Insights

2015: A Record Year for Class Actions [Report]

March 2, 2016

Management Liability/D&O

Last August, we predicted that 2015 would be a record year for securities class action lawsuits against public companies. Our prediction turned out to be true: data from the “DataBox Year-End Securities Class Action” report shows that 179 cases were filed in 2015 – a 10-year high.

lawsuits1

Looking back over the past 10 years, there have often been notable themes: for example, stock options backdating in 2006, cases related to the financial crisis from 2007 to 2010, and cases against China-headquartered companies surging in 2011. 2015, however, did not have an unusual or previously unseen theme. Instead, we mostly saw classic cases related to things like run-of-the-mill disclosure and restatement issues.

Caught in the Crosshairs: Tech, Biotech

It will come as no surprise that the tech and biotech sectors experienced the most class action lawsuits in 2015, making up 52 percent of the total suits filed.

Here is the breakdown for the full year:

companiesSuedbyIndustry

 

Cases against tech companies made up 36 percent of the 179 cases filed, up from 21 percent in 2014 – but not as high as 2013, where tech experienced a 39 percent share of total filings.

Tech also saw some of the largest settlements, trumped only by the finance sector. In fact, 57 percent of the settlement dollars were split amongst three sectors: finance, high tech and biotech.

cash settlements

Growing Settlements > $100 Million

Settlements were higher in 2015, too. Data show triple the number of $100 million or more settlements in 2015 compared to the prior year.

Pfizer (in the biotech sector) had the highest settlement in 2015, settling for $400 million. The runners up were General Motors Company and HCA Holdings Inc.

InsurerSuits

 

Notwithstanding some notably high settlements, median settlements from 2011 through 2015 ranged between $5 million to $8 million. We expect median settlements in 2016 to be in this same range.

IPO Vulnerabilities

IPO companies are particularly vulnerable to class action suits during their first three years of going public. From the report, we see more than half (62 percent) of the 53 cases filed against IPO companies in 2015 were companies that went public in 2014.

(By the way, if you’re headed into your IPO, you can download a Woodruff Sawyer resource on risk management ahead of the IPO here.)

Cases against IPOs

 

In the year-end DataBox report, we talk more about the additional vulnerabilities California IPOs may be facing with Section 11 lawsuits now being filed and won in California state courts.

To get a more complete picture of the current securities class action litigation landscape for public company Ds and Os, take a moment to download the latest issue in our DataBox series.

The report reviews 2015 trends as well as discusses some of the 2016 issues on the horizon for public companies, IPOs, and directors and officers.

 

The views expressed in this blog are solely those of the author. This blog should not be taken as insurance or legal advice for your particular situation. Questions? Comments? Concerns? Email: phuskins@woodruffsawyer.com.

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All views expressed in this article are the author’s own and do not necessarily represent the position of Woodruff-Sawyer & Co.

Priya Cherian Huskins

Senior Vice President, Management Liability

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

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Priya Cherian Huskins

Senior Vice President, Management Liability

Editor, Management Liability/D&O

Priya is a recognized expert and frequent speaker on D&O liability risk and its mitigation. In addition to consulting on D&O insurance, she counsels clients on corporate governance matters, including ways to reduce their exposure to shareholder lawsuits and regulatory investigations. Priya serves on the board of an S&P 500 public company and a large private company and has an impressive list of publications, speaking engagements, and awards for her influence and expertise in the industry. 

415.402.6527

LinkedIn