2015 SECURITIES CLASS ACTIONS UP TO HIGHEST LEVEL SINCE 2008

Cornerstone Research recently released its “Securities Class Action Filings: 2015 Year in Review,” which tracks the number and type of securities class action lawsuits filed nationwide each year. In 2015, plaintiffs filed 189 new federal securities class actions, which is an 11% increase from the 170 new federal securities class actions filed in 2014. The 189 new federal securities class action filings is the largest number of filings since 2008, and is right in line with the historical average of 188 new class actions filed each year between 1997 and 2014. Notably, it is the third straight year that the number of federal securities class actions has increased. Of those 189 new class actions filed in 2015, fifteen were filed in district courts located within the Fifth Circuit, three more than were filed in the Fifth Circuit in 2014. This accounted for approximately 8% of the nationwide securities class actions, which is slightly higher than the 6% historical trend, between 1997 and 2014.

Although the Fifth Circuit saw slightly increased numbers in 2015, by far the largest increase by circuit occurred in the Ninth Circuit, which saw 28 more federal securities class actions filed within its district courts in 2015 than were filed in 2014. This increase is likely the result of increased filings against technology firms. In 2015, technology firms saw ten more class actions filed against them than in 2014. Filings against industrial and communication firms also increased substantially in 2015. Federal securities class actions brought against foreign-headquartered companies accounted for 18.5% of all filings in 2015, consistent with numbers from the last three years.

The vast majority (84%) of securities class action lawsuits filed in 2015 asserted a Rule 10b-5 claim. The next most frequently asserted claim was a Section 11 claim, which was asserted in 15% of the filings. As recently as 2013, only 9% of securities class action filings asserted a Section 11 claim. This increase in Section 11 claims likely corresponds with increased IPO activity over the last three years, which saw 481 IPOs conducted in that timespan. Significantly, Cornerstone Research found that companies that conducted IPOs between 2009 and 2014 face litigation at increased rates than companies that conducted IPOs prior to the 2008 financial crisis. In fact, in 2015, 4% of all U.S. Exchange-Listed Companies were subject to a federal securities class action. That is the highest percentage since Cornerstone Research began compiling data in 1997. With federal securities class actions continuing their upward trend in 2015, there is no reason to expect anything different in the coming year. Click to view the full Cornerstone Research report.