Median securities class-action settlement amounts continued to grow in 2019, as did the size of issuer defendants, while the number of settlements involving public pension plans as lead plaintiffs dipped, according to a report released Wednesday by Cornerstone Research.
The report, "Securities Class Action Settlements — 2019 Review and Analysis," also found that in larger cases — those with "simplified tiered damages," a proxy for what plaintiffs will claim for damages in a case — the median settlement amounts in cases where a public pension plan served as lead plaintiff were more than three times higher than those without.
Still, even though settlements and companies involved were larger in 2019, the proportion of settlements with public pension plan lead plaintiffs continued on a downward trend that has occurred over the past few years, said Laura Simmons, report co-author and Cornerstone Research senior adviser. "It is still true that when they are involved, they tend to be involved in larger cases. It's just that given the size of the cases we saw this year, we expected more to be involved," Ms. Simmons said in an interview. Public pension plans served as lead plaintiffs in 27% of cases in 2019, compared with 46% in 2012, and the lowest level in a decade, the report found.
Courts approved settlements totaling $2 billion in 2019, down from $5.2 billion in 2018, which included a single settlement of $3 billion, while the largest settlement in 2019 was $389.6 million. The median settlement value was $11.5 million in 2019, a 34% increase from the 2010-2018 median.
The size of issuer defendant firms by total assets grew 59% in 2019 and was 117% larger than the median size of assets over the past 10 years. That could be fueled in part by fewer initial public offerings and more merger activity, said Joseph A. Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse. "This trend, combined with the heightened filing activity against public companies, may contribute to sustained levels of higher settlement amounts," Mr Grundfest said in a statement.
It could also be causing plaintiff firms to pursue claims more vigorously, said Laarni T. Bulan, report co-author and Cornerstone principal. "One possible measure of the time and effort by plaintiff counsel is the number of docket entries per case. In 2019, average docket entries were the highest in the last 10 years, primarily driven by cases with relatively large damages."
Settled pharmaceutical industry cases reached an all-time high in 2019, both in the number and percentage of cases, which tend to differ from other cases in several ways, including fewer accounting allegations and less frequently having an institutional lead plaintiff.
