Securities Class Actions Hit 14-Year Low

The average reported settlement amount dramatically rose from 2011 levels—more than 150%—to $54.7 million in 2012 from the inflation-adjusted amount of $21.6 million in 2011, the report notes.

Laura Simmons, Cornerstone’s senior advisor, noted in a statement that “it is well known that larger cases tend to settle for smaller proportions of shareholder losses. However, never has this been more apparent than in the 2012 data, which revealed an all-time high for ‘estimated damages’ and a historic low in settlements as a percentage of ‘estimated damages.’”

Based on the volume of recent securities class-action filings, Simmons says, “the unusually low number of settlements reported in 2012 is unlikely to persist in the future.”

Professor Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse, added in the same statement that “class-action securities fraud litigation is, like many other lines of business, ‘hit driven,’ in that a small number of settlements often account for a large percentage of the dollar flow. That fact of life can make annual settlement data quite lumpy.”

Settlement trends, Grundfest continued, “are often best viewed over time periods longer than a year, and by carefully analyzing settlement data to reflect the underlying characteristics of the cases being settled. So, just as a lull in last year’s data suggested a pickup for this year in the aggregate statistics, it is always possible that this year’s bump could cause total settlement dollars to tick downward next year.”