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An increase in the filing of federal securities class actions during 2010 stemmed from plaintiffs attorneys targeting merger and acquisition activity as well a spike in filings against Chinese companies, a semiannual report released Thursday states.
Meanwhile, credit crisis-related filings fell to 13 during 2010, down from 55 in 2009.
In total, 104 federal securities class actions were filed during the last six months of 2010, compared with 72 filings during the first half of the year, according to the report prepared by the Stanford Law School Securities Class Action Clearinghouse and Boston-based Cornerstone Research.
For all of 2010, there were 176 filings, representing a 4.8% increase from 168 filings in 2009. Still, the 2010 number is 9.7% less than the annual average of 195 filings between 1997 and 2009.
During 2010, there were 40 federal filings alleging disclosure violations in mergers and acquisitions, up from seven in 2009, a nearly six-fold increase. Yet overall M&A activity increased only 20% in 2010, the researchers found.
That suggests a change in plaintiff law firm strategy, the researchers said.
“The sharp increase in federal litigation alleging disclosure violations in M&A transactions suggests that plaintiff lawyers are scrambling for new business as traditional fraud cases seem to be on the decline,” professor Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse, said in a statement. “There is little reason to believe that this trend will reverse or slow down.”
Researchers also found a spike in filings against Chinese companies, with 12 such filings in 2010, which represents nearly 43% of all filings against foreign issuers.
Filings against foreign issuers accounted for nearly 16% of all 2010 filings, which is among the highest rate ever observed.
A record 1,196 securities lawsuits were filed in 2010, driven by factors that include mergers and acquisitions and litigation related to the Deepwater Horizon oil spill, Advisen Ltd. said in a report released Thursday.