NEW FEDERAL SECURITIES CLASS ACTIONS UP 44% IN 2017

Securities class action filings in federal court were up 44% in 2017, according to a report just released by National Economic Research Associates (“NERA”) entitled, “Recent Trends in Securities Class Action Litigation: 2017 Full-Year Review.” In 2017, plaintiffs filed 432 new federal securities class actions, which is a 44% increase from the 300 new federal securities class actions filed in 2016. The 432 new federal securities class action filings are the most since 2001, and this is the third straight year that the number of federal securities class actions has increased. The 432 new federal securities class action suits involved approximately 8.2% of publicly traded companies, nearly double the rate seen in 2014.

Of those 432 new class actions filed in 2017, twenty were filed in district courts located within the Fifth Circuit, three more than were filed in the Fifth Circuit in 2016. This accounted for approximately 5% of the nationwide securities class actions. Although the Fifth Circuit saw slightly increased numbers in 2017, the circuits with the most filings continue to be the Second (97 new filings in 2017), the Ninth (89 new filings in 2017), and the Third (85 new filings in 2017). Filings in the Third Circuit more than doubled from 2016, with the majority of the new filings being merger-objection filings. Nationwide, federal merger-objection filings more than doubled for the second consecutive year and accounted for 46% of the new filings. This increase may be the result of the Delaware Court of Chancery’s In re Trulia, Inc. Stockholder Litigation decision, which changed the standard for approval of disclosure only settlements in Delaware, driving these lawsuits into federal court. Outside of the merger-objection context, the most frequently asserted claim was a 10b-5 claim, which was asserted in 47% of the new filings.

In 2017, the health care (26%), technology (14%), and financial services (13%) sectors continued to be the three most frequently targeted industries for newly filed securities class action lawsuits. Foreign-based companies were the subject of 55 new securities class actions, a 25% increase over flings against foreign-based companies in 2016. Whether the upward trend of federal securities class action filings will continue into 2018 likely depends on whether merger-objection cases continue to be filed in federal court in increasing numbers.

The full NERA report may be found at here.