NERA Releases Mid-Year Trends Report on Shareholder Class Actions

27 July 2009

New York/27 July 2009 -- Shareholder class action filings reached 127 for the first half of 2009, driven by the continued surge of Ponzi scheme and credit crisis allegations, according to a report released today by NERA Economic Consulting.

NERA's report, Recent Trends in Securities Class Actions Litigation: 2009 Mid-Year Update, shows that cases related to the credit crisis represent over 40% of these filings, and 20% were related to Ponzi scheme allegations of Bernard Madoff, R. Allen Stanford, Howard K Waxenberg, and others.

Although filings peaked in March 2009 with 31 cases, and gradually declined each month in the 2nd quarter, filings currently remain on track to match the 2008 level. The aggregate investor losses associated with the cases filed in the first six months of this year are over $158 billion.

Settlement Values Remain Steady

Historically, median settlement values have been under $10 million, and this trend has continued in 2009. In the first half of 2009, the median settlement was $8 million, the same as in 2008. Almost 10% of the settlements in 2009 have been for more than $100 million, making the average 2009 settlement $43 million.

Credit Crisis Cases Outlook

"As a large amount of the recent litigation activity is related to the credit crisis, most credit crisis cases remain pending," according to report co-author and NERA Senior Consultant Dr. Stephanie Plancich. "Only a small fraction of cases have been dismissed, and just three credit crisis cases have settled to date. Given this pattern, it is too early to say for sure how these cases may ultimately resolve."

Other Notable Key Trends

  • Fillings have continued to mass in the Second Circuit, due to the heavy concentration of credit crisis-related cases clustered there.
  • For the first six months in 2009, 58 shareholder class actions have settled.
  • Looking at cases by age at the time of resolution, a higher fraction of cases have been dismissed since the Supreme Court's ruling in Dura in April 2005.
  • 67% of cases filed in 2009 name at least one financial company as primary or co-defendant, compared to 50% in 2008.
  • In the first half of 2009, 19 filings, or 15% of all cases filed, named a foreign company as a primary defendant -- this is the highest percentage of foreign defendants ever observed post-PSLRA.

Securities Class Action Trends Report Series

NERA has been analyzing trends in securities class actions for more than 15 years. Two reports are published a year: one at mid-year and an annual review published at year's end. This year-end report was authored by NERA Senior Consultant Dr. Stephanie Plancich and Consultant Svetlana Starykh, and includes data on filings, dismissals, and settlements through June 30, 2009.

About NERA

NERA Economic Consulting (www.nera.com) is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For over half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities and the world's leading law firms and corporations. We bring academic rigor, objectivity, and real world industry experience to bear on issues arising from competition, regulation, public policy, strategy, finance, and litigation.

NERA's clients value our ability to apply and communicate state-of-the-art approaches clearly and convincingly, our commitment to deliver unbiased findings, and our reputation for quality and independence. Our clients rely on the integrity and skills of our unparalleled team of economists and other experts backed by the resources and reliability of one of the world's largest economic consultancies. With its main office in New York City, NERA serves clients from more than 25 offices across North America, Europe, and Asia Pacific.