Insights

2020 Securities Class Actions Exceed the 10-Year Average [Report]

January 27, 2021

Management Liability/D&O

For nine years in a row, securities class action filings have grown steadily with each year breaking a new record. Then 2020 hit and that trend has finally broken.

By the close of 2019, we saw 268 class action filings, up from 223 the year prior. Filings in 2020, however, were slightly down, with the final tally coming in at 210 class action filings. This is according to Woodruff Sawyer’s year-end analysis of securities class action filings from our proprietary DataBox.

2011-2020 Securities Class Action Lawsuits show a total of 210 for 2020, down from 268 in 2019.

That said, 210 filings still exceed the 10-year average of class action filings by 13%, with the average coming in at 186 filings. In other words, the plaintiff’s bar remained committed to filing class actions despite the rollercoaster of 2020.

GET INSTANT ACCESS TO THE DATABOX YEAR-END 2020 REPORT NOW >>

COVID-19 Cases in 2020

Ten percent of the cases filed in 2020 involved related to COVID-19 issues. Factors to these 20 cases involved everything from direct impact of the virus to business disruption, financial impact and more.

In addition to private litigation, there have been government enforcement actions against public companies related to the impact of COVID-19 as well. The Cheesecake Factory is a recent example. You can read about that and more in my recent article on COVID-19 litigation.

Top Sectors Targeted in 2020

Technology and biotech continue to secure top spots as sectors that are most targeted with securities class actions. Together, these two sectors comprise 47% of all filings. From 2017 to 2019 the financial sector had dropped out of the top three, but moved back up into third place in 2020.

2020 Filings by Industry

Filings Against Mature Public Companies in 2020

Ten percent of S&P companies were sued in 2020, representing a 10-year high. In addition, more than a dozen high-profile, mature companies were sued in the past year.

There is indeed an upward trend in filing securities class actions against mature public companies, as illustrated below:

Increase in Suits Against Mature, Public Companies (2019 vs 2020)

Filing by Company Size in 2020

For mid-cap companies with a market value of $2 billion to $10 billion, there were markedly fewer cases in 2020. We believe the reason for this is due to a drop in frivolous Section 11 lawsuits against them. In 2019, Section 11 suits accounted for 32% against companies in this market cap range versus 16% in 2020.

Distribution of Suits Across Market Cap Ranges Shows 38% in 2020 for >$250M to $2B, up from 35% in 2019

Settlement Activity in 2020

In 2020, we saw a total of 79 settlements with an aggregate of $2.3 billion. The top ten settlements, which accounted for $1.4 billion of the total settlement dollars, are listed below.

EntitySuit YearIndustryAmountCase Matter
First Solar, Inc.2012Technology$350MManufacturing flaws and warranty claims
Signet Jewelers Limited2016Retail$240MSexual harassment & assault claims
Snap, Inc.2017Technology$187.5MUser metrics and revenue growth
Equifax, Inc.2017Services$149MCyberattack of consumer data
DaVita Inc.2017Services$135MHealth insurance scheme
The Southern Company2017Utilities$87.5MProduction delays and cost overruns
MetLife, Inc.2012Financial$84MAccounting issues
SeaWorld Entertainment, Inc.2014Services$65MMistreatment of orca whales
Chemical & Mining Co. of Chile2015Mining$62.5MBribery and tax evasion scheme
Community Health Systems, Inc.2011Services$53MAccounting fraud

By industry, the technology, services, and retail sectors took the biggest hit when it comes to settlements.

Percentage of Settlement Dollars by Industry Chart Showing Technology and Services Industries Took Biggest Hit

What Will 2021 Look Like?

We do not expect the pace of securities class action filings to slow in 2021. And, with approximately 600 securities class action cases yet to be resolved and limited capacity in the D&O insurance market, 2021 will be another challenging year for public companies seeking to obtain D&O insurance.

For a deeper dive into what’s covered in this article plus data on the following, access your copy of the report now:

  • Filings against foreign companies
  • Filings against newly public companies
  • Section 11 lawsuit updates
  • What to expect in 2021

GET INSTANT ACCESS TO THE DATABOX YEAR-END 2020 REPORT NOW >>

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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