Securities class action litigation has been an important part of the corporate and securities litigation environment in the United States and Canada for many years. What has been interesting in more recent years has been the steady rise of collective investor actions outside North America. As these various claims have accumulated, a number of them have developed into significant settlements, as documented in a recent report. ISS Securities Class Action Services has published an interesting report entitled “The Top 25 Non-North American Settlements: Largest Securities-Related Settlements Outside of North America of All-Time” (here) detailing the largest collective investor action settlements in Europe, Australia, and Asia.
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A Closer Look at Two Recent Securities Lawsuit Mega Settlements
Over the course of the past few weeks, very substantial settlements were announced in two separate securities class action lawsuits, one involving the giant Internet company Alibaba and one involving the auto manufacturing company Fiat Chrysler. Given the size of these settlements, they are interesting in and of themselves. However, the settlements are interesting, separately and together, for several other reasons, among other things for the fact that both involve companies organized and based outside the U.S. but with securities trading on a U.S. exchange. Each of these settlements is described below, and a discussion of the settlements’ significance follows.
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Cornerstone Research: Accounting-Related Securities Suit Filings and Settlements Increased in 2018
Driven by a general overall increase in the number of securities class action lawsuit filings, as well as by an increase in the number of M&A-related lawsuits involving accounting allegations, the total number of securities class action lawsuits involving accounting allegations filed in 2018 was well above historical levels, according to a newly released Cornerstone Research report. Also consistent with overall securities suit settlement patterns during the year, the value of settlements of securities suits with accounting allegations during 2018 was at second-highest level in in the last ten years. The Cornerstone Research report, entitled “Accounting Class Action Filings and Settlements: 2018 Review and Analysis,” can be found here. Cornerstone Research’s April 17, 2019 press release about the report can be found here.
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Massive Settlement in Wells Fargo Bogus Account Scandal Derivative Suit
In one of the largest shareholder derivative lawsuit settlements ever, the parties to the consolidated Wells Fargo derivative suit arising out of the bank’s phony customer account scandal have agreed to settle the case for a variety of cash and non-cash benefits with a stated value to the company of $320 million, inclusive of a cash payment of $240 million. The $240 million cash portion of the settlement is to be paid by the bank’s D&O insurers, in what is, according to the plaintiffs’ counsel, “the largest insurer-funded cash component of any shareholder derivative settlement in history.” This settlement represents the latest in a series of derivative suit settlements with a significant cash component, a case resolution pattern in high-profile derivative suits that arguably represents the new normal in the world of D&O liability exposures.
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Securities Class Action Settlement Opt-Outs: Statistics and Trends
One of the more interesting story lines in the world of securities class action litigation over the past several years has been the rise of class settlement opt outs, whereby various claimants representing significant shareholder ownership interests select out of the class suit and separately pursue their own claims – and settlements. The class action opt-out litigation emerged as a significant phenomenon in the litigation arising out of the era of corporate scandals a decade ago. In an October 6, 2016 report entitled “Opt-Out Cases in Securities Class Action Settlements” (here), Cornerstone Research and Latham & Watkins LLP take a look what the statistics show about securities class action opt-outs. This recent report updates the findings in their 2013 study, based on updated data reflecting case settlements during the period 2012 to 2014. Cornerstone Research’s October 6, 2016 press release regarding the report can be found here.
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Cornerstone Research: Accounting-Related Securities Suit Filings and Settlements Increase
The number of securities class action lawsuit filings raising accounting-related allegations rose in 2015, as did the number and value of accounting-related securities suit settlements, according to a new report from Cornerstone Research. In addition to the increase in the number of accounted-related lawsuit filings, the market capitalization losses associated with those new filings increased as well. The April 19, 2016 report, entitled “Accounting Class Action Filings and Settlements: 2015 Review and Analysis,” can be found here. Cornerstone Research’s April 19, 2016 press release about the report can be found here.
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PwC Report: Surge of Suits Involving Smaller Companies Drove 2015 Securities Suit Filing Increase
Largely as a result of the number of suits filed against smaller companies, the number of securities class action lawsuits filed in 2015 increased for the third year in a row, to the highest level since 2008, according to a new report from PwC. The April 2016 report, entitled “Small Companies, Big Targets: 2015 Securities Litigation Study,” can be found here. The numbers in the PwC report differ slightly from the figures reported in previously released annual securities class action litigation studies by Cornerstone Research (here) and NERA Economic Consulting (here), but the reports are directionally consistent. My own analysis of the 2015 securities litigation filings can be found here.
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Cornerstone Research: Aggregate and Average Securities Suit Settlements Surged in 2015
Aggregate and average securities class action lawsuit settlements increased significantly in 2015 compared to the year before, according to the latest annual report from Cornerstone Research. Among reasons for the increase in aggregate settlement amounts is the increase in the absolute number of settlements during the year. The increase in the average settlement amount is largely attributable to an increase in the number of “mega” settlements. While overall and average settlement amounts increased during the year, the number of smaller settlements also increased, and median settlement amounts held steady. The Cornerstone Research report, entitled “Securities Class Action Settlements: 2015 Review and Analysis,” can be found here. Cornerstone Research’s March 29, 2016 press release about the report can be found here.
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NERA Report: 2015 Securities Class Action Filings at Highest Level Since 2008
Securities class action lawsuit filings in 2015 were at their highest level since 2008, according to the latest annual report from NERA Economic Consulting. The report also states that not only as the number of lawsuits filed increased in 2015, but the rate of lawsuit filings relative to the number of publicly traded companies has also increased compared to historic levels as well. The report entitled “Recent Trends in Securities Class Action Litigation: 2015 Full-Year Review,” can be found here. NERA’s January 25, 2016 press release describing the report can be found here. My own analysis of the 2015 securities class action filings can be found here.
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In Latest Jumbo Merger Suit Settlement, Duke Energy Agrees to Pay $146 Million to Settle Suit Over “Boardroom Coup” Following Progress Energy Merger
One of the hot topics in the world of corporate and securities litigation in recent years has been the rise of M&A-related litigation. Among the many themes that are part of the discussion of this topic has been the fact that the M&A lawsuits often settle for the defendant company’s agreement to additional disclosures about the merger, with no cash payment to shareholders. The disclosure-only settlements continue to be a concern, but at the same time there recently have been a number of merger-related lawsuit settlements in which there has been very significant cash components.
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