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New class action securities cases down 22% in 2020

Posted On: Feb. 3, 2021 2:49 PM CST

class action

Plaintiffs filed 334 new class action securities cases in federal and state courts in 2020, a 22% decline from 427 in 2019, according to a report released Wednesday.

The 2020 total, however, was 49% higher than the 1997-2019 average, according to the report issued by San Francisco-based Cornerstone Research Inc. and the Stanford Law School Securities Class Action Clearinghouse in Stanford, California.

“Core filings,” which exclude merger and acquisition-related filings, fell 12%, to 234 in 2020, according to the report.

The number of state court filings alleging claims under the Securities Act of 1933 fell to 17, from 53 in 2019. The report said the decline was likely because of the March 2020 Delaware Supreme Court’s Sciabacucchi ruling, which restricts some shareholder lawsuits to federal courts.

Sasha Aganin, Cornerstone Research senior vice president and a co-author of the report, said in a statement, “In the last six months, four trial courts in California have enforced these federal forum-selection provisions; no trial court has ruled that they are unenforceable. In the future, other courts will likely consider this issue.”

There were 19 COVID-19-related filings last year against companies that were negatively impacted by the virus or had sought to address demand for products because of the virus, according to the report. Cryptocurrency was the next most common trend, with 11 filings.

Five filings last year related to special purpose acquisition company activity, compared with six in 2019. But, given that the number of SPAC IPOs increased to 248 in 2020, raising more than $75.3 billion, from 59 in 2019, “that trend will likely change,” the report said. Directors and officers liability insurance experts have also said they are bracing for increased SPACs-related litigation.