Securities class action filings during the first half of 2013 dipped by 16 percent compared with the same period in 2012, continuing last year’s downward trend. There were 74 new cases in the first half of the year, compared with 88 in the comparable period of 2012.
Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse published the data Wednesday in a report titled Securities Class Action Filings—2013 Mid-Year Assessment.
Loss of market capitalization—a measure of public company's value based on the stock price multiplied by the number of outstanding shares—tended to trigger filings, the data indicate. The survey measured so-called maximum dollar loss by comparing the trading day with the highest market capitalization during the class period to the day immediately following that period.
Those losses were historically low during the first half of 2013—$113 billion, 65 percent below the $326 billion six-month average from 1997 to 2012.
“Securities litigation really is event-driven, whether it is the economy or when we saw the credit crisis or mutual fund market-timing cases. Over the last 12 to 18 months, there haven’t been those macro events,” said David Kotler, a Dechert white-collar and securities litigation partner who practices in New York and Princeton, N.J.
The data also show an upswing in dismissals—including half of 2008’s 223 cases; 53 percent of the 167 cases filed in 2009; and 56 percent of the 176 cases filed in 2010.
“A change in defense litigation strategy is likely to be the most significant development in the securities fraud litigation market,” clearinghouse director Joseph Grundfest said in a written statement.
He cited the Supreme Court’s 6-3 February ruling in Amgen v. Connecticut Retirement Plans and Trust, which kept intact the so-called "fraud on the market" theory holding that a stock's price reflects all publicly available information about a company.
Although the justices declined to require proof that company misstatements affected its stock before class certification, “several justices invited argument” about the issue, Grundfest said. “We are observing class certification challenges on the grounds that the fraud on the market doctrine should not apply,” he said.
The survey noted other trends, including that cases against Chinese companies listed on U.S. exchanges through reverse mergers have dwindled to two thus far this year. Additionally, cases associated with mergers and acquisitions remained low, at seven thus far.
Cases against smaller companies that trade on the Over-the-Counter Bulletin Board and Pink Sheets climbed to 8 percent of total cases in the past 18 months.
Sheri Qualters is a reporter for The National Law Journal, a Legal affiliate based in New York.