The number of securities class action filings set a new record last year, according to a recent report by Cornerstone Research titled Securities Class Action Filings, 2019 Year in Review (here). According to the Report, the number of those actions filed last year eclipsed the record set the prior year. The Report also tracks key trends the filing of securities class actions s in a number of other areas.
Number of cases filed: Last year 428 securities class actions were filed in federal and state courts, passing the record set the year before of 420. The number of suits filed as the decade drew to a close was the most on record, nearly doubling the 1997-2018 average. Core filings, defined as all such suits except those tied to M&A, also set a record at 268 compared to 238 suits filed the year before. While the number of M&A suits filed did not set a record, the 160 cases initiated represents the third largest number.
Exchange listed firms: The likelihood of being named as a defendant in a securities class action increased again in 2019 for firms listed on a major exchange. Since 2011 the likelihood of being named as a party for an exchange listed firm – NYSE or NASDAQ – has increased each year. In 2019 firms listed on one of the exchanges had a 5.5% of being named in a core action, up from 4.8% in 2018, 4.2% in 2017 and 4.1% in 2016. In contrast, the likelihood of being named in an M&A case for an exchange listed firm dropped to the lowest level since 2016.
S&P 500: In contract, the likelihood of an S&P 500 firm being named as a defendant in a securities class action declined after a record high was set in 2018. Firms in the health care sector were most frequently named in a suit in 2019, the same as in 2018. Firms in the consumer staples sector were second while those classified as industrials were third. During the prior year firms involved in telecommunications/information tech were second followed by those in consumer staples.
1933 Act claims: Last year the number of cases filed in state court under the 1933 Act continued to increase. A total of 49 such cases were filed last year compared to 35 in 2018. While 28 of those cases were brought in either New York or California state courts, the overall increase was fueled in large part by the 18 cases initiated in other state courts. That represented a significant increase over 2017 when only 13 cases were filed in other state courts.
Non-U.S. federal filings: The number of actions filed against non-U.S. issuers as a percentage of total filings has generally been trending upwards. Last year the number of core cases filed against non-U.S. issuers increased to 57, compared to 47 in the prior year. While the number of cases against non-U.S. issuers last year was the highest recorded during the decade, as a percentage of the total cases initiated it ranked third.
Circuits: Most securities class actions are filed in either the Second or Ninth Circuit followed by the Third. Last year was no exception. In 2019 103 cases were filed in the Second Circuit, followed by 52 in the Ninth and 28 in the Third. In 2018 there were 71 actions filed in the Second Circuit, 69 in the Ninth and 26 in the Third.