Friday, September 21, 2007
The overall trend of lower securities class action filings has continued through the first six months of 2007, but that trend may be reversing. Thatâ€™s the upshot of a recent study from NERA Economic Consulting. The report notes that from 1998 through 2005 there were well over 200 federal class action filings each year, but filings dropped to 136 in 2006. While this general pattern has continued through June 30, 2007, NERA projects there will be 152 filings in 2007, a 12 percent increase on 2006. In the first half of 2007 there have been 76 filings, a 47 percent increase on the second half of 2006. A few other points of interest: the probability of a corporation facing at least one shareholder class action suit over a five-year period has declined to 6.4 percent; for the first time, all of the top 10 shareholder class action settlements exceeded $1 billion; eight of the top 10 settlements of all time were resolved in 2006/07, with Enronâ€™s $7.2 billion settlement top of the list; excluding the top 10 settlements, average settlement values doubled to $23.2 million in the 2002-2007 period. As for future trends, NERA notes that recent turmoil in the subprime market has led to seven claims in the first half of 2007. For our take on the subprime issue, check out a new paper authored by Dr. Steven Weisbart, I.I.I. vice president and chief economist. Further commentary on the NERA study can be found at The D&O Diary, a blog focused on D&O liability issues.