Securities Litigation Surges Following a Quiet First Quarter, sponsored by ACE
A surge in securities litigation in the second quarter of 2010 was driven by short term reactions to headline-grabbing events as well as what are shaping up to be longer term shifts in litigation trends. The number of securities lawsuits filed in the quarter, including derivative actions, regulatory suits, and other suits with securities-related allegations in addition to securities class action suits, was up sharply - nearly 30 percent higher than the first quarter, and about 19 percent above the very active second quarter of 2009.
The heightened activity was due in large measure to suits sparked by highly visible events such as the government investigation of Goldman Sachs and the Deepwater Horizon oil spill. The focus on Goldman Sachs was in part responsible for a small surge in subprime/credit crisis suits, though other factors suggest that these events will not be driving a material number of new suits in the future. While subprime/credit crisis suits are on the wane, financial firms continued to be targeted frequently.
The average settlement through the first half of 2010 - for all categories of securities suits, and including proposed and tentative settlements - fell as compared to 2009, from $29.6 million to $18.9 million. Though the overall average fell, the average securities class action settlement increased materially, from $10.4 million to $49.6 million.
The US Supreme Court handed down several decisions at the end of the second quarter that will influence pending and future securities litigation to varying degrees. In a challenge to the Sarbanes-Oxley Act, the Court upheld all substantive provisions of the law. In a case involving Jeffrey Skilling, the Court ruled that the former Enron CEO should not have been convicted of violating the federal "honest services" fraud law. Perhaps the most significant decision as concerns securities litigation effectively put an end to so called f-cubed cases - lawsuits brought in the US by foreign shareholders of foreign companies with shares traded on foreign exchanges. In Morrison v. National Australia Bank, the Court held that plaintiffs cannot pursue fraud claims in US courts for securities purchased on foreign exchanges.
This 14 page report, "Securities Litigation Surges Following a Quiet First Quarter, " is sponsored by ACE.
ADVISEN'S LARGE LOSS DATA
Advisen tracks significant lawsuits filed against companies and their directors and officers in its Master Significant Case and Action database (MSCAd). MSCAd is the most complete and accurate database of such lawsuits, consisting of more than 45,000 events and over $3.2 trillion in aggregate losses. Securities cases in MSCAd represent more than 8,900 events and over $86 billion in aggregate losses.
For information or a list of the suits click here
Advisen Webinar: Second Quarter Securities Litigation Review, Sponsored by ACE
On Friday, July 16 at 11am EST, join a panel including ACE's Carol Zacharias, Integro's Louise Pennington, Goodwin Procter's Carl E. Metzger, the D&O Diary's Kevin LaCroix, , and Advisen's Dave Bradford to review Securities Litigation cases filed and settled during the second quarter of 2010. The session will review Advisen's analysis of 2010 Securities litigation and settlements and discuss the larger implications for underwriters, brokers and risk managers.
Please register for free by clicking here.
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