Class Action Settlements, Cases Paralleled by SEC Up in 2015
Cornerstone Research released a report on Securities Class Action Settlements, “Securities Class Action Settlements, 2015 Review and Analysis” (here). It records an increased number of settled securities class actions last year. Those settlements include an increase in the number of so-called mega-settlements as well as those at the other end of the spectrum – there was a record number of what are generally considered nuisance settlements. An increasing number of those cases are paralleled by an SEC enforcement action.
Highlights from the Report include:
Settlements up: Last year 80 cases settled. That is the highest number since 2010 when there were 85 settlements. The 2015 number compares to 63 in 2014, 66 in 2013, 56 in 2012 and 65 in 2011.
Settlement dollars up: The total settlement dollars increased in 2015 to $3,034 million, compared to $1,069 the prior year. In 2013, however, the total amount was $4,856 compared to $3,313 in 2012, $1,435 in 2011 and $3,294 in 2010.
Mega settlements up: Last year the number of mega-settlements, defined as those equal to or over $100 million, returned to historic levels. There were eight mega settlements compared to only one in 2014. In 2015 six of the eight mega-settlements were between $100 and $200 million.
Nuisance settlements: Last year the percentage of nuisance settlements reached its highest single year level since 1997 at 26%. Those settlements are defined as being $2 million or less.
Accounting restatements: Traditionally, cases involving GAAP allegations were associated with higher settlements. That pattern has been inconsistent in recent years, according to the Report. Last year, however, 22% of the cases settled were associated with higher settlements as a percentage of estimated damages compared to those actions without restatements.
Derivative action: Historically higher settlement values have been associated with actions paralleled by a derivative suit. Last year the median settlement for a case with a companion derivative actions was $8.3 million compared to $3.1 for those without the parallel action. Specifically, 40 of the 80 cases settled last year had a parallel derivative action compared to 20 of 35 settled the prior year, 27 of 39 settled in 2013, 29 of 27 in 2012, 24 of 41 in 2011 and 35 of 53 in 2010.
SEC enforcement Action: Last year the SEC filed a record number of enforcement actions. About 20 of the 80 class actions settled had a parallel SEC enforcement action. That compares to 10 of 63 in the prior year, 13 of 66 in 2013, 11 of 56 settled in 2012, 7 of 65 in 2011 and 23 of 85 in 2010.