Risk Management

Class-action Plaintiffs Head to Court

Of the nine securities-law class actions that went to trial since the passage of the Private Securities Litigation Reform Act of 1995, six cases ha...
Stephen TaubAugust 9, 2005

So far this year, six securities class actions have gone to trial, according to The National Law Journal, citing data from Institutional Shareholder Services.

Doesn’t sound like much?

Consider, then, that only nine cases have gone to trial since the passage of the Private Securities Litigation Reform Act of 1995, which made it easier for companies to defend themselves against securities fraud lawsuits. (The law was co-authored by Christopher Cox, then a California congressman and now the chairman of the Securities and Exchange Commission.) That’s nine cases out of more than 1,700 filed between 1996 and 2004, according to the Law Journal, which cited Cornerstone Research.

Why the sudden surge in trials?

The legal newspaper observes that the dollar size of settlements continues to climb, making defendants more willing to settle, and that plaintiffs’ attorneys have become much more sophisticated
about honing their cases before mock juries.

Indeed, last year’s cases reportedly settled for a total of $5.45 billion; seven of them came in above $100 million apiece. And 2005 is already shaping up as a record year. In one notable (although atypical) 48-hour period, noted the Law Journal, Canadian Imperial Bank of Commerce agreed to pay $2.4 billion to settle claims arising from the Enron Corp. scandal, while Time Warner Inc. agreed to pay $2.4 billion to settle a lawsuit stemming from its merger with AOL.

“It is causing a shift in the settlement landscape and a shift in the way both sides look at a case,” Michael Tu, a partner in Orrick, Herrington & Sutcliffe’s securities litigation group in Los
Angeles, told the newspaper.

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