Recent Trends in Securities Class Actions Litigation: 2009 Mid-Year Update; Filings Remain High, Fueled by Credit Crisis and Ponzi Scheme Claims; Median Settlements Remain Under $10 Million

Mon Jul 27 16:24:38 EDT 2009
By Dr. Stephanie Plancich and Svetlana Starykh

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 this newly released edition of NERA's semi-annual study. Co-authored by Vice President Dr. Stephanie Plancich and Senior Consultant Svetlana Starykh, 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 2009.

The latest edition shows that in 2009 cases related to the credit crisis represent over 40% of 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.

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.

According the authors, although a large amount of the recent litigation activity is related to the credit crisis, most credit crisis cases remain pending. 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.