2015 Securities Class Action Mid-year Report

According to the Stanford Law School Securities Class Action Clearinghouse (SCAC) in collaboration with Cornerstone Research, securities class action litigation filings so far this year remain below the historical average. Based on the SCAC’s findings there have been a total 85 privates securities class actions filed in the federal district courts.

In the first six months of 2015, there have been more securities class actions filed against foreign companies when compared to the first half of last year. Asian companies were the defendants in more than half of the foreign firms.

“Securities class actions continue to percolate at a relatively low level, whether measured by the number of cases filed or the dollar amounts at stake,” noted Professor Joseph Grundfest, former Securities and Exchange Commissioner and current director of the SCAC. “The interesting question is ‘why?’ Some observers point to high stock price valuations and the lack of volatility in equity markets. Others point to the fact that many of the major accounting scandals now appear to be happening outside the United States. A combination of both factors could well be at work.”

The major trends observed within Cornerstone’s Midyear Assessment were:

• The total Disclosure Dollar Loss (DDL), which calculates investor losses at the time that an alleged fraud is disclosed, remained at low levels.  Aggregate DDL was $34 billion in the first half of 2015, 43% below the historical semiannual average of $60 billion.

 

• The total Maximum Dollar Loss (MDL), a measure of the largest amount that plaintiffs might seek to recover, was $105 billion, an amount 65% below the historical semiannual average MDL of $304 billion.

 

• Filing activity against companies with large market capitalizations, as represented by firms in the S&P 500, remained well below average. Only 1.6% if S&P 500 firms were the subject of class actions in the first half of 2015.

 

• The median lag between the end of the alleged class period and the filing of the lawsuit declined to 11 days, the third lowest on record, suggesting intensifying completion for filings by the plaintiff bar.

 

• Dismissals within the first three years of the filing of a class action peaked for 2010 and 2011 filing cohorts.  In filing cohort years 2012, 2013, and 2014 early dismissals (those within the first year) have declines relative to 2010 and 2011 cohorts.

 

• Reversing trends noted at year-end 2014, filing activity against Industrial and Technology firms increased to levels more consistent with historical averages, while filings against Energy companies declines to average historical levels.

 

• Biotechnology, healthcare, and pharmaceutical companies (included in the Consumer Non-Cyclical sector) together accounted for 19% of total filings in the first half of 2015. Within this group, filings against pharmaceutical firms were the most common class action.

 

The full report can be found here.