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Report Cites Small Increases in Class Suits Over M&A Deals

Publication Date: 
January 25, 2012
Class Action Litigation Alert - BNA

Professor Joseph A. Grundfest and a report by the Stanford Law School Securities Class Action Clearinghouse (of which he is the director) are both featured in the following article that ran in the Class Action Litigation Alert and covered the small rise in class action lawsuits over mergers and acquisitions.

The number of class securities suits over disclosures in business combinations grew slightly in 2011—43 filings compared to 40 in 2010—while filings stemming from the financial crisis continued to decline—only three cases were filed in 2011, compared with 13 the previous year, according to a new report by Cornerstone Research.

The semiannual report, prepared by the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone, also noted a sharp dropoff in the number of suits challenging Chinese issuers listed on U.S. exchanges through reverse mergers.


In a Jan. 19 statement, the clearinghouse said that in keeping with a trend first observed in 2010, filings related to mergers and acquisitions continued to constitute a larger percentage of total filings than any other kind of federal securities fraud class action filing.

In 2011, class suits related to M&As accounted for 22.9 percent of total filings. There were 20 such filings in the first half of the year and 23 filings in the last six months of the year. In 2010, M&A filings constituted 22.7 percent of all filings.


In the statement, Professor Joseph Grundfest, director of the clearinghouse and former Securities and Exchange Commissioner, said federal securities class action litigation “continues to run at a pace well below historic norms.” The aggregate statistics would not even approach historic norms except for the growth of merger-related litigation, which has historically been brought in state court, he said.

"Taken together, these data suggest that there are far fewer claims of traditional securities fraud by U.S. issuers than has been the case since the mid-1990s,” Grundfest concluded.