Securities class action filings increase nine percent in 2013

WASHINGTON (Legal Newsline) - There was a nine percent increase in 2013 in the amount of new federal securities class actions filed, according to a report by Cornerstone Research and Stanford Law School.

In 2013, plaintiffs filed 166 new federal securities class actions, according to a press release by the U.S. Chamber Institute for Legal Reform, which owns Legal Newsline. The number of filings is still 13 percent below the historical average from 1997 to 2012.

"While the almost 50 percent decrease in listed companies has played a part in the recent trend of low numbers of class action filings, the sharp increase in IPOs in 2013 may provide fuel for a new wave of filings in the next few years," Dr. John Gould, senior vice president of Cornerstone Research, said in a press release.

The decline in securities class action filing could accelerate, depending on the outcome of Halliburton vs. Erica P. John Fund, according to Reuters.

Halliburton features a challenge to the way classes are certified in Section 10(b) securities cases.

"If Halliburton prevails in its case before the U.S. Supreme Court, then the entire market for class action securities fraud litigation is likely to be disrupted because it will become impossible to certify a large number of Section 10(b) class actions," Professor Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse, said in a press release.

"Large investors with substantial losses in the biggest of the frauds will likely be able to litigate their claims on an individual basis, but small investors will then have to look to Congress to fashion an alternative remedy."

The report found that filing activity increased by 21 percent in the second half of 2013 - the largest number of non-acquisition filings in recent years.

Approximately one in 29 companies in the S&P 500 was a defendant in a class action filed during the year, according to the report. There was no new filing activity in the Financials sector of the S&P 500 for the first time in the last 14 years.

The report found that healthcare, biotechnology and pharmaceutical companies together accounted for 21 percent of total filings in 2013. As in 2012, companies in this industry grouping were most commonly the subject of a class action.

Foreign filings, led by filings against Chinese companies, continued in 2013 at historically high rates and filings against Canadian companies picked up in 2013.

Filing activity in 2013 was more concentrated in the Second and Ninth circuits than in most years, according to the report.

From Legal Newsline: Kyla Asbury can be reached at classactions@legalnewsline.com.