities litigation. Indeed, the chances of a publicly-traded company being sued in a securities class action has increased (by 40.5%), while the percentage of cases dismissed (12-13%) or settled for nuisance value (24%) have remained roughly the same. These results lead to one question: has all of the controversy over the PLSRA (presidential veto, periodic calls for its repeal, etc.) been much ado about nothing?

Congress may want to take a hard look at the lessons of the PSLRA as it considers the Class Action Fairness Act and other tort reforms.

Posted by Lyle Roberts at 7:46 PM | TrackBack