Federal securities fraud class action filing activity in 2009 was down sharply compared to 2008 and historical averages, according to Securities Class Action Filings 2009: A Year in Review, an annual report prepared by the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research.
A total of 169 federal securities class actions were filed in 2009, a 24 percent decline from the 223 observed in 2008, and 14 percent below the average of 197 observed between 1997 and 2008. Litigation activity related to the credit crisis declined even more markedly from 100 filings in 2008 to only 53 in 2009, a 47 percent decrease. Only 17 of those filings occurred in the second half of 2009. “Perhaps most striking this past year was the rapid decline of credit crisis securities class action filings, which followed an equally quick ascent in 2007 and 2008,” said Dr. John Gould, a senior vice president of Cornerstone Research.
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Plaintiff law firms also filed a much larger number of lawsuits long after the date on which the alleged fraud was disclosed to the market. The filing of these delayed class actions was particularly notable in the second half of the year when the median filing lag was 100 days, more than three times the historical average. The plaintiff law firm Coughlin Stoia Geller Rudman & Robbins appears to be disproportionately involved in filing these delayed claims. According to Stanford Law School Professor Joseph A. Grundfest, director of the Securities Class Action Clearinghouse,
The remarkable increase in old claims filed during 2009 suggests that plaintiffs are trying to fill the litigation pipeline by bringing older lawsuits that weren’t attractive enough to file while the firms were busy pursuing financial sector claims. If history is a guide, these lawsuits are more likely to be dismissed and can therefore be characterized as lower quality claims.
Other trends discussed in the report include market capitalization losses; filings by industry, federal circuit, and stock exchange; and frequency of filings against firms with non-U.S. headquarters. In addition to the Securities Class Action Clearinghouse, the report is also available at http://securities.cornerstone.com.