Securities Class-Action Settlements at 14-Year Low

The number of securities class- action settlements fell to a 14-year low in 2012 while their average dollar value rose to an all-time high, a research study found.

The 53 court-approved settlements reported last year represent a more than 45 percent decline from the 10-year average since 2002, and the average settlement increased to $54.7 million in 2012 from $21.6 million in 2011, Cornerstone Research concluded in a report released today.

“Based on the volume of recent securities class action filings, the unusually low number of settlements reported in 2012 is unlikely to persist in the future,” said Laura E. Simmons, senior adviser of Cornerstone. That’s based on higher numbers of filings in recent years that may come to settlement later, she said. For 2008 and 2009, there are 70 cases yet to be resolved, she said.

“Settlement trends are often best viewed over time periods longer than a year,” Joseph Grundfest, a law professor and director of the Stanford Law School Securities Class Action Clearinghouse, said in the statement. “A lull in last year’s data suggested a pickup for this year.”

The Cornerstone researchers said such cases historically take years to settle, and the decrease in the number of settlements last year may be traced to fewer lawsuits being filed in 2009 and 2010. Since 2007, the median time for settlement was 3.3 years, the researchers said.

‘Significant Slowdown’

They also cited a “significant slowdown in the initial public offering market in 2008 and 2009” as a possible cause for a dip in some 2012 settlements.

Cornerstone found that a third of the settlements in 2012 were in the financial services industry, with the technology and pharmaceutical industries being the next most prevalent sectors.

Institutional investors are being seen more as plaintiffs in securities class-action lawsuits, the study determined. Since 2006, institutions and public pension funds have been settling more lawsuits, with public pensions serving as lead plaintiffs in 49 percent of settled cases, compared with 6 percent in 2003, according to Cornerstone.

The organization, based in Menlo Park, California, provides economic and financial consulting and expert testimony, with consultants across the country.

In one case cited by Simmons, Motorola Solutions Inc. last May won final federal court approval of a $200 million settlement with shareholders who sued the company and top executives in 2007 for allegedly overstating its prospects during the prior year.

To contact the reporter on this story: Phil Milford in Wilmington, Delaware at pmilford@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.