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.