Category Archives: Lies, Damn Lies, And Statistics

NERA Economic Consulting has released a study entitled “Recent Trends In Securities Class Action Litigation: 2003 Early Update.” The study reaches the following notable conclusions:

(1) Although three of the six largest securities class action settlements of all time were in 2003 (Lucent, DiamlerChrysler, and Oxford Health Plans), the average settlement amount fell 15% to $19.8 million as compared to last year. Two-thirds of all settlements in 2003 were for less than $10 million.

(2) There were 210 securities class action filings in 2003. This is consistent, excluding laddering and analyst cases, with the post-PSLRA average of 212 filings a year.

(3) Over a five-year period, the average public corporation faces a 9% probability that it will face at least one securities class action suit.

(4) Following the passage of Sarbanes-Oxley in 2002, there have been one-third fewer dismissals of securities class actions. According to NERA, the “lower rate of dismissal suggests that either cases are proceeding more slowly or that judges are being more generous at the margins in evaluating the merits of cases.”

The number of foreign companies listed on U.S. stock exchanges has grown over the past few years. In 2002, there were over 1300 foreign registrants. With access to the U.S. capital markets, however, also comes the possibility of securities litigation brought by U.S. investors.
According to a study by PricewaterhouseCoopers, filings against foreign companies have been on the rise. In 2002, 22 foreign companies were names in securities class actions. This total is an increase of 47% over the 15 cases filed in 2001 and 29% higher than the previous record of 17 cases filed in 1998.
In a press release issued yesterday, PWC announced some additional findings, including:
1) Thus far in 2003, 13 foreign companies have been sued in securities class actions.
2) The average post-PSLRA settlement in cases against foreign companies is nearly $23 million.
3) More than 77% of the cases against foreign companies contained accounting allegations in 2002, and more than half of the 2003 cases contain accounting allegations.

PricewaterhouseCoopers LLP has issued a study on private securities litigation trends in 2002 and the first part of 2003. Notable findings for the period from January 1, 2003 to July 31, 2003 include:

(1) 60 securities class actions were settled with a total settlement value of $1.5 billion ($25.1 million average).

(2) The total number of securities class action filings in 2003 is on track to be approximately 190 (down from 217 in 2002).

(3) The number of securities class actions involving health services and pharmaceutical companies is rising, while the number of cases against telecommunications and utlilities companies has dropped dramatically.

Quote of note (from the related press release): “In 2002, approximately one out of every five shareholder class actions involved either a Department of Justice investigation, or a federal indictment, conviction or guilty plea/conviction, a 200 percent increase over 2001, and a 290 percent increase over the average for the years 1996 through 2000.”

Veritas, an Atlanta corporation that provides securities litigation data and services, has released some of the results from its review of class action activity from April 1, 2003 to June 30, 2003. Notable findings include:

(1) 59 securities class actions were filed during the second quarter of 2003, a slight decline from the 65 securities class actions filed during the first quarter of 2003.

(2) Milberg Weiss was bumped out of its historically commanding position for lead counsel appointments by Schiffrin & Barroway, who garnered 27% of lead counsel appointments in the second quarter (Milberg came in second with 23% of the appointments).

(3) Milberg Weiss continued to dominate the settlement arena, with 30% of the settlements that were approved in the second quarter for a total of 68% of the total funds recovered.

NERA, an economics consulting firm, has released its latest study on securities class actions entitled “Recent Trends in Securities Class Action Litigation: Will Enron and Sarbanes-Oxley Change The Tides?” The study reached the following conclusions about the trends in securities litigation since the passage of Sarbanes-Oxley in June 2002:

1) Securities class action filings have not increased dramatically (annual rate of 214 filings, compared to average annual rate of 208 filings from 1996-2001).

2) Dismissals have fallen sharply (half as many dismissals as in the previous 11 month period).

3) Average settlement values have fallen modestly ($22.7 million per settled case, compared to $25.5 million from 1996-2002).

These short-term trends are not nearly as interesting, however, as NERA’s findings suggesting that the PSLRA (enacted in 1995) has not achieved Congress’ goal of reducing meritless securities litigation. Indeed, the chances of a publicly-traded company being sued in a securities class action has increased (by 40.5%), while the percentage of cases dismissed (12-13%) or settled for nuisance value (24%) have remained roughly the same. These results lead to one question: has all of the controversy over the PLSRA (presidential veto, periodic calls for its repeal, etc.) been much ado about nothing?

Congress may want to take a hard look at the lessons of the PSLRA as it considers the Class Action Fairness Act and other tort reforms.