The average value for settlements in 2009 increased to $37 million compared with $28 million in 2008, according to Securities Class Action Settlements: 2009 Review and Analysis, published by Cornerstone Research. Securities class action settlements totaled $3.8 billion in 2009, a jump of more than 35 percent over 2008. The new study also reports 103 settlements approved in 2009, up from 97 reported in 2008.
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Professor Joseph Grundfest, Director of the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research, observed that, “Because securities fraud litigation typically settles three to five years after the first complaint is filed, this year’s settlement activity reflects lawsuits brought roughly between 2004 and 2006. Given litigation trends over those years, the 2009 settlement data are within the zone of expected settlements, and aren’t much of a surprise.”
Although the financial sector had the highest industry concentration among 2009 settled cases, these settlements primarily were for cases filed through 2007. For the most part, case filings related to the credit crisis in 2008 have yet to be resolved.
Professor Laura Simmons of the College of William & Mary Mason School of Business and Senior Advisor at Cornerstone Research observed, “As we predicted last year, the decline in settlements that occurred in 2008 has proven to be temporary. Looking ahead, we anticipate that as cases brought in conjunction with the 2008 stock market decline and surrounding credit-crisis issues are resolved, settlements are likely to continue to increase both in number and value.”
The following are among the key findings in Securities Class Action Settlements: 2009 Review and Analysis.
- The median settlement in 2009 was $8 million, unchanged from 2008. While this is lower than the inflation-adjusted median of $9.3 million in 2007, it is higher than the median for all cases settled from 1996 through 2008.
- Institutional investors continued to participate actively in post–Reform Act securities class actions and served as lead plaintiffs in nearly 65 percent of 2009 settlements. Cases involving public pensions as lead plaintiffs were associated with significantly higher settlements.
- Alleged violations of Generally Accepted Accounting Principles (GAAP) were included in more than 65 percent of settled cases in 2009. Cases with GAAP allegations had larger settlement amounts and a higher percentage of estimated “plaintiff-style” damages compared with cases not involving accounting allegations.
The full text of the report is also available at securities.cornerstone.com.