Securities Litigation Update

Securities Class Actions Continue to Decline as Percentage of All Securities Litigation: Using different statistical methods, year-end studies published by both Advisen and Cornerstone Research found that, despite a strong surge in filings in the latter part of 2010, the number of securities class actions filed in 2010 was below the historical average. The reports noted that class actions have dropped from approximately 33 percent of all securities litigation prior to 2006 to just 16 percent in 2010, although the number of securities class actions filed in 2010 increased slightly from 2009. The decrease in class action filings as a percentage is significant given that both Advisen and Cornerstone found a significant drop in credit-crisis-related filings. Cornerstone indeed reported a 76 percent drop from 2009. With heightened pleading standards and other obstacles to prosecuting securities actions, derivative and single-/joint-party suits have become more common.

Nonetheless, the reports noted that securities class actions are still one of “the most commonly filed types of security suits,” and “typically produce most of the largest settlements.” For example, Advisen termed “eye-popping” the tentative $600 million class action settlement agreed to by Countrywide Financial in 2010. Cornerstone also noted that many analysts expect a higher number of M&A transactions in 2011, which may translate into sustained, if not increased, securities class action filings this year.