New York (Feb. 19, 2004) -- Despite a handful of blockbuster settlements in 2003, Sarbanes-Oxley hasn’t had any statistically significant impact on securities class action filings, average or median settlement values, or investor recovery rates, according to a report by NERA Economic Consulting, which tracks securities class action cases.

Class action filings, average or median settlement values, and investor recovery rates all remained flat or declined in 2003, according to the report, “Recent Trends in Securities Class Action Litigation: 2003 Early Update.” The average settlement fell 15 percent in 2003 to $19.8 million, down from $23.3 million in 2002. The median settlement declined by 14 percent to $5.4 million in 2003, down from $6.3 million in 2002. Investor losses in the median case settling in 2003 were $215 million, more than three times the median of $65 million in 1996.

However, the act has had a marked effect on the pace of dismissals of securities class action cases, NERA said. The rate at which cases are dismissed has fallen by a third since the July 2002 enactment of SOX, which NERA said suggests that either cases are advancing more slowly or that judges may be allowing more cases to proceed.

NERA economists and study co-authors Elaine Buckberg, Todd Foster and Stephanie Plancich noted that the tremendous settlements that occurred in 2003 were more a function of stock market losses than the change in the law. The median recovery rate remained near an all-time low of 2.8 percent in 2003, slightly up from 2.7 percent in 2002, but down from a high of 7.2 percent in 1996.

NERA noted that three of the largest shareholder class action settlements of all time occurred during 2003. Lucent Technologies Inc. paid the second-largest settlement of all time, $517 million. Settlements paid by DaimlerChrysler AG and Oxford Health Plans, which each paid some $300 million to class action plaintiffs, were the fifth and sixth largest settlements in the history of securities class action litigation. Those settlements are associated with huge investor losses that ranked first, second and fifteenth among settled cases.

However, the pace of securities class action filings dropped in 2003 for the second year in a row, to 210, in line with the recent average of 212 filings each year. Those figures exclude so-called laddering and analyst cases, which NERA said are widely considered to be one-time events.

-- WebCPA staff

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