Mega-settlements drive 100% growth in total securities class action settlement amounts

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FRT Admin
Site administrator
March 27, 2013

While the number of securities class action settlements hit a fourteen-year low in 2012, the total amount of settlement dollars available to shareholders increased dramatically from the previous year. According to Cornerstone Research’s 2012 Analysis, mega-settlements (settlements in excess of $100 million) helped increase available settlement dollars by more than 100 percent over 2011. Propelled by giant settlements for financial companies like Bank of America and Citigroup, remnants of the large swath of credit-crisis cases, mega-settlements accounted for nearly 75 percent of all settlement dollars last year. This represents the highest proportion of mega-settlement dollars vs. total settlement dollars in the last five years.

The low number of settlements in 2012 can be traced back to the low number of cases filed in recent years. Historically, class actions have generally taken several years to reach settlement. There were relatively fewer securities class actions filed in 2009 and 2010 than previous years. According to Cornerstone, there was an average of approximately 148 cases filed per year in ‘09 and ’10, compared with an average of approximately 200 cases filed per year during ‘07 and ‘08.

In another industry trend, cases have generally been settling in less time from the date the case is filed with the courts. From 2007–2011, the median time to reach settlement was 3.3 years. In 2012, a greater number of cases settled within two years of the filing date (22.6% in 2012 vs. 13.4% in 2007-2011). Cases are not only settling quicker in general; cases that settled in 2012 progressed more quickly through the court system once tentative settlements were publicly announced. Announcements about case settlements are often made to the public well in advance of the settlement being approved by the court. Last year, for more than half of the cases for which an announcement was made publicly, court hearings for the cases occurred within six months of the announcement taking place.

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