Observations from the NERA Report on Class Action Trends

by Dorsey & Whitney LLP
Contact

Many in the legal and securities compliance industries are discussing the NERA Economic Consulting report, Recent Trends In Securities Class Action Litigation: 2013 Full-Year Review.  The Wall Street Journal provides a good summary as does Kevin LaCroix at The D&O Diary.  NERA’s executive summary is available here.

TrendsThe three takeaways that most commentators are discussing are a marked increase in class action filings, an increase in court dismissals of these cases and but also a significant increase in average settlement amounts.

Securities class actions are up 10% in 2013 compared to 2012.  As the Wall Street Journal summarizes:

But while plaintiffs are filing more lawsuits, the claims are more likely to get dismissed. Dismissal rates increased from 32%- 36% for cases filed between 2000 and 2002 to 44%- 51% for cases filed between 2007 to 2009, according to the report. . . . The average settlement amount in 2013 hit a record $55 million, an increase of 53% over 2012 and 31% more than the previous high in 2009, the report found.

It is difficult to reconcile all of these indicators and predict whether they represent future trends for 2014 and beyond.  Assuming that these trends continue into 2013, there will be more lawyers filing securities class action cases but more judges will seriously consider dismissing those cases in which the plaintiff fails to satisfy the PSLRA pleading standards (at the motion to dismiss stage) or present the evidence required to withstand a defensive motion for summary judgment.  The new record in settlements further suggests that, notwithstanding the good prospects of obtaining a dismissal, corporate boards are often eager to eliminate the risks early, presumably to the great delight of the plaintiff lawyers who take home a handsome premium in almost any settlement.

The other statistic that caught my eye in the NERA report is the following: “Of the 4,226 class actions filed since the PSLRA, only 20 have gone to trial and only 14 of them reached a verdict.”  NERA Report p. 36.  The PSLRA (“Plaintiffs Securities Litigation Reform Act”) was signed into law in 1995.  It is astounding to me that only 14 securities litigation cases have reached verdict since then.  That would mean that every other case has either settled or been dismissed prior to verdict or is pending.

As a class action litigator most often on the defense side of the “v”, this statistic reminds me that, what can be said of securities class action can be said of class actions in general: the likelihood of a class action lawsuit making it to trial is incredibly small.  While attorneys on both sides must be willing to try any case to verdict and plan for that possibility—the real job description of most defense lawyers is to obtain a dismissal (the best case scenario) or position the parties for the most reasonable settlement that might be achieved given all facts and the risks.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Dorsey & Whitney LLP | Attorney Advertising

Written by:

Dorsey & Whitney LLP
Contact
more
less

Dorsey & Whitney LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.