D&O insurers closely track the annual number of securities class action lawsuit filings. The number of annual filings can provide some indication of the insurers’ ultimate loss costs for the year. The current year’s filing patterns can also inform the insurers’ efforts to try to determine the profit-making price for their insurance product.

In 2023, the number of federal court securities class action lawsuits filed increased more than 7% compared to 2022, although the number of federal suit filings still remained well below the elevated levels seen in the recent past. Several factors contributed to the increased number of securities suit filings during the year, including disruption in the banking sector as well as the overall impact of macroeconomic factors.

According to my tally, 213 federal court securities class action lawsuits were filed in 2023, compared to 197 in 2022, representing an increase of about 8%. The number of 2023 federal court securities suit filings, while up compared to 2022, was well below the over 400 securities suit filings each year during the period 2017-2019 (when the filing totals were inflated by an influx of federal court merger objection class action lawsuits). Please note that these figures do not include securities class action lawsuits filed in state court.

While the number of annual federal court securities class action lawsuit filings was elevated during the period 2017-2019 by a flood of federal court merger objection class action lawsuits, the merger-related lawsuits were hardly a factor in the total number of federal court securities class action suit filings in 2023. By my count, there were only six federal court merger objection class action lawsuits. (The merger objection lawsuits were still being filed in significant numbers during 2023, but the lawsuits were filed as individual actions rather than as class actions, and so do not show up in the class action lawsuit filing tallies.)

Factors that contributed significantly to the number of federal court lawsuit filings in 2022 continued to contribute to the number of filings in 2023, though to a lesser agree than in 2022. Thus, for example, there were 12 SPAC-related securities suits filed in 2023, compared to 23 in 2022. Similarly, there were nine COVID-19-related securities suits filed in 2023, compared to 18 in 2022. There were 12 crypto currency and digital asset related securities suits in 2022, compared to 22 in 2023.

The overall increase in the number of federal court securities class action lawsuit filings in 2023 compared to 2022 was driven by other factors that developed during the year.

Thus, as will be discussed in my forthcoming annual Top Ten Stories in D&O survey (which I hope to publish this week), there were a series of new lawsuits filed in 2023 related to the Banking Crisis of 2023; indeed, banks in general were a more frequent target in 2023. By my tally, there were twelve federal court securities class action lawsuits filed in 2023 against companies in the 602 SIC Code Industry Group (Commercial Banks). High interest rates caused many of the issues at the banks; as my forthcoming Top Ten survey will also show, high interest rates and other macroeconomic factors (including economic inflation and supply chain and labor supply disruption) were generally significant factors in the total number of securities suits filed overall in 2023.

As has been the case in most recent years, there were significant numbers of federal court securities class action lawsuits filed in 2023 against companies in the biotech and high-tech sectors. Thus, by my tally there were 25 securities class action lawsuits filed against companies in the 283 SIC Code Industry Group (Drugs), including 17 in the 2834 SIC Code category (Pharmaceutical Preparations). There were also an additional nine securities class action lawsuits filed against companies in the 384 SIC Code Industry Group (Surgical and Medical Instruments), bringing the total number of 2023 federal court securities class action lawsuit filings against companies in the biotech sector to 34, representing 16% of all securities suits filed during 2023.

With respect to the securities suit filings against high-tech companies, there were 29 federal court securities class action lawsuits filed in 2023 against companies in the 737 SIC Code Industrial Group (Computer Programming and Data Processing), including 17 in SIC Code Category 7372 (Prepackaged Software). The 29 securities suits against companies in the this SIC group represented about 13.7% of all of the federal court securities class action lawsuits filed in 2023.

The lawsuits filed against biotech and high-tech companies together represented a total of 66 suits, representing about 31% of all the 2023 federal court securities class action lawsuit filings.

The 2023 federal court securities class action lawsuits were filed in 44 different federal district courts. The courts with the greatest numbers of first-filed federal court securities lawsuits were the Southern District of New York with 34 filings; the Northern District of California, with 30 filings; the District of New Jersey, with 23 filings; and the Central District of California, with 19 filings.

There was a total of 58 securities lawsuit first-filed in the California federal district courts taken together, representing about 27% of all 2023 securities lawsuit filings. There was a total of 46 first-filed federal court securities lawsuit filings in district courts located in New York, representing about 22% of all 2023 securities suit filings.

The total of all of the cases first-filed in California and New York taken together is 104, representing about 49% of all 2023 federal court securities suit filings.

There was a total of 34 federal court securities class action lawsuit filings against companies based outside the U.S., representing 15 different countries. The countries with the highest number of companies sued were China (with 9, plus one more for Hong Kong and another for Taiwan); Israel (5); and the U.K (with 4, plus one more for Jersey). The 34 lawsuits against foreign companies represents about 16% of all 2023 federal court securities class action lawsuit filings, roughly equivalent to the proportion of foreign companies among all companies listed in U.S. exchanges.

Notes about Data and Methodology: I count each company that has been sued in a securities class action lawsuit for essentially the same allegations only once, regardless of the number of complaints actually filed. This counting methodology may differ from the methodology used by other public sources that track securities lawsuit filings, which in turn may cause my tallies to differ from other published tallies.

In tracking the securities lawsuits, I rely on several different sources, including the Stanford Law School Securities Class Action Clearinghouse; Law 360; Justia; ISS Securities Class Action Services; and Stanford Securities Litigation Analytics. I also audit my tally against other resources periodically throughout the year.

Top Ten Stories of 2023 Webinar: Please note that on Thursday, January 11, 2024 at 11:00 AM EST, my colleagues Marissa Streckfus, Chris Bertola, and I will be conducting a free, hour-long webinar in which we will discuss The Top Ten D&O Stories of 2023. Registration for the webinar can be found here. I hope you can join us for the webinar.

One Final Note: Go Blue!