While securities class-action lawsuits edged up slightly in 2011, primarily driven by mergers-and-acquisition activity, the total number remained below average for the third year in a row, according to a Stanford Law School report.
The "Securities Class Action Filings—2011 Year in Review" report, prepared by Stanford Law School Securities Class Action Clearinghouse along with Cornerstone Research, says a total of 188 federal securities class actions were filed in the last year—up from 2010 when there were 176 such filings. In 2009, there were 167 filings.
However, those figures are still below the 223 that took place in 2008 and below the average of 194 when measured during the period 1997 to 2010.
"This corner of the litigation market continues to run at a pace well below historic norms," says Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse.
Grundfest notes that the two major contributors of securities class-action lawsuits—litigation against Chinese issuers that entered the U.S. market through reverse mergers; and financial-crisis claims—are both beginning to see declines.
He says the growth in merger-related litigation that was historically brought in state court inflated the federal statistics.
"Taken together, these data suggest that there are far fewer claims of traditional securities fraud by U.S. issuers than has been the case since the mid-1990s," says Grundfest.
The report says slightly more than 3 percent of S&P companies were subject to securities-litigation filings in 2011. That works out to one out of every 31 companies in the S&P 500 index getting hit with a securities suit. The average is one in 16 between 2000 and 2010.
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