securities class action litigation

It is extremely rare for securities class action lawsuits to go all the way through to a jury verdict. Since 1996, there have been more than 5,200 securities class action lawsuits filed, but, as detailed further below, fewer than 25 cases during that time have gone to trial. However, on February 4, 2019, a jury in the Central District of California entered a verdict in the securities class action lawsuit pending against Puma Biotechnology and certain of its directors and officers. While the jury found that the plaintiffs had not proven that three of the four allegedly misleading statements at issue were “false and misleading,” the jury found against the defendants and for the plaintiff as to a fourth statement. The jury specified damages of $4.50 a share with respect to the one misleading statement, which, according to the plaintiff’s counsel’s press release, amounts to a damages award of “up to $100 million,” although the actual damages amount remains to be calculated based on trading during the class period. 
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The world of directors’ and officers’ liability is always dynamic, but 2018 was a particularly eventful year in the D&O liability arena. The past year’s many developments have significant implications for what may lie ahead in 2019 – and possibly for years to come. I have set out below the Top Ten D&O Stories of 2018, with an eye toward future possibilities.
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The torrid pace of securities class action lawsuit filings continued in the first half of 2018, coming in at a rate only very slightly below last year’s record-setting pace. While a significant number of the first half filings are attributable to merger objection lawsuit lawsuits, the number of traditional filing alone during the first half of the year were well above historical levels. If the first half’s pace continues in the second half of the year, the projected number of year-end filings would approach last year’s elevated total.
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It is big news when one of the most successful plaintiff-side corporate and securities lawyers decides to walk away from the game, but that is exactly what Stuart Grant of Grant & Eisenhofer, the Delaware shareholder litigation firm, is going to do. According to Alison Frankel’s interesting June 25, 2018 Reuters article and interview (here), Grant is leaving his firm effective June 30, 2018, because, in his own words, he doesn’t like losing, as he has been doing in the past few years. Both Grant’s reasons for leaving and his plans for what comes next are interesting. In his interview with Frankel, Grant also had a number of interesting things to say about a number of corporate and securities litigation topics.
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This past year was an eventful one in the corporate and securities litigation arena. In the following guest post, Haynes and Boone, LLP Partners Dan Gold, Kit Addleman, Thad Behrens, Emily Westridge Black, Carrie Huff, Tim Newman, David Siegal, and Odean Volker take a look at the important securities litigation developments during 2017. This article was previously published as a Haynes and Boone client alert. I would like to thank the authors for their willingness to publish their memorandum on this site. I welcome guest post submissions from responsible authors on topics of interest to readers of this site. Please contact me directly if you are interested in submitting a guest post. Here is the authors’ guest post.
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In general, securities litigation filing trends emerge gradually and across long stretches of time. These kinds of long term trends have been the subject of a number of recent reports discussed on this site – including, for example, recent reports from NERA Economic Consulting (about which refer here), Cornerstone Research (here), as well as my own report. Though trends often become apparent only over the course of months and years, sometimes they are apparent in much shorter time frames. As it happens, the securities suit filings on a single day last week managed to neatly encapsulate all of the important current securities litigation filing trends.
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As has been well-documented on this site, 2017 was an extraordinary year for securities class action lawsuit filings, with a record number of new lawsuits filed at a record rate. Among the important contributing factors to the significant volume of securities suit filings during the year was the volume of lawsuits filed against life sciences companies. The significance of the litigation activity against biopharma companies, a subset of the overall life sciences sector, was the subject of a detailed and precise analysis in a guest post earlier this week.

There is still the question of the meaning of large volume of litigation involving life sciences companies generally.  According to the latest annual analysis from the Dechert law firm, the number of securities lawsuits filed against life sciences companies in 2017 increased 30% from the previous year, and increased more than 225% from only five years earlier. The law firm’s February 8, 2018 report entitled “Developments in Securities Fraud Class Actions Against U.S. Life Sciences Companies: 2017 Edition” can be found here.
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For the second straight year, securities class action lawsuit filings reached record levels in 2017, according to the January 30, 2018 report from Cornerstone Research. According to the report, entitled “Securities Class Action Filings: 2017 Year in Review” (here), securities suit filings during the year reached “unprecedented levels” and companies on U.S. exchanges were more likely to be the subject of a securities suit than in any previous year. Cornerstone Research’s January 30, 2018 press release about the report can be found here. My own analysis of the 2017 securities class action lawsuit filings can be found here.
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According to a January 29, 2018 report from NERA Economic Consulting, there was “an explosion” of U.S. federal court securities class action litigation filing in 2017, as new securities suits were filed at a “record pace.” The report, entitled “Record Trends in Securities Class Action Litigation: 2017 Full-Year Review,” can be found here. NERA’s January 27, 2018 press release regarding the report can be found here. My analysis of the 2017 securities class action lawsuit filings can be found here.
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More securities class action lawsuits were filed in 2017 than in any year since 2001, in significant part because of the substantial number of federal court merger objection lawsuit filings during the year. But even disregarding the merger suits and looking only at the traditional securities lawsuits, the number of lawsuit filings was at the highest level since at least 2004.  While the elevated numbers of lawsuit filings is noteworthy, it is the litigation rate – that is, the number of securities suits relative to the number of public companies – that is most significant. According to my estimate, the litigation rate during 2017 was at all-time record levels.
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