|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
Stanford Law School and Cornerstone Research Release Annual Securities Fraud Class Action Filings Report Indicating That Recent Increase in...
Staff Writer
Business Wire. January 3, 2008
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EXCERPT: The number of companies sued in securities fraud class action litigation rose 43 percent between 2006 and 2007, from 116 to 166. Although litigation activity for 2007 as a whole was 14 percent below the ten-year historical average (covering 1997 - 2006) of 194 companies sued per year, activity jumped in the second half of the year as the subprime mortgage crisis unfolded and stock market price volatility increased. One hundred companies were sued in the second half of the year, a litigation rate that reversed a trend of eight consecutive quarters with below average litigation activity. But this increase may not signal a longer-term trend. Professor Joseph Grundfest, Director of the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research, observes that, "For the past two years, securities fraud class action litigation has been driven by market-wide events, such as the 2006 backdating scandals and the 2007 subprime crisis. If these systemic shocks are excluded from consideration, the 'core' litigation rate continues to be remarkably low. When litigation related to the subprime crisis is excluded from the calculation -- on the assumption that the subprime crisis is a nonrecurring event -- the resulting core litigation rate remains well below historical norms. Measured as a core litigation rate, 126 companies were sued in the full calendar year, compared with the average core litigation rate from 1997 through 2006 of 192." John Gould, Vice President at Cornerstone Research and contributor to the report, believes that the increase in filings in the second half of 2007 raises as many questions as answers. He notes, "Just a few months ago we were trying to pin down the cause of the two-year lull in class action activity that began in mid-2005. Unfortunately, the increase in filing activity in 2007 does not provide much insight into why filings were down in the preceding years. While it is likely that both the subprime crisis and the increase in stock market volatility contributed to the increase in filings in the second half of the year, it is not possible, as a technical matter, to separate these two effects." This past year also saw defendants prevailing in the JDS Uniphase securities class action, a rare example of such litigation reaching trial. Professor Grundfest commented that "the JDS trial is an important landmark in modern securities litigation. These cases rarely go to trial, and for the defendants to win a total victory in a case that claimed $20 billion in damages demonstrates that not every case that makes it past summary judgment has merit. The interesting question is how and whether this trial result might cause plaintiffs to modulate their settlement demands or embolden defendants to take cases to trial." |
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