Cornerstone Research recently published its Securities Class Action Filings—2025 Mid-Year Assessment. The report contains useful data and information about the securities class action landscape thus far this year. The headline takeaway is that, while the number of new filings has remained stable (114 filings in the first half of 2025 compared to 115 in the second half of 2024), the numerical stability may mask an important trend: the continued emergence of “mega litigation” targeting companies with massive potential damages.
The Specter of Mega Litigation
Cornerstone Research tracks several proprietary indices that elucidate private securities litigation trends. The Disclosure Dollar Loss (DDL) Index measures the aggregate dollar value of investor losses based on stock price declines following corrective disclosures. The Maximum Dollar Loss (MDL) Index calculates the maximum possible damages based on all shares traded during the alleged class period. In the first half of 2025, the DDL reached $403 billion, representing a 56% increase from the second half of 2024 and marking the highest semiannual total in several years. Even more dramatically, the MDL surged to $1.851 trillion, a remarkable 154% increase from the previous six months.
This mega litigation trend is evident in the Ninth and Tenth Circuits. In California litigation against a marketing automation company, plaintiffs allege a 32% stock drop on a market capitalization of over $50 billion following revelations about the rollout of a key product that did not meet the expectations touted by company management. And in a case in Colorado, plaintiffs claim that the company’s stock price dropped 15% on a similar market capitalization when company management acknowledged issues that caused the company to report poor results from recently acquired assets.
The data reflects what may be a strategic shift in the tactics of the class action plaintiffs’ bar. Rather than pursuing numerous smaller cases, sophisticated firms are increasingly focusing their resources on high-value targets where outsized potential recoveries justify substantial litigation investments. The financial stakes in securities class action litigation have dramatically escalated. Indeed, in a survey of securities class action settlements in the first half of 2025 by National Economics Research Associates, Inc., the median settlement amount declined somewhat even though the average amount increased by more than 25%, reflecting a markedly higher percentage of cases settling above the threshold amount of $50 million. Though it remains to be seen whether this “size over quantity” approach is a blip in the data or a longer-term trend, issuers should be prepared for potentially more resource-intensive legal battles.
Artificial Intelligence: A New Frontier of Securities Litigation
With 12 AI-related cases filed in the first half of 2025, this category is on pace to far exceed the 15 AI-related filings in 2024. This increase reflects plaintiffs’ focus on so-called “AI washing”—the practice of companies exaggerating or misrepresenting the role of artificial intelligence in their products or services.
At least two such cases were filed in the Northern District of California. One alleges that SoundHound AI, Inc. and its executives made false statements about the company’s ability to integrate conversational AI technology it had recently acquired. Another contends that AppLovin Corporation and its management used manipulative practices to obscure the fact that its AI product was not generating the promised results.
Companies operating in the AI space, or those incorporating AI into their business models, must be mindful of potential gaps between their marketing and shareholder-facing language and the reality of their technological capabilities. Companies should ensure their AI-related disclosures are precise, substantiated, and regularly updated to reflect actual capacities rather than aspirational goals.
Sectoral Shifts and Geographic Concentration
The consumer non-cyclical sector (consumer staples like packaged foods and household goods) experienced a notable 31% increase in filings during the first half of 2025, driven primarily by a surge in biotechnology and pharmaceutical litigation. By contrast, the number of filings in the consumer cyclical sector decreased from sixteen to six.
The geographic story mirrors the overall picture. Core filings are down somewhat in the traditional securities litigation centers in the Second and Ninth Circuits, but filings in those jurisdictions still account for more than three quarters of total MDL in the first half of the year. Filings more than tripled in the Third Circuit, driven largely by a surge in biotech and pharmaceutical cases, with a similar numerical increase observed in the Eleventh Circuit.
Strategic Implications for Companies
The 2025 mid-year data suggests several key strategic considerations for public companies and their counsel. While the overall likelihood of facing securities litigation has decreased slightly to an annualized rate of 3.8% for U.S. exchange-listed companies, the potential financial impact of any given securities lawsuit has increased dramatically. Companies should ensure that their risk assessment frameworks account for this new reality. The surge in AI-related litigation underscores the critical importance of robust processes that ensure that forward-looking statements regarding AI and other emerging technologies are precise, substantiated, and routinely updated. Companies in the biotechnology, pharmaceutical, and broader consumer non-cyclical sectors should be particularly attentive to disclosure obligations and market communications, given the elevated filing activity in these areas.
