New York (July 15, 2003) -- Contrary to some expectations, the rate of securities class action lawsuits - as well as the average value of litigation settlements - so far appears unaffected by either public indignation over the Enron corporate scandal or the passage of Sarbanes-Oxley.
From Sarbanes-Oxley’s passage in July 2002 until June 2003, securities class action suits were filed at an annual rate of 214, comparable to the average rate of 208 filings per year between 1996 and 2001, according to international economic consulting firm NERA . Their study, "Recent Trends In in Securities Class Action Litigation," looked at federal class action litigation filings, settlement values and dispositions between January 1991 and June 2003. Filing tallies for 2001 and 2002 excluded so-called "laddering" cases alleging unfair IPO allocation practices and analyst conflict-of-interest cases.
Filings after the Enron scandal occurred at an annual rate of 212 from November 2001 through late June 2003, comparable to the average annual rate in previous years, NERA said. The report noted that dismissals have fallen sharply since SOX, with only half as many cases dismissed since its passage as in the previous 11-month period.
Average settlement values fell modestly in the first ten months after SOX passed, dropping from $25.5 million for the period of January 1996 - July 2002 to $22.7 million for the period of August 2002 - June 2003. They remained unchanged after the Enron scandal, NERA said.
"Securities litigation has been increasing as a long-term trend, but not as a result of either Enron or Sarbanes-Oxley," said NERA economist Elaine Buckberg, co-author of the study. According to NERA, the likelihood of a public company being sued rose approximately 40 percent between 1995 and 2002. Filings of securities class action suits increased from an annual total of 190 to 280 during that period - an increase of over 47 percent.
-- WebCPA staff
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