Securities class action lawsuits filings are on pace to make 2009 the most active for securities class action filings in years, according to Advisen’s May 1, 2009 Securities Litigation Quarterly (here). According to the report, there were 67 securities class action lawsuits in the first quarter of 2009, up from 56 a year earlier. The first quarter filings represent an annualized filing rate of 268 securities class action lawsuits, which would not only represent a significant increase over 2008 but would even be greater that the "relatively litigious year of 2004."
My own analysis of the first quarter 2009 securities class action filings can be found here.
The overall purpose of the Advisen report is to analyze "securities lawsuits" in the first quarter of 2009. As used in the Advisen report, the term "securities lawsuits" refers not just "securities class action lawsuits," but also includes SEC enforcement actions, state court fiduciary duty cases, and even lawsuits filed in non-U.S. courts.
In addition, the report uses yet a different term – "securities fraud lawsuits" – as a subset of "securities lawsuits," to describe SEC enforcement proceedings and other regulatory actions.
So in the report "securities class action lawsuits" and "securities fraud lawsuits" are each separate and distinct subcategories of the larger category of "securities lawsuits."
According to the Advisen report, filings in the broadest category — "securities lawsuits" — were up significantly in the first quarter of 2009, with 169 of these actions, compared with only 125 in the fourth quarter of 2008, and 134 in the first quarter of 2008. These filings (which, again, represent a broader category than just "securities class action lawsuits") were significantly increased by Madoff-related lawsuit filings, which represented 30% of all the "securities lawsuits" in the first quarter. The report notes that "2009 might end up as a year with a heavy front-end load of lawsuits" due to the "flurry of Madoff-related cases" in the first quarter.
Using its own categorization, the report notes that fewer of the "securities cases" plaintiffs are filing are "securities class action lawsuits," and that plaintiffs increasingly have been filing securities lawsuits alleging common law torts, contract law violations, and breach of fiduciary duties." The report speculates that plaintiffs’ counsel may be pursing these alternatives in order to be able to proceed in state court and to avoid having their case consolidated with the larger class action suit.
With respect to "securities lawsuits" other than "securities class action lawsuits," the enforcement and regulatory actions that the report categorizes as "securities fraud lawsuits" accounted for 34 suits filed in the first quarter, up from 19 in fourth quarter of 2008, but down from 54 in third quarter of 2008. The "securities fraud lawsuits" filed in first quarter of 2009 represent an annualized filing rate136 cases, flat with 2008 but down from 175 in 2007.
Other types of "securities lawsuits" other than "securities class action lawsuits" filed in the first quarter of 2009 were: breach of fiduciary duties (26), collective actions in non-US courts (20), derivative shareholder actions and other derivative cases (14), and others (8).
The Advisen report notes that suits against financial firms dominated the "securities lawsuit" filings in the first quarter. The report notes that 117 out of the 169 "securities lawsuits" filed (or 69%) in the first quarter involved financial services firms (including insurance companies). These financial services claims fall in four basic groups: the Madoff-related claims; subprime and credit crisis-related claims; specialist improper trading claims; and Stanford Group-related claims.
With respect to the subprime and credit crisis-related claims, the report suggests that these claims "will crest in 2009," adding that "as bankruptcies rise through the economy, hitting all sectors, and securities suits are filed as a consequence, suits filed will become more dispersed…broadly affecting all sectors."
The report notes that many of the cases will not only potentially trigger D&O insurance policies, but "may also trigger coverage under errors and omissions (E&O) and fiduciary liability policies" which is true with respect to may of the Ponzi scheme cases as well as with to some of the subprime and credit crisis-related cases.
First Quarter Report Webinar: On Friday May 8, 2009, at Noon EDT, I will be joining David Bradford and Jim Blinn of Advisen for a free one-hour webinar to discuss the findings in the Advisen quarterly report and to discuss the implications for the liability insurance market. Registration for this free webinar is available here.