Continuing 2015’s elevated pace, the number of securities class action lawsuit filings during the first half of 2016 accrued in numbers well above both historical averages and recent levels. The first half 2016 levels puts the securities suit filing activity on pace for the most active year for securities class action lawsuit filings since 2004.

Elevated First-Half Filing Levels: There were 119 federal court securities class action lawsuit filings in the first half of 2016. (There were also a number of state court securities class action lawsuit filings under the ’33 Act’s concurrent jurisdiction provisions. The first half total including these state court lawsuits is at least 122.)

The 119 federal court securities suit filings is well above the semi-annual average number of federal court securities lawsuit of 94 filings during the period 1H97 to 2H14. The 116 federal court lawsuits is also significantly above the 85 filed in the first half of 2015, which is noteworthy because 2015 as a whole proved to be one of the most active years for securities class action lawsuit filings since at least 2011.

If this year’s first-half pace were to continue for the remainder of 2016, by year end this year’s filings would represent the highest annual number of filings since 2004 (when there were 239 securities suit filings).

There was no single factor contributing to the elevated filing levels in the year’s first half; rather, the upsurge is the result of a combination of factors, each of which contributed in part to the increase. These factors include the number of lawsuits against life sciences companies; the number of lawsuits against IPO companies and the number of merger related lawsuits; and the number of lawsuits against non-U.S. companies.

Types of Companies Sued: The securities suits filing in the year’s first half hit a wide range of kinds of companies. The companies named as defendants in the lawsuits filed in the year’s first half involve companies in 76 different Standard Industrial Classification (SIC) code categories. But while the lawsuits were filed against companies in a broad range of industries, there were definite areas of concentration.

Among other things, life sciences companies as a group were among the most frequent targets of securities suits. The 2834 SIC Code category (Pharmaceutical Preparations), with 14 securities suit filings, had the highest number of any single SIC code category in the year’s first half. The 283 SIC code Industry Category (Drugs) had a total of 17 filings, the highest number in any single Industry Category. There were also an additional ten companies named as securities suit defendants in the 3800 SIC Code series (Measuring and Analyzing Instruments), including five in the 384 SIC code group (Surgical, Medical and Dental Instruments and Supplies).

There were a total of 25 companies from these different life sciences SIC code categories named as defendants in the year’s first half, representing 21% of all of the lawsuit filings in the first half (the same as the 21% that life sciences companies represented in 2015  among securities suit targets).

There were several other SIC Code categories that had significant numbers of securities suit filings, all of which generally were in the high tech sector. The 7372 SIC Code category (Prepackaged Software) had 7 securities suit filings, and the 737 Industry Group (Computer Programs, Data Processing) had a total of 13 filings, representing about 11% of all first-half filings.

Together, the life sciences and high tech filings represented slightly less than a third of all first-half securities suit filings.

Filings Against Non-U.S. Companies: As has been the case in the recent past, lawsuit filings against non-U.S. companies were an important part of securities suit filings activity in the year’s first six months. Of the first half filings, 22 involved non-U.S. companies (compared to a total of 34 for the full year 2015 and the full year 2014), representing about 18.5% of filings. These 22 lawsuits included company defendants from ten different countries. The countries with the largest number of lawsuits were Germany (4), Israel (4), and Ireland (4).

Interestingly, there were no lawsuits filed in the year’s first half against Chinese companies, which represents quite a contrast to the last several years in which elevated levels of securities filing activity against non-U.S. companies was largely a factor of the number of lawsuits filed against Chinese companies.

Lawsuits Against IPO Companies: There were ten lawsuit filed in federal court in the year’s first half involving IPO companies. (There were at least three more IPO-related securities class action lawsuits filed in state court under the ’33 Act’s concurrent jurisdiction provisions.) Of the ten federal court lawsuits, two involved companies from the IPO class of 2014 and eight involved companies that went public in 2015.

Given that the number of IPOs began to decline significantly in the second half of 2015, and that level of IPO activity in 2016 has been at even lower levels, the pace of filing activity against IPO companies seems likely to decline in the second half of 2016 and to decline further next year.

Merger-Related Lawsuits: In addition, there were a number of merger related lawsuits filed as well. There were a total of 22 federal court merger-related securities class action lawsuits filed in the first half, representing about 18.5% of filings. Merger-related cases have been a significant part of securities suit filing activity in recent years. What is surprising about the level of activity in the first half of 2016 is that as a result of rulings from the Delaware Court of Chancery, merger objection lawsuits were expected to decline this year. Most of the merger suits were filed outside the District of Delaware, so the plaintiffs’ lawyers may be seeking to continue this particular lawsuit product line by filing suits in federal courts away from Delaware. It may be, as some had speculated might happen, that merger objection lawsuits are living on outside Delaware.

Place of Filing: The federal court securities class action lawsuits filed during the first six months were filed in 26 different courts, although there were certain federal districts were significantly greater number of securities lawsuits accrued. Thus, for example, 32 of the 119 securities lawsuits filed in federal courts during the year’s first six months were filed in the Southern District of New York, representing about 27% of all filings.

There were 15 securities class action lawsuits filed in the Central District of California in the year’s first half, as well 13 in the Northern District of California, and two in the Southern District of California. Thus, a total of 30 securities suits were filed in these three California federal district courts, representing about 25% of all first half federal court filings.

Together the filings in the Southern District of New York and the three California federal district courts represented more than half of all first half filings (52%).

A Final Note About Data Sources and Methodology: The data used in the analysis above were compiled from a variety of sources, including media outlets (such as Bloomberg and Yahoo Finance), online legal news services (including Law 360 and Advisen), and other online data services (including the Stanford Law School Securities Class Action Clearinghouse). In addition, during the course of the year, I took advantage of opportunities to audit my lawsuit dataset by comparing it to those being compiled by other litigation monitoring services.

In tallying the securities class action lawsuits, I count each company sued for the same basic set of allegations only once, which is different from the methodology used by other prominent litigation monitoring sources. At least some of these services count each complaint separately (at least if the complaint is filed in a separate judicial district), unless and until the separate lawsuits are consolidated. In addition, by comparison to several of the securities class action monitoring services, I count state court securities class action lawsuit filings as well as securities class action lawsuits filed in federal court; most of the other monitoring services only count federal court lawsuits, not state court lawsuits.

The different methodologies used will not only result in different litigation counts, but it could also result in differing analytical conclusions. It is very important to understand the methodologies used by the different prominent securities litigation monitoring services and to understand how the methodologies used will affect analyses of the data.