Recent Trends in Securities Class Action Litigation: 2014 Full-Year Review

Tue Jan 20 04:45:00 EST 2015
By Svetlana Starykh et al

Securities class action settlement amounts plummeted in 2014 according to new analysis from NERA. In the latest edition of this annual study, Recent Trends in Securities Class Action Litigation: 2014 Full-Year Review, co-authors Svetlana Starykh and former Senior Consultant Dr. Renzo Comolli examine a wide range of data and draw from more than 20 years of NERA research on case filings and settlements in the US.

Measured by median amount, settlement amounts have been the lowest in 10 years. Measured by average amount, settlements have dropped 38-61 percent, depending on which types of class actions are considered. Moreover, average settlement amounts were actually lower after Halliburton II as compared with the previous part of 2014.

On the other hand, filings of 10b-5 cases increased 14 percent post Halliburton II compared to when the case was before the Court. Filings alleging violations of Rule 10b-5, Section 11, or Section 12 totaled 168 in 2014, an 11 percent increase over 2013 and a 30 percent increase over 2010 (the recent trough).

We rounded out our analyses related to Halliburton II by providing statistics about the presumption of reliance pled at the first filing of 10b-5 complaints in which holders of common stock were part of the proposed class. We found that fraud-on-the-market is virtually always invoked; and while Affiliated Ute was hardly ever invoked in 2009, now it is invoked as an additional presumption in a very large fraction of the cases.

Last, in 2014 the Supreme Court also granted certiorari in a Section 11 case, Omnicare. The decision, expected for the first half of 2015, will come right on the heels of what some have called a “bumper IPO year.” In preparation, we analyzed the historical distribution of Section 11 filings across circuits based on the question posed to the Court.