The average settlement as a result of securities class-action litigation dropped more than 50 percent in 2008, to $31.2 million, according to a report from Cornerstone Research.
The study, “Securities Class Action Settlements: 2008 Review and Analysis, also reported a 10-percent decline in the number of settlements in 2008, to 110. However, Cornerstone projected that the ongoing financial crisis will most likely jump-start securities litigation.
“This decline in the number of securities class-action settlements does not come as a surprise,” said Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research. “The inventory of cases waiting to be settled had been depleted by recent vigorous settlement activity.
New litigation didn’t pick up the slack, at least until the recent uptick in lawsuits caused by the financial market meltdown. Settlement figures may well bounce back over the next few years.”
Other key findings include:
• The median amount for cases settled in 2008 was $8 million.
• The average length of the class period in 2008 reached a new high of over 800 days, nearly a year longer than the average for all prior settlements through 2007, which was 518 days.
• The percentage of cases involving estimated damages in excess of $1 billion, otherwise known as “mega-damages,” fell to 20 percent — the lowest rate in five years.
• In 2008, accounting-related allegations, specifically alleged violations of GAAP, were included in almost 70 percent of settled cases.
