We thought securities litigation would correlate to a bear market—we were wrong.
Lex Machina is out with its “2018 Securities Litigation Report,” which, for comparison’s sake, it broke out by the pre and current Jay Clayton era as chairman of the SEC.
Among its key findings, the report reveals that during the 18 months following the Clayton nomination in January 2017, securities case filings were at an all-time high (2,622 cases, a 60 percent increase over the prior 18 months) with Q1 2018 recording the most case filings to date (485 cases).
During the same period, plaintiff losses on judgments on the pleadings also increased, with fewer cases proceeding to trial on the merits.
Between July 1, 2015 through December 31, 2016, there were 42 claim defendant wins with a judgment on the pleadings, but during the next 18 months, that number jumped to 173.
The median time to termination decreased from 419 days in the first 18-month period to 138 in the second, likely due to the increase in cases resolving on plaintiff voluntary dismissals and judgment on the pleadings.
In addition (and not surprisingly), the first two quarters of 2018 saw a significant rise in the number of securities cases relating to cryptocurrency or Bitcoin.
Among the other highlights presented in the report:
Damages: Damages awarded from 2017 through Q2 2018 ($4.8 billion) were 64 percent lower than in the previous 18 months (nearly $13.3 billion) and included a $1.5 billion class action settlement in Jaffe v. Household Intl. Inc. and a $1 billion class action settlement in Merck & Co., Inc., Securities, Derivative & “ERISA” Litigation from 2016.
The highest class-action settlement award since 2017 was $210 million in Woburn Retirement System v. Salix Pharmaceuticals, Ltd.
Law firms: Aside from the SEC, the top three plaintiff firms for cases filed from 2017 to Q2 2018 were Levi & Korsinsky (266 cases), Pomerantz (204 cases) and The Rosen Law Firm (198 cases).
Among defendant firms, Skadden, Arps, Slate, Meagher & Flom lead the list with 58 cases, followed by King & Spalding (49 cases) and Paul, Weiss, Rifkind, Wharton & Garrison (49 cases).
Skadden also topped the list of law firms with the most claim defendant wins (13 cases), followed by Sidley Austin (10 cases).
Jurisdiction changes: More securities cases are being filed in the District of Delaware (D. Del.) than ever before.
- Del. rose to 3rd place from 14th and now holds 8 percent of new cases filed between 2017 and Q2 2018 (198 cases).
Lex Machina’s data shows that Delaware state court filings are down for causes of action like breach of fiduciary duty. The reduction in breach of fiduciary duty claims in the Delaware Court of Chancery (DCC) and the increase in the D. Del Securities cases could be the result of the Delaware Supreme Court and DCC decisions in the C&J Energy, Corwin and Trulia cases.
Following those decisions, it seems likely that practitioners have begun filing certain mergers & acquisitions claims in D. Del. instead of the DCC.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
