Category Archives: Lies, Damn Lies, And Statistics

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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Compare and Contrast

NERA Economic Consulting and Cornerstone Research (in conjunction with the Stanford Securities Class Action Clearinghouse) have released their 2013 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 2013 include:

(1) The reports agree that filings have increased by a slight amount. NERA finds that there were 234 filings (compared with 213 filings in 2012), while Cornerstone finds that there were 166 filings (compared with 152 filings in 2012). NERA normally has a higher filings number due to its counting methodology (see footnote 2 of the NERA report).

(2) The reports note that the number of companies listed on U.S. exchanges has declined nearly 50% from 1996 to 2013, but draw different (albeit not contradictory) conclusions from this statistic. NERA states that “the implication of this decline is that an average company listed in the US was 83% more likely to be the target of a securities class action in 2013 than in the first five years after the passage of the PSLRA.” Cornerstone, in contrast, points to this decline as “one explanation for the recent relatively low levels of filing activity compared with historical averages.”

(3) The Cornerstone report offers a new analysis of class certification trends. It notes that between 2002 and 2010, class certification was denied for reasons based on the merits of the motion (e.g., typicality, predominance, etc.) in less than two dozen cases.

(4) NERA found a sharp increase in the average settlement amount in 2013, reaching a new record of $55 million. The median settlement amount, however, decreased 26% to $9.1 million. NERA concludes that “a few large settlements drove the average up, while many small settlements drove the median down.”

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 2013 midyear report on federal securities class action filings.

The findings for the first half of 2013 include:

(1) There were 74 filings, which was 16 percent higher than the second half of 2012 (but well below the historical average per six-month period). The increase is primarily the result of an increase in filings against technology and energy companies.

(2) Federal filings associated with M&A transactions remained at low levels. These actions now are being pursued primarily in state court.

(3) For filings in the years 2008 through 2010, a larger percentage of cases were dismissed than in prior years, with dismissal rates climbing significantly above 50%. One contributing factor, however, was the higher dismissal rates for M&A filings, which frequently were brought in federal court during this period.

Quote of note (Professor Grundfest – Stanford): “We are observing class certification challenges on the grounds that the fraud on the market doctrine should not apply. If this defense strategy is successful, and if the Supreme Court eventually backs away from the fraud on the market doctrine, then the class action securities fraud litigation market will likely shrink significantly. This potential evolution in legal doctrine likely represents the largest ‘risk factor’ for anyone trying to predict the future course of the securities fraud litigation market.”

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