Compare and Contrast

NERA Economic Consulting and Cornerstone Research have released their respective 2020 annual reports on federal securities class action filings.  As usual, the different methodologies employed by the two organizations have led to slightly different numbers, although they both identify the same general trends.

The findings for 2020 include:

(1) The reports agree that there was a significant decline in filings, with less than 400 overall filings for the first time since 2017.  The reports state that a drop in M&A-related cases is responsible for most of the decline, although “standard” filings alleging violations of Rule 10b-5, Section 11, and/or Section 12 were also down.  NERA finds that there were 326 filings (compared with 420 filings in 2019), while Cornerstone finds that there were 334 filings (compared with 427 filings in 2019).

(2) Both NERA and Cornerstone analyzed the number of filings with COVID-19 related claims: NERA identifies 33 filings with COVID-19-related claims, while Cornerstone identifies 19 filings with COVID-19-related claims.

(3) In 2019, there was a leap in the number of standard filings in the Second Circuit, which accounted for nearly twice the number of filings as the Ninth Circuit.  In 2020, however, the numbers reverted to the norm, with the Second Circuit (NERA – 69; Cornerstone – 77) and Ninth Circuit (NERA – 79; Cornerstone – 79) having a similar number of standard filings.  The Third Circuit had the next highest number of standard filings (NERA – 25; Cornerstone – 24).

(4) The percentage of cases brought against foreign issuers continues to rise.  Cornerstone finds that there were 74 standard filings against foreign issuers in 2020 (compared to 57 filings in 2019), representing 33% of all standard filings.

(5) NERA finds that if settlements related to merger objections, settlements with no cash payment to the class, and individual cases with settlements of $1 billion or greater are removed, the annual average settlement values have been stable over the last four years, ranging from $26 million to $31 million.

The NERA report can be found here.  The Cornerstone report can be found here.

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