On an annualized basis, the pace of securities class action lawsuit filings fir the first quarter of 2012 ran above historical averages, although the pace of filings declined compared to the prior month in the quarter’s second and third months. Merger-related cases, which were such a significant part of 2011 filings, remained an important factor in filings in the first quarter of this year, but other pronounced 2011 filing trends diminished in the year’s first three months.
Overall, there were 57 new securities class action lawsuit filings in the first quarter of 2012, which represents an annual filing rate of about 228 lawsuits. This filing rate is above the 2011 filing levels, when there were 188 securities class action lawsuit filings, and the 1996-2010 annual average filing rate of 194. However, the pace of filings was not level throughout the first quarter. The number of lawsuit filings declined from the prior month in the second and third months of the quarter. Thus, while there were 24 new securities class action lawsuit filings in January, there were 19 in February and only 14 in March.
One pronounced 2011 filing trend was the number of lawsuits filed against U.S.-listed Chinese companies. Last year, 41 of the 188 filings (or about 22%) involved these Chinese companies. There were fewer of these lawsuit filings in the second half of 2011 than there were in the first half of the year, and this downward trend continued in the fist quarter of 2012, when there were only two filings involving U.S.-listed Chinese companies.
Overall in 2011, 68 of the 188 filings (or about 38%) involved non-U.S. companies. The number of filings against non-U.S, companies declined significantly during the first three months of 2012, when there were only six filings against foreign companies, or about 10.5% of all first quarter filings. This rate is much closer to the historical proportion of all filings involving non-U.S. companies; during the period 1996 to 2010, only about 8.5% of all filings involved companies domiciled outside the U.S. Of the six first quarter filings involving non-U.S. companies, four involved companies from Canada, and two involved Chinese companies. Of the four Canadian companies, three were in SIC Cod 1040 (Gold and Silver Mining)
One 2011 filing trend that continued in the first quarter of the year was the significant percentages of all filings that were merger related. In 2011, 43 of 188 filings were merger related (22.87%). In the first quarter of 2012, 13 of 57 filings (22.81%) were merger related. The percentage of cases relat4ed to mergers was virtually unchanged in the first three months of 2012 compared to the full year of 2011. The significant numbers of merger-related cases is an important reason why the filing rate in the year’s first quarter is above longer term norms.
The filings during the year’s first quarter involved companies drawn from a wide variety of industries. The 57 first quarter lawsuits involved companies in 39 different Standard Industrialization Code (SIC) code categories. Companies in Life Sciences-related grouping had the greatest number of first quarter filings. There was a total of six filings in Industry Group 283 (Drugs), and there was a total of four filings in Industry Group 384 (Surgical, Medical and Dental Instruments), The ten total filings from these two groupings represent about 17.5% of all first quarter 2012 filings. The 17.5% percentage of all filings during the first quarter involving Life Sciences companies is above the historical annual percentage of all filings involving Life Sciences companies; as discussed at greater length here, during both 2008 and 2009, about 10% of all filings involved Life Sciences companies.
Industry Group 737 (Computer Programming, Data Processing and Other Computer-Related Services) also had a total of four filings. No other industry group had more than three filings.
With one exception, the first quarter 2012 filings were widely distributed among the U.S. district courts.` During the first quarter, the 57 securities class action lawsuits were filed in 29 different district courts. The one court where there was a concentration of filings was the federal court in Manhattan. During the first quarter there were 18 filings (or just less than a third of all filings) in the Southern District of New York.
It is important to note that the filing figures for the first quarter of 2012 do not include two categories of cases that have been an important part of all corporate and securities litigation activity during recent periods. Thus, the 57 first quarter securities class action lawsuit filings does not include merger objection lawsuits that were filed in state courts. The first quarter figures also do not take into account securities cases that were filed during the quarter that were not filed on a class action basis. There have been a host of individual actions relating to mortgage-backed securities and alleging violations of the securities laws; because these actions were not filed on behalf of a class, they are not reflected in the tally of securities class action lawsuits. But when these other types of cases are taken into consideration, it is very clear that the level of all corporate and securities litigation is at elevated levels.