Securities class action settlements soar: Cornerstone

Bolstered by five “mega” settlements, total dollars in securities class action settlements increased to $5.06 billion in 2018 compared with $1.5 billion in 2017, says Cornerstone Research Inc., in a report issued Tuesday.

The report by San Francisco-based Cornerstone said compared with 2017’s historically low levels, in 2018 the average settlement amount more than tripled to $64.9 million from $18.7 million, while the median settlement amount more than doubled to $11.3 million from $5.1 million.

Contributing to the increase in median and average settlement was that the number of settlements under $5 million declined by nearly 40%, from 40 cases in 2017 to 25 in 2018, according to the report Securities Class Action Settlements.

Among other trends, more than 14% of settled cases involved an accompanying criminal action, which was the highest proportion over the last 10 years. Cases associated with a criminal action generally settle for higher amounts, according to the report.

The survey also found that defendant firms in settled cases were 50% larger than in 2017, and more than 20% larger than over the prior five years.

In addition, the proportions of settlements involving delisted and bankrupt firms were the lowest over the last decade, said the report.  “Taken together, this suggests that economic factors played an important role in the increase in settlement size in 2018,” said the report.