You know something big is brewing in investor litigation when every study on last year’s rise in securities class action filings includes the caveat that the practice could come to a screeching halt in 2014. The latest report comes from Cornerstone Research, which said Tuesday that a modest increase in 2013 filings could be eclipsed by a “dramatic change” in the securities class action landscape.
Such is the perceived power of Halliburton v. Erica P. John Fund, which is being billed as the biggest threat to the securities plaintiffs bar in almost two decades. As we’ve reported, in March the U.S. Supreme Court will hear Halliburton’s challenge to the so-called fraud-on-the-market presumption in securities fraud cases, a theory that has long helped investors win class action status.
The case has cast its shadow over year-end reports on securities litigation from the likes of NERA Economic Consulting and Gibson, Dunn & Crtucher, which both noted an uptick in new class actions filed in 2013 but warned that Halliburton could radically alter the trend lines.
Add to those studies Cornerstone’s 2013 Year in Review of securities class action filings, released Tuesday. According to the report, plaintiffs filed 166 new federal class action securities cases in 2013, or 14 more than they did in 2012. That number still sits 13 percent below the historical average of 191 filings during the period from 1997 to 2012, for which Cornerstone has data.
Perhaps more importantly, Cornerstone found that more than 84 percent of filings in the past two years have included Rule 10b-5 securities fraud claims—precisely the sorts of claims under fire in Halliburton. “If Halliburton prevails, then the entire ecology of the market for class action securities fraud litigation is likely to undergo a dramatic change,” said Stanford Law School professor Joseph Grundfest in the report.