NERA Economic Consulting Releases Semiannual Securities Class Action Trends Report: Class Actions Continue to Be Filed at Historical Levels; Number of Settlements Plummets, but Average Settlement Is Rising

24 July 2012

New York -- Securities class actions filed in US Federal court continue to be filed at their historical pace in the first half of 2012, but the number of settlements has dropped sharply, according to NERA Economic Consulting's new report, Recent Trends in Securities Class Action Litigation: 2012 Mid-Year Review.
 
Through the first half of the year, 116 class actions have been filed; the projected 2012 total of 232 class action filings is in line with the 224 filed in 2011 and the average of 217 class actions filed annually between 1996 and 2011.
 
While filings of class actions have maintained their historical levels, their composition has changed significantly. In 2011, NERA observed a wave of filings against Chinese domiciled companies. In the first half of 2012, cases involving Chinese companies have decreased considerably, with only 10 cases being filed, less than half the 2011 filing rate. Merger objection cases continue to be a major portion of total filings, as they have since 2010.

Number of Settlements Dropping, but Average Settlement Is Rising

Settlements of class actions in 2012 will be at their lowest level since 1999 if the current pace is maintained. Only 49 cases have settled in 2012 through June; the projected full-year total of 98 is down sharply from 128 in 2010 and 123 settlements in 2011.
 
Meanwhile, the average value of a securities class action settlement in the first half of 2012 was $71 million, up from the average value of $31 million last year. However, the 2012 average was heavily influenced by the $1.01 billion settlement in In Re American International Group, Inc. Securities Litigation, the fourth tranche of which obtained final approval earlier this year. Excluding the latter, the average settlement amount in the first half of 2012 was $41 million, still a substantial increase from last year’s $31 million.  The median settlement amount in the first six months of 2012 was $7.9 million, approximately the same as in 2011 and consistent with pre-credit crisis levels.
 
New Area of Analysis: Motions

This version of Trends includes a new area of analysis covering motions and their resolutions for class actions filed and settled in 2000 or later. The authors found that motions to dismiss had been filed in nearly 90% of the cases that settled, and motions for class certification had been filed in 42% of the cases that settled.
 
Additional Trends

  • Class actions alleging violations of Rule 10b-5, Section 11, and/or Section 12 have been filed in 83 cases in the first half of 2012. If filings continue at this pace, 166 class actions in these categories will have been filed - more than any of the last three years, but still below the 2008 peak.
  • The number of cases filed against all foreign-domiciled companies is decreasing, due to the decrease in filings against Chinese companies. With this decline, the rate of securities class actions filings against foreign companies listed in the US has now reverted to a level only slightly above the rate for US companies.
  • Filings remain concentrated in the Second and Ninth Circuits, but the balance between them is shifting. In the first half of 2012, Second Circuit filings were made at a higher pace than in any recent year except 2008, while filings in the Ninth Circuit decreased substantially.
  • The share of filings against companies in the financial sector continued to decline from its peak in 2008 and 2009; only 11% of the filings so far in 2012 have involved issuers in the financial sector.
  • The average "time to file," the time from the end of the alleged class period to the date of filing of the first complaint, has been steadily decreasing since 2009. In the first half of 2012, the time to file a complaint was 107 days, on average, compared to 224 days in 2009 and 152 days in 2011.

NERA Securities Class Action Trends Report Series

NERA has been analyzing trends in securities class actions for more than 15 years. Two reports are published per year: a mid-year study and an annual review at year's end. This mid-year study was authored by NERA Senior Consultant Dr. Renzo Comolli, Vice President Dr. Ronald Miller, Senior Vice President Dr. John Montgomery, and Senior Consultant Svetlana Starykh and includes data on filings, dismissals, and settlements through 30 June 2012. For more details and to read the full report, visit: www.nera.com/recenttrends.

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.