Two reports released late last month show that the number of new securities class action cases dropped during the first half of 2010, thanks largely to a decrease in litigation sparked by the credit crisis. Yet while new filings went down, median settlement sizes were up.
NERA Economic Consulting and Cornerstone Research both found that filings are on track to be down overall for the year, although their numbers and methodologies vary slightly.
According to NERA, from January to June, there were 101 filings of securities class actions. If that pace continues through the remainder of the year, 2010 will see 202 cases filed, a nearly 9 percent decline from the 221 filings in 2009. There were 248 filings in 2008.
The Cornerstone study, prepared in cooperation with Stanford Law School Securities Class Action Clearinghouse, counted a total of 71 federal securities class actions filed in the first half of the year, a 15.5 percent decline from the 84 filings in the first half of 2009.
Both reports attributed the decline to a drop in cases related to the global credit crisis. NERA, for example, counted 17 credit crisis cases filed in the first half of the year, compared to 57 for the whole of 2009.
The NERA study found that the median settlement for the first half of 2010 was considerably higher than in any prior year: $11.8 million, compared to $9 million for 2009. It was the first time the median settlement crossed the $10 million mark. One reason for the increase was a substantial jump in median investor losses, which correlate strongly with settlement size. Median investor losses for cases settled in the first half of the year were $436 million – the highest since 1996.
“Half of all settlements were for an amount higher than $11.8 million, a record,” said Dr. Jordan Milev, NERA senior consultant and co-author of the report. “Whether this shift is temporary or permanent remains to be seen.”
The average settlement size was $209 million, although that was significantly influenced by the $7.2 billion Enron settlement finalized in February. Excluding Enron, the average settlement was $24 million, down from the $42 million average in 2009 but within the same range as the overall $28.7 million average between 2003 and 2010.