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The number of securities class action lawsuits exploded last year, reflecting growth not seen in almost two decades and driving the average filing rate to more than one per day, says a report issued Monday.
Growth was dominated by a record number of federal merger-objection filings, which continued a trend sparked by state court decisions that have restricted “disclosure-only” settlements, according to the report issued by New York-based NERA Economic Consulting.
The report’s findings included:
-A total of 432 cases were filed in 2017, a 44% increase over 2016. These accounted for about 8.2% of the 5,241 publicly traded companies, which was nearly double 2014’s rate.
-Foreign companies continued to be disproportionately targeted in “standard” non-merger objection securities class actions.
-Filings increased in every federal circuit except the 7th U.S. Circuit Court of Appeals in Chicago, primarily because of the increase in merger-objection lawsuits.
-Filing counts were highest in three historically dominant sectors: health care, technology and financial services.
-A motion to dismiss was filed in 94% of securities class actions, but the court reached a decision in only 77% of these cases. In the remaining 23% of cases, cases were either resolved before a decision was reached, plaintiffs voluntarily dismissed the action or plaintiffs voluntarily withdrew the motion to dismiss.
-Federal merger-objection filings more than doubled for the second consecutive year, to 197 in 2017, and accounted for 46% of all filings.
-A total of 353 securities class actions were resolved in 2017.
-The average 2017 settlement fell to less than $25 million, a drop of about two-thirds compared to 2016.
-Aggregate investor losses, as defined by NERA, totaled $334 billion in 2017, which was a 50% increase over the five-year average.
-Aggregate plaintiff attorneys’ fees and expenses were $467 million, a drop of about 65%, which was a level not seen since 2004.
A report issued earlier this month by Kevin LaCroix, executive vice president of RT ProExec, a division of R-T Specialty L.L.C., in Beachwood, Ohio, said there were 415 securities class action lawsuits filed in 2017, the highest number of securities suit filings since 2001, when there were 498.
The number of securities class action settlements approved by U.S. courts in 2016 was 85, the highest level since 2010, according to a report issued Wednesday by San Francisco-based Cornerstone Research.