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Trends 2010 Mid-Year Study: Filings Decline as the Wave of Credit Crisis Cases Subsides, Median Settlement at Record High

27 July 2010
By Dr. Jordan Milev, Robert Patton, Dr. Stephanie Plancich, and Svetlana Starykh

The pace of federal securities class action filings slowed in the first half of 2010, with filings on track to decline for a second consecutive year, according to this edition of NERA's semi-annual study. The study draws from more than 15 years of NERA research on case filings and settlements in securities class actions, and includes data on filings, dismissals, and settlements through 30 June 2010.

The latest edition shows that, from January to June 2010, there were 101 fillings of securities class actions. If the pace of filings to date continues there will be a total of 202 federal securities class actions filed in 2010. This would represent a decline from the 221 filings observed in 2009 and the 248 filings in 2008. 

According to the authors, one key factor in the decline of securities class action filings was a decline in cases related to the global credit crisis. In the first half of 2010, there were 17 credit crisis cases filed; if the pace of such filings is maintained there will be 34 such cases filed in 2010. That would represent a sizeable drop from the 57 credit crisis-related cases filed in 2009 and the 103 filed in 2008. The decline in credit crisis-related filings was partially offset by an increase in the frequency of other types of filings—such as cases alleging breaches of fiduciary duty and cases filed against companies in the life sciences and technology sectors. Recent developments such as the Gulf of Mexico oil spill also produced new filings.

The median settlement in the first half of 2010 was considerably higher than in any prior year. At $11.8 million, the median settlement exceeded 2009's value of $9 million by almost one-third, crossing the $10 million mark for the first time. According to the authors, one factor driving the increase in median settlement values was a substantial increase in median investor losses—a variable which correlates strongly with settlement size. Median investor losses in cases settled in the first half of the year were $436 million, the highest level since 1996.