Category Archives: Lies, Damn Lies, And Statistics

Compare and Contrast – Midyear 2019

NERA Economic Consulting and Cornerstone Research have released their 2019 midyear reports on 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 key findings include:

(1) The reports agree that filings continue to be at near-record levels, driven by continued growth in “standard” filings alleging violations of Rule 10b-5, Section 11, and/or Section 12, even while M&A-related cases have declined.  NERA finds that there were 218 filings (compared with 217 filings in 1H 2018), while Cornerstone finds that there were 198 filings (compared with 199 filings in 1H 2018).

(2) Following the Cyan decision by the U.S. Supreme Court, there has been a surge in state court filings alleging Section 11 claims.  Cornerstone finds that this has continued in 1H 2019, with 19 cases brought in state courts (with over a third of these cases being accompanied by a federal filing alleging similar claims).

(3) NERA finds that there has been an increase in accounting-related claims, making up 37% of standard filings and notching the highest first half case count since the first half of 2011.

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

 

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Compare and Contrast

NERA Economic Consulting and Cornerstone Research have released their respective 2018 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 2018 include:

(1) The reports agree that filings continue to be at near-record levels, driven by a steady growth in “standard” filings alleging violations of Rule 10b-5, Section 11, and/or Section 12 and the continued shift to federal court of M&A-related cases.  NERA finds that there were 441 filings (compared with 434 filings in 2017), while Cornerstone finds that there were 403 filings (compared with 412 filings in 2017).

(2) Both NERA and Cornerstone report that approximately 8% of publicly-listed companies were subject to securities class actions in 2018.  While that is an all-time high, it also is a function of the fact that the overall number of publicly-listed companies has declined substantially over the last 25 years (the result of a combination of fewer IPOs and M&A activity).

(3) Filings against foreign issuers had steadily increased from 2013-2017, with these companies facing a disproportionate (as compared to their percentage of listings) risk of securities class action litigation.  In 2018, however, both NERA and Cornerstone find a decrease in these filings, although the overall number of filings against foreign issuers (Cornerstone – 47; NERA – 43) remains high as compared to the historical average.

(4) NERA reports that, in 2013, 24% of filings alleging violations of Rule 10b-5 contained insider trading allegations.  That percentage has dropped precipitously since 2013, with only 5% of last year’s filings containing insider trading allegations.  NERA attributes the decline to the regulatory crackdown on insider trading and the increased corporate use of Rule 10b5-1 trading plans.

(5) NERA finds that the average settlement value for standard cases (excluding settlements over $1 billion) increased from $25 million (2017) to $30 million (2018). Meanwhile, the median settlement value for these cases increased from $6 million (2017) to $13 million (2018).

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

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Top 100 Settlements

With the dog days of summer comes the issuance of statistical reports on securities class actions.  ISS Securities Class Actions puts out an interesting report, now updated through 2016, on “The Top 100 U.S. Settlements of All Time.”  As it turns out, “all time” is actually from the passage of the Private Securities Litigation Reform Act of 1995 forward, but the report breaks down the settlements by amount, lead plaintiff, lead counsel, claims administrator, and the presence of a financial restatement.

Highlights:

(1) Six of the “Top 100 U.S. Settlements” were in the second half of 2016: Caremark, Genworth Financial, Household Int’l, Band of America, Pfizer, and MF Global Holdings.

(2) The plaintiffs’ firms with the most settlements on the list are Bernstein Litowitz (35 settlements) and Robbins Geller (17 settlements).

(3) Forty-three of the “Top 100 U.S. Settlements” have involved financial restatements.

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Compare and Contrast

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.

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

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Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2014 annual reports on 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 2014 include:

(1) The reports agree that filings have stayed flat.  NERA finds that there were 221 filings (compared with 222 filings in 2013), while Cornerstone finds that there were 170 filings (compared with 166 filings in 2013).  NERA normally has a higher filings number due to its counting methodology (see footnote 4 of the NERA report).

(2) Cornerstone notes that companies in the S&P 500 were less likely to be targeted by a securities class action in 2014 than in any year measured (2000 through 2014).  Not coincidentally, the dollar losses associated with the 2014 filings were significantly below the historical average.

(3) NERA found a sharp decrease in the average settlement amount to $34 million (down from $55 million in 2013, but the 2014 average is roughly the same as the 2012 and 2011 averages).  The median settlement amount decreased 29% from $9.1 million (2013) to $6.5 million (2014).   NERA also notes that while 59% of securities class actions filed between 2000 and 2010 were settled or dismissed within three years, the number of pending cases has been rising since 2011, “suggesting a slow-down of the resolution process over that period.”

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

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Cornerstone Releases Midyear Report

Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) has released its 2014 midyear report on federal securities class action filings.

The findings for the first half of 2014 include:

(1) There were 78 filings, which closely matches the pace of the first half of 2013. Approximately one in sixty companies listed on a major exchange were sued.

(2) Healthcare, biotechnology, and pharmaceutical companies were the most frequent targets for securities class actions, accounting for 21% of the filings.

(3) The number of filings in the Sixth, Eighth, and Tenth Circuits was up sharply, already equaling or eclipsing the full year totals for 2013.

Quote of note (Professor Grundfest – Stanford): “The most intriguing new trend in the market concerns high-frequency trading and allegations related to Michael Lewis’s Flash Boys. There lawsuits are very much in the early stages, and raise issues with a degree of economic complexity that far surpass the challenges encountered in the typical class action securities fraud case as we know it.”

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Cornerstone Releases Report On Settlements

Cornerstone Research has released its annual report on securities class action settlements. The notable findings include:

(1) There were 67 settlements last year, a 17.5% increase from 2012. The report concludes that the increase is likely due to the settling of “credit crisis” cases.

(2) The average settlement value was $71.3 million (significantly higher than historical levels), but the median settlement value was $6.5 million (significantly lower than historical levels). The discrepancy can be explained by the presence of six settlements over $100 million, which increased the average settlement value even as the size of more typical settlements declined.

(3) Overall, 50% of cases since 1996 (post-PSLRA) have settled for between $3.6 million and $20.6 million.

(4) In 2013, the median time to settlement from filing was 3.2 years.

Quote of Note (press release): “This past year’s data also represent the fading echoes of the financial crisis, as some of the largest settlements resolve claims of fraud surrounding transactions in mortgage-backed securities. These lawsuits won’t be around in the coming years to drive aggregate settlement values.”

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