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January 28, 2014

REPORT: One Year Rise in Securities Class Actions Still Below Historical Average

Plaintiffs filed 166 new federal securities class actions in 2013, a nine percent increase over 2012, according to a report released byes week by Cornerstone Research and Stanford Law School.

The 2013 filings, however, are still 13 percent below the historical average from 1997 to 2012. 

As Reuters reports, this decline in securities class action filings “could accelerate”, depending on the outcome of Halliburton v. Erica P. John Fund, in which the U.S. Supreme Court granted cert last year.

Halliburton features a challenge to the way classes are certified in Section 10(b) securities cases. As part of that case, Reuters reports, the Court will reexamine “a 1988 precedent that made it easier to pursue class actions against companies”:

In that decision, Basic Inc v. Levinson, the court let shareholders who claimed they were defrauded by false statements in securities filings rely on a “fraud on the market” presumption that stock prices reflected those false statements, and not have to show they relied on actual filings.


According to NERA Economic Consulting, federal courts in 2013 approved $6.5 billion of securities class action settlements, up from $3.3 billion in 2012. 


According to Joseph Grundfest, a Stanford law professor who works with Cornerstone Research and is a former SEC commissioner, such settlements could be “harder to come by if the Supreme Court narrowed or overruled Basic.” 

As Forbes’ Daniel Fisher writes  the mere fact that the Supreme Court granted cert in the Halliburton case shows that “at least some of the justices want to hear arguments on whether Basic should remain the law of the land.”

“There may,” writes Fisher, “be the voters to overturn it” and the “time of reconsideration may have come.”

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