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2009 Securities Class Actions Filings Decline Significantly, According to Mid-Year Report by Stanford Law School and Cornerstone Research

Publication Date: 
August 09, 2009
Source: 
Investment Business Weekly

Professor Joseph Grundfest, Director of the Stanford Law School Securities Class Action Clearinghouse discusses mid-year findings in this IBW story:

Federal securities class action activity declined in the first half of 2009, with a particularly significant decline in the second quarter, according to Securities Class Action Filings-2009: Mid-Year Assessment, an annual report prepared by the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research.

A total of 87 federal securities class actions were filed in the first half of 2009, a 22.3 percent decline from the 112 filings in both halves of 2008. Only 35 filings were observed in the second quarter, the lowest quarterly total since the first quarter of 2007. Financial services firms are defendants in 66.7 percent of these filings, an increase over the 50.0 percent share of all filings in 2008.

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... Commentary Professor Joseph Grundfest, Director of the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research: "Securities litigation activity continues to be driven by claims against financial services firms, but all the large firms in the industry have already been sued. Plaintiffs are therefore filing claims against the smaller number of smaller financial services firms yet to be sued. Those facts, combined with the general decline in stock market valuations, help explain the decline in the number of companies sued and in the dollar amounts at risk in recent litigation, as measured by the DDL."

"A disproportionate number of recent claims against foreign firms target the financial services sector. The uptick in litigation activity against foreign firms can therefore be viewed as a side-effect of the larger trend to sue financial services firms, wherever they are headquartered. The key question for the plaintiffs is whether they can get jurisdiction in the U.S. courts." Dr. John Gould, Vice President of Cornerstone Research: "The continued rise in securities class action filings against foreign firms, as presented in the report's new metric, underscores the interconnected nature of the credit crisis and the global reach of securities class action litigation."

"A possible explanation for the decline in filings thus far in 2009 may be the reduced stock market volatility. The market was much more volatile in the second half of 2008, when filings were rising, compared to the first half of this year, when filings dropped off. Moving forward, greater market stability may signal a reduced number of securities class action filings."