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.