2018 US Securities Class Action Filings Break New Records; NERA Economic Consulting Releases Annual Securities Class Action Trends Report

29 January 2019

New York, NY—441 new securities class actions were filed in US federal courts in 2018, the highest number of filings since the aftermath of the 2000 dot-com crash, according to “Recent Trends in Securities Class Action Litigation: 2018 Full-Year Review,” an annual report released by NERA Economic Consulting.

“While the number of filings was roughly unchanged compared to 2017, the pace of new litigation accelerated over the second half of the year and the average size of new cases was considerably larger,” said NERA Managing Director Dr. David Tabak. “Merger-objection cases constituted about half the 441 total filings, but growth of such cases slowed sharply versus 2017, indicating that the explosion in filings sparked by the Trulia decision may have run its course.”

In total, 351 securities class actions were resolved in 2018, the second consecutive year in which a record number of cases concluded. Resolution numbers were once again dominated by a record number of dismissals, which outnumbered settlements more than two-to-one for the first time.

In 2018, the average settlement rebounded to $69 million from a near-record low in 2017, largely due to the $3 billion settlement involving Petróleo Brasileiro S.A.—Petrobras, the fifth-highest settlement ever. The median settlement in 2018, $13 million, was more than twice that of 2017, primarily due to higher settlements of many moderately sized cases and, generally, fewer very small settlements.

Additional Key 2018 Trends

  • Aggregate NERA-defined Investor Losses, a measure of total case size, came to a record $939 billion, nearly four times the preceding five-year average.
  • Filings against technology firms jumped nearly 70% from 2017, primarily due to cases alleging accounting issues or missed earnings guidance.
  • The 441 federal securities class action suits filed in 2018 involved approximately 8.2% of publicly listed companies.
  • In 2018, foreign companies were targeted in about 25% fewer cases than in 2017, and in only about 20% of complaints, just above the share of listings. This contrasts with persistent growth in foreign firm exposure to securities litigation over the preceding four years.
  • There were 21 federal filings alleging violations of Section 11 in 2018, which approximates the five-year average.
  • Filings in 2018 (excluding merger objections) were again concentrated in the Second and Ninth Circuits. The concentration of filings in these circuits increased in 2018, during which they received 64% of filings, up from an average of 57% over the prior two years.
  • The median time to file fell by about half over the last decade, to 14 days in 2018, indicating that it took 14 days or less to file a complaint in 50% of cases.
  • A motion to dismiss was filed in 95% of the securities class actions tracked. However, the court reached a decision on only 77% of the motions filed. In the remaining 23% of cases, either the case resolved before a decision was reached, plaintiffs voluntarily dismissed the action, or the motion to dismiss was withdrawn by defendants.
  • In 2018, the number of pending Standard cases on federal dockets increased to 660, up 6% from 2017 and 31% from 2012. In 2018, aggregate plaintiffs’ attorneys’ fees and expenses were $790 million, about 70% higher than in 2017.

NERA Securities Class Action Trends Report Series

NERA has been analyzing trends in securities class actions for more than 25 years. This year-end study, “Recent Trends in Securities Class Action Litigation: 2018 Full-Year Review,” is co-authored by NERA Senior Consultants Stefan Boettrich and Svetlana Starykh, with contributions from Dr. Tabak. In addition to NERA’s US report, the firm produces annual reports on securities class action litigation in Canada and on UK regulatory enforcement actions.

To download the report, visit: http://www.nera.com/publications/archive/2019/recent-trends-in-securities-class-action-litigation--2018-full-y.html

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.