Recent Trends in Securities Class Action Litigation: 2011 Year-End Review

14 December 2011
By Dr. Jordan Milev, Robert Patton, Svetlana Starykh et al.

The pace of filings of class actions under federal securities and commodity laws held relatively steady in 2011 as compared to the previous three years, according to this edition of NERA's semi-annual study. 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 and dismissals through 30 November 2011, and settlements through 31 December 2011. The authors project there will be 232 shareholder class action filings in 2011, broadly in line with levels observed in 2010 (241), in 2009 (218), and in 2008 (245). Suits objecting to a merger or an acquisition have accounted for 29 percent of filings so far in 2011, and filings against Chinese companies have accounted for approximately 18 percent.

The authors find that, while shareholder filings continue to be filed at a relatively steady level as compared to the past three years, there has been a substantial shift in the composition of suits filed. A surge in cases involving Chinese companies listed in the US and in M&A objection suits, along with a waning of credit-crisis cases, has been driving this trend. Filings against foreign-domiciled issuers reached 64 in 2011, more than double the annual count observed in recent years. This surge in suits is largely attributed to the surge in filings against Chinese companies. So far in 2011, there have been a total of 29 filings against Chinese-domiciled firms. However, this number understates the number of Chinese firms targeted, as not all companies based in China are legally domiciled there. When including Chinese companies that are either domiciled in China or have their principal executive offices in the country, there have been 39 suits against Chinese companies in 2011.

Meanwhile, average settlement values of securities class actions fell to $31 million, well below the 2010 average of $108 million. However, the annual average settlement figure can be significantly affected by large settlement outliers. Excluding settlements in excess of $1 billion, as well as 309 small settlements related to IPO laddering cases that were approved in October 2009, there was still a substantial decline in average settlements from 2010 to 2011 -- from $40 million in 2010 to $31 million in 2011.