NERA Economic Consulting and Cornerstone Research have released their respective 2016 annual reports on federal 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 2016 include:
(1) The reports agree that filings are up sharply. NERA finds that there were 300 filings (compared with 228 filings in 2015), while Cornerstone finds that there were 270 filings (compared with 188 filings in 2015). NERA usually reports higher filings numbers due to its methodology, which counts cases against the same issuer that are filed in different circuits as separate filings (at least until they are consolidated).
(2) Both NERA and Cornerstone find that there has been a steady growth in “standard” filings alleging violations of Rule 10b-5, Section 11, and/or Section 12. Most of the discrepancy between 2015 and 2016, however, is the result of a large increase in M&A-related cases (NERA – 88 filings; Cornerstone – 80 filings). The increase is likely attributable to the fact that various state courts, most notably in Delaware, have issued recent decisions limiting the viability of “disclosure-only” settlements for this type of case.
(3) The Ninth Circuit led the nation in overall filings. NERA notes, however, that relatively few M&A-related cases were filed in the Second Circuit. The Second Circuit had the highest number of “standard” filings.
(4) The pharmaceutical, biotechnology, and healthcare sector easily had the most filings. NERA and Cornerstone agree that around a third of all cases were brought against companies in this space.
(5) NERA finds that for cases filed and resolved between 2000 and 2016, a motion to dismiss was decided in 79% of the cases. The outcome of those motions to dismiss was: granted with or without prejudice (44%), granted in part and denied in part (30%), and denied (25%). Only 15% of cases filed over that same period reached a decision on a motion for class certification.
(6) NERA finds a significant increase in the average settlement amount to $72 million (up from $53 million in 2015, as adjusted for inflation). However, that number was affected by two settlements of more than $1 billion. If those settlements are removed, the average actually declined to $43 million. The median settlement amount held fairly steady, as compared to the last few years, at $9.1 million.