From the May 2010 issue of Investment Advisor • Subscribe!

May 1, 2010

Settlements On Rise

The total value and number of securities class action settlements increased in 2009 to $3.8 billion, a jump of more than 35% from 2008, according to the recent annual report, Securities Class Action Settlements: 2009 Review and Analysis, released by Cornerstone Research.

The securities fraud litigation reflected in the report represents lawsuits brought roughly between 2004 and 2006, as it takes an average of three to five years to settle a complaint. Securities case filings related to the credit crisis in 2008, for the most part, are yet to be resolved.

Professor Laura Simmons of the College of William & Mary, and a Cornerstone Research senior advisor, said in a statement that, "As we predicted last year, the decline in settlements that occurred in 2008 has proven to be temporary. Looking ahead, we anticipate that as cases brought in conjunction with the 2008 stock market decline and surrounding credit-crisis issues are resolved, settlements are likely to continue to increase both in number and value."

More highlights include:

o The median settlement in 2009 was $8 million, unchanged from 2008. This is lower than the inflation-adjusted median of $9.3 million in 2007, but higher than the median for all cases settled from 1996 through 2008.

o Estimated "plaintiff-style" damages for all cases settled in 2009 averaged $2.7 billion, a 35% increase over 2008 settlements.

o The Ninth Circuit--including California, Alaska, Arizona, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington, had the highest number of settled cases in 2009 with 28 settlements.

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