The value of securities class-action settlements fell 60% in 2007, despite a 21% rise in the number of settlements, according to a new report by Cornerstone Research. The total value of the settlements was $7 billion in 2007, down from the all-time high of $17.6 billion in 2006, the report said. The number of settled cases rose to 111 in 2007 from 92 in 2006, the report said.
The $3.2 billion Tyco International settlement was the only settlement approved in 2007 to exceed $1 billion and accounted for 46% of the total settlements value in 2007, the report said. It was the third-largest securities settlement in history, it added.
Public pension plans were recognized in the report for their role in achieving higher settlements on average than other institutional investors. The 31 cases in which public pension plans served as lead plaintiff tended to result in a statistically significant increase in settlement size, a median $18 million in 2007, in contrast with a median $6 million in cases in which a public pension plan was not a lead plaintiff, the Cornerstone report said. Public funds as lead plaintiffs accounted for $5.7 billion, or 81%, of the total $7 billion settlement value in 2007.
Public pension funds serve as a more active lead plaintiff and provide closer monitoring of plaintiff counsel (which) is important to ensure the class-action settlement is in the best interest of the class of investors participating in the settlement, Laura Simmons, a senior advisor to Cornerstone Research and an author of the report, said in an interview.