Trends In Securities Class Action Filings

by Dorsey & Whitney LLP

Next month the Supreme Court will hear argument in Halliburton Co. v. Erica P. John Fund, Inc., No. 13-317 for the second time. The first time the High Court held that a securities law plaintiff need not establish loss causation at the class certification stage. This time the Court will consider an issue which may significantly impact the ability of plaintiffs to bring a securities class action. The question for resolution is if Basic Inc. v. Levinson, 485 U.S. 224 (1988), which adopted the fraud on the market theory as a substitute for the reliance element of an Exchange Act Section 10(b) damage claim, should be overruled or substantially modified. Halliburton will be previewed later this month.

While Halliburton may represent the future of securities class actions, there status today is chronicled in a new report from Cornerstone Research tiled Securities Class Action Filings, 2013 Year in Review (here). Last year the number of securities class actions filings ticked-up slightly to 166 compared to just 152 in the prior year, according to the Report. That number is, however, the lowest since 2006 and, excluding that year, the represents the fewest number of actions filed since 1997, the first year cited in the Report. For example, in 2011 there were 188 filings, 176 in 2010, 167 in 2009, 223 in 2008 and in 174 in 1997.

Similar results are seen for the aggregate dollar loss referenced in the filings. Last year that totaled $104 billion, up slightly from the $97 in 2012 but below the $110 billion in 2011. Indeed, in the last five years the amounts claimed have not exceeded the historical average, according to Cornerstone.

Over the years the legal basis for the actions has narrowed, focusing on Rule 10b-5 claims. In 2013 84% of the cases brought asserted a claim under this Rule. That is about the same as in 2012 but up substantially from 2011 at 71%, 2010 at 66% and 2009 at 69%. This trend contrasts with those for claims based on Securities Act Section 11 or Section 12(2). As to the former, in 2013 only 9% of the claims were based the Section which is about the same as in 2012 but which is down from the 11% in 2011, 15% in 2010 and 23% in 2009. As to the latter, only 7% of the claims were based on Section 12(2) while in 2012 and in 2011 it was 9%, 2010 10% and 2009 25%.

Similarly, claims asserted in class action filings are increasingly focusing on allegations of misrepresentations in financial documents. In 2013 97% of the cases were based on this claim compared to 89% in 2009. At the same time the number of cases based on an announced restatement has held essentially constant at 11% in 2013 and the same number in 2009.

The critical issue in Halliburton revolves around what must be demonstrated at class certification. Yet the Report notes that in a “great majority of cases” a class certification motion was never filed. Rather, an increasing number of cases are dismissed prior to certification. In 2002 29% of the cases were dismissed prior to class certification. By 2010 that number had increased to 57%. When the certification motion was denied, it typically was not on the merits. Frequently those motions were denied based on typicality and adequacy. Overall, in the few cases where the motion was filed in actions brought between 2002 and 2010, it had an equal chance of being granted or denied.

Two additional findings in the Report center on the number of companies listed on U.S. exchanges and IPO and M&A activity. As to the former, the number has declined 46% since 1998. However, the rate of decline has slowed to 3% from the 6% that had prevailed in earlier years. As to the latter, a comparison of IPO and M&A activity reflects a decline in the number of initial public offerings compared to mergers in recent years. From 1990 through 1997 IPOs equaled or outnumbered M&A deals in six of eight year. That trend reversed during the period 1998 through 2013 when M&A deals outnumbered IPOs in every year.

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

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):

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.


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 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:

- 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.