Study: Class Action Settlements Reach Record Level in 2004

Mammoth shareholder filings against such scandal-hit corporations as WorldCom, Raytheon and Bristol-Myers Squibb contributed to a 33 percent rise in the average settlement value of class-action litigation to $27.1 million, compared to the prior year, according to a study conducted by global consultancy NERA Economic Consulting. Of the 119 settlements made last year, nine were valued at $100 million or more, while16 settlements exceeded $50 million. NERA said that one of the determining factors behind the settlements was the magnitude of investor losses -- calculated by estimating how much a stock changed compared to the S&P 500. In 2004, investor class losses in the typical suit were $1.7 billion, compared to an average of $140 million in 1996. According to NERA, federal filings in 2004 remained roughly the same at 238, compared with 234 in 2003. Three years ago, class-action suits hit a peak of 505 filings. NERA data projected that if class-action suits continue to be filed at the same pace as in 2004, a publicly traded company faces a 10 percent probability that it will be named in at least one suit over the next five years.