Securities Class Action Filings—2019 Year in Review
(Source: harvard.edu)

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(Original link: harvard.edu)

Securities Class Action Filings—2019 Year in Review Posted by Alexander “Sasha” Aganin, Cornerstone Research, on Friday, February 14, 2020
Alexander “Sasha” Aganin is senior vice president at Cornerstone Research. This post is based on a report by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse. Executive Summary
For a third consecutive year, the number of new class action securities filings based on federal statutes remained above 400. Most notably, core filings surged to record levels. Market capitalization losses, as in 2018, surpassed $1 trillion. Number and Size of Filings Plaintiffs filed 428 new class action securities cases (filings) across federal and state courts in 2019, the most on record and nearly double the 1997–2018 average. “Core” filings—those excluding M&A filings—rose to the highest number on record. Federal and state court class actions alleging claims under the Securities Act of 1933 (1933 Act) helped push filing activity to record levels. The number of 1933 Act filings themselves reached unprecedented levels. Disclosure Dollar Loss (DDL) decreased by 14 percent to $285 billion in 2019. Maximum Dollar Loss (MDL) also fell by 9 percent to $1,199 billion. In 2019, eight mega filings in federal courts made up 52 percent of federal core DDL and 21 mega filings in federal courts made up 71 percent of federal core MDL. Both of these percentages track closely with historical averages. Filings with a DDL of at least $5 billion or an MDL of at least $10 billion are considered mega filings. Other Measures of Filing Intensity In 2019, the likelihood of litigation involving a core filing for U.S. exchange-listed companies increased for a seventh consecutive year. This measure reached record levels because of both the heightened filing activity against public companies and an extended decline in the number of public companies over the last 15 years. One in about 14 S&P 500 companies (7.2 percent) was subject to litigation in federal courts in 2019. Companies in the Health Care sector were the most frequent targets of new core federal filings. Key Trends in Federal Filings
Companies on U.S. exchanges were more likely to be sued in 2019 than in any previous year whether measured solely on core filings or on total filings. Core filings in federal courts (core federal filings) against non-U.S. issuers (i.e., companies headquartered outside the United States with securities trading on U.S. exchanges) also reached record levels. U.S. Companies In 2019, 5.5 percent of U.S. exchange-listed companies were the subject of core filings. Core federal filings against S&P 500 firms in 2019 occurred at a rate of 7.2 percent. Non-U.S. Companies Core federal filings against non-U.S. companies rose to 57, the highest level on record. The likelihood of a core federal filing against a non-U.S. company increased from 4.8 percent in 2018 to 5.6 percent in 2019. By Industry In 2019, 66 core federal filings were brought against companies in the Technology and Communications sectors combined, up 32 percent from 2018. Core federal filings in the Consumer Non-Cyclical sector jumped from 67 in 2018 to 88 in 2019. Within this sector, combined filings against biotechnology, pharmaceutical, and healthcare companies also increased. By Circuit There were 103 and 52 core federal filings in the Second and Ninth Circuits, respectively. Second Circuit core federal filings were at historically high levels, 45 percent greater than 2018. Third Circuit filings remained at elevated levels with 28 in 2019 compared with the 1997–2018 historical average of 17. M&A Filings Federal filings of merger-objection class actions—those involving M&A transactions with Section 14 claims but no Rule 10b-5, Section 11, or Section 12(2) claims—decreased again, from 182 in 2018 to 160 in 2019. M&A filings were concentrated in the Third Circuit. In 2019, 127 of the 160 M&A filings were in the Third Circuit, including 126 in Delaware federal court. M&A filings had a much higher rate of dismissal (89 percent) than core federal filings (47 percent) from 2009 to 2018. Filings by Lead Plaintiff For 2019 core federal filings, individuals were appointed lead plaintiff more often than institutional investors, a pattern that has persisted since 2013. Appointment of Plaintiff Lead Counsel The growth in core federal filings over the last seven years has coincided with the activity of three plaintiff law firms that have increasingly been involved in securities class actions. New Developments There has been an increased number of core filings involving companies in and related to the cannabis industry. The forum selection case, Sciabacucchi v. Salzberg , is currently before the Delaware Supreme Court. Featured: Annual Rank of Filing Intensity
Filing activity in federal and state courts accelerated in 2019. Each of the last three years—2017 through 2019—has been more active than any previous year. More core filings in federal and stat...