Insights

D&O Databox: A Mid-Year Review of Securities Class Action Suits, Key Rulings and More

August 13, 2014

Management Liability/D&O

Sixty-nine securities class action cases were filed against U.S. public companies in the first half of 2014. That’s a 19 percent year-over-year increase. This is according to the “Mid-Year Securities Class Action Report”. from the D&O Databox (a Woodruff Sawyer publication).

But those data don’t necessarily indicate securities class actions are on the rise as a whole.

Even though May saw 19 cases filed, making it the month with the most activity in the first half of 2014, the 6-month average was 11.5 cases per month. If it continues this way through 2014, we would see 138 cases by the close of the year. That’s not far from the 10-year average at 139 cases, starting in 2004 and ending 2014.

The tech industry saw the most cases filed in the first half of 2014 at 22 percent, followed by life sciences at 19 percent. Not surprising, as these two sectors showed the most activity in Q1, too.

When it came to payouts, 83 percent of cash settlements settled in the $0 to $20 million range. The largest cash settlement in 2014 thus far was Massey Energy Company for $265 million for mine safety issues where lives were lost.

In Q2, Hewlett-Packard joined the list of top cash settlements in 2014 at $57 million in addition to Autoliv at 22.5 million.

Key Rulings in 2014 for Class Actions

This year, we’ve also seen the ruling for what would have been a landmark case to put the kibosh on frivolous class action suits.

In Halliburton v. Erica P. John Fund, the U.S. Supreme Court decided not to overturn the 1988 ruling, Basic, Inc. v. Levinson, which would have made it harder to certify a class moving forward.

But there was a silver lining in the Halliburton ruling for public companies facing class actions; the Court said it would be acceptable for defendants to present evidence at the class certification stage to potentially make weaker cases go away much earlier.

And another ruling in the first half of 2014 could amplify the message that class action suits without merit are losing steam. The Delaware Supreme Court said Delaware law supports fee-shifting bylaws where the losers pay not only their own legal fees, but also those of the defendants.

What’s in Store for the Second Half of 2014?

Forward looking to the second half of 2014, and we continue to regard very seriously the U.S. Securities and Exchange Commission’s stated agenda.

In January of this year, SEC’s Chair Mary Jo White said 2014 would be “an incredibly active year in enforcement, as we continue to vigorously pursue wrongdoers and bring enforcement actions across the entire industry spectrum.”

This includes:

For more data from the report, including resources that dive into trending topics of 2014 for public companies and directors and officers, access the “Mid-Year Securities Class Action Report” here.

 

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