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Securities Class Action Litigation Declines In 2009: Study

Publication Date: 
January 10, 2010
Source: 
Business Insurance
Author: 
Roberto Ceniceros

Professor Joseph Grundfest is quoted in this article on a report issued by The Securities Class Action Clearinghouse and Cornerstone Research on class action filings in 2009:

A report on securities litigation cases filed in 2009 contains good news for directors and officers liability insurance purchasers, observers say.

The number of securities fraud lawsuits filed in 2009 fell 24% from 2008, Cornerstone Research and the Stanford University Law School Securities Class Action Clearinghouse said last week in the annual review of filings. Claimants filed 169 federal class action suits last year vs. 223 in 2008.

Securities litigation filed in 2009 also was 14% lower than the average of 197 cases between 1997 and 2008, the report states. The decrease reflects a drop in stock market volatility and winding down of the subprime and credit crises, leaving plaintiffs fewer financial entities to sue, the researchers said.

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Not only did the number of filings tracked by the report fall, but several filings that Stanford and Cornerstone researchers counted are not actually against directors and officers, Mr. Shappell said.

The report, for example, includes several auction rate securities lawsuits.

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For now, there are no foreseeable trends that would cause a reversal in the falloff of filed securities cases, said Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse.

 

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“There tend to be shocks that are unpredictable” Mr. Grundfest said. “If I knew what the next shock was going to be, I would be a much richer man than I am now. That is why there is insurance.”

Credit crisis-related litigation fell 47% in 2009, according to the report, Securities Class Action Filings 2009: A Year in Review.

There were 53 credit-related cases in 2009 and only 17 during the second half of the year. In contrast, plaintiffs filed 100 credit crisis-related filings in 2008.

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The report is available online at: http://securities.stanford.edu/clearinghouse_research/2009_YIR/Cornerstone_Research_Filings_2009_YIR.pdf.