The number of federal court securities class action filings in the year’s first half project to a year-end total roughly level with year-end total number of suit filings last year, while case resolutions (dismissals and settlements) are on track to exceed 2023 levels, according to a recent report from NERA. The August 6, 2024, report, entitled “Recent Trends in Securities Class Action Litigation: 2024 H1 Update,” can be found here.
According to the report, there were 112 federal court securities class action lawsuit filings in the first six months of 2024, of which 106 were standard securities suits (alleging violations of Rule 10b-5, Section 11, or Section 12). The number of merger objection lawsuits and suits involving unregistered crypto securities continued to decline in the first half of 2024, with only two suit filings in each of these categories. The 112 first half federal court securities suit filings projects to a year-end total of 224, which would be slightly below the 228 securities suit filings for the full year 2023, but above the year-end totals for 2022 (206) and 2021 (210).
Securities suits against companies in the electronic technology, technology services and healthcare technology and services sectors together constituted the majority of first-half 2024 filings; together, suits in these sectors comprised 54% of new filings in the year’s first half. On the other hand, the percentage of cases against companies in the financial sector declined in the year’s first six months compared to 2023, largely as a result of a decline in cases against banking institutions. Thus, while suits against companies in the finance sector represented 18% of all filings in 2023, they represented only 11% of suits filed in the first half of 2024.
The report notes that while foreign companies as a percentage of all U.S.-listed companies have been increasing steadily since 2015, the percentage of securities suits against foreign companies has been declining since 2020. Since 2022, the percentage of suits against foreign companies has been below the percentage of foreign companies among all U.S.-listed companies. In the first six months of 2024, foreign companies represented 24.7% of all U.S.-listed companies, but first half 2024 lawsuit filings against foreign companies represented only 14.2% of all first-half securities suit filings. Of the 15 filings against foreign companies in the first six months of 2024, nine were against companies domiciled in Asia.
The report notes that as interest in Artificial Intelligence has increased, litigation involving AI-related allegations has increased as well. The report notes that there has been a total of 31 AI-related securities class action lawsuit filings since 2020, including six in the first six months of 2024 in which plaintiffs have alleged that companies overstated their use of or the effectiveness of AI in their own or clients’ businesses.
The report also notes that while the number of SPAC-related securities suit filings in the first six months (5) appeared to reflect a decline in filings of these kinds of cases relative to 2023 (when there was a total of 18 SPAC-related cases for the full year), the number of COVID-related securities suit filings appears to have increased. According to the report, there were eight first half COVID-related securities suit filings, compared to 13 for the full-year 2023.
There were 100 cases resolved in the first half of 2024, of which 52 were dismissed and 48 were settled. The first half cases resolutions in the year’s first six months projects to a year-end total of 200 case resolutions, which would represent a 5% increase relative to the 190 case resolutions for the full year 2023.
With respect to settlement values, the report states that, excluding settlements of $1 billion or more, the average first-half 2024 settlement was $26 million, representing a $9 million decline compared to the full year 2023 inflation-adjusted average settlement value of $35 million. Among the first-half 2024 settlements, about 52% settled for less than $10 million, while only 12% settled for $50 million. The median settlement in the first half of 2024 was $9 million, compared to an inflation adjusted year-end 2023 median settlement value of $15 million.
The aggregate settlement amount for the first six months of 2024 was $1.2 billion, which projects to a year-end total well below the inflation adjusted aggregate total of $4.0 billion for the full year 2023. However, the report notes that there are several large previously announced pending settlements for which settlement-approval hearings are scheduled in the second half of 2024, including Under Armour ($434 million), Alphabet ($350 million), Zoom Video Communications ($150 million), and Perrigo Company plc ($97 million). The report comments that “the aggregate settlement value in the second half of 2024 would be expected to exceed the $1.2 billion seen in the first half of 2024.”
Some readers may have noted that NERA’s count of first half 2024 federal court securities class action lawsuit filings differs slightly from other published accounts (although all of the published reports are directionally consistent). The differences between the various counts likely is attributable to differences in methodology. Thus, for example, while other published filing reports count all related lawsuits filed against a single company only once, the NERA report counts multiple lawsuits filed against a single company as a single lawsuit only if the various suit are filed in a single circuit. If suits are filed in separate circuits, NERA treats the suits as separate filings – but if the cases in different circuits are consolidated, NERA revises its count to reflect the consolidation.
In addition, NERA’s suit tally includes not only class action lawsuits that allege violations of the federal securities laws, but it also includes suits that “allege violations of common law, including breach of fiduciary duty, as with some merger-objection cases.” The NERA tally also includes other cases filed in federal court that allege violations of foreign or state law.