Securities Class Action Settlements Update

Despite a rise in the number of securities class action cases settled last year, the total value of those settlements plummeted 60 percent from the all-time high of $17.2 billion reported in 2006, to $7 billion in 2007. That’s the latest analysis from Cornerstone Research in its 2007 Securities Class Action Settlements Report. More than 70 percent of this drop was due to the largest settlement in history, the $7.2 billion Enron settlement, the majority of which was approved in 2006. Cited in the Cornerstone press release, Stanford Law School professor Joseph Grundfest, director of the Securities Class Action Clearinghouse (sponsored in cooperation with Cornerstone Research), says: “It seems clear that the aggregate dollar value of settlements over the next two or three years is likely to decline significantly because the inventory of large cases in the pipeline just isn’t there. The interesting open question is whether the subprime crisis will cause an uptick in securities fraud settlement activity that might, given settlement cycles in the litigation industry, only become apparent three to five years from now.† Further commentary on the Cornerstone Research study can be found at The D&O Diary, a blog focused on D&O liability issues.

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