On March 24, 2010, Cornerstone
Research released its annual study of securities class action lawsuit
settlements. The most recent study, which is entitled "Securities Class
Action Settlements: 2009 Review and Analysis" and is written by Ellen M.
Ryan and Laura E. Simmons, can be found here.
Cornerstone's March 24, 2010 press release concerning the study can be found here.
The study reflects a number of
interesting observations about median and average securities class action
lawsuit settlements that were approved during 2009. The study also includes a
useful analysis of the factors that affect settlement size, and concludes with
some commentary about likely future settlement trends.
First, the median 2009 settlement of
$8.0 million is unchanged from 2008, although slightly up from the $7.4 median
of all settlements during the years 1996 through 2008.
Second, the 2009 average settlement
amount of $37.2 million is up from the 2009 average of $28.4 million. The 2009
average of $37.2 million is well below the $55.4 million average of all
settlements during the period 1996 through 2009. However, if the largest four
settlements during the period 1996 through 2008 are removed from the analysis,
the average 2009 settlement of $37.2 million is slightly higher than the
adjusted $34.4 million average for the 1996 to 2008 period.
(This analysis of average
settlements excludes the settlements associated with the IPO Laddering cases,
which given the number of cases resolved in that settlement has the effect of
distorting the average settlement values.)
Third, the distribution of 2009
settlements also is comparable to prior years. Almost 60% of all settlements
during the period 1996 through 2009 are below $10 million, and more than 80
percent settled for less than $25 million. Settlements in excess of $100
million remain relatively infrequent, occurring in approximately 7 percent of
Fourth, according to the study, the
largest single most important factor is the amount of so-called plaintiffs'
style damages (that is, "damages" calculated using the methodology
most often urged by securities class action plaintiffs). However, settlements
as a percentage of plaintiffs' style damages generally decrease as damages
increase, and this observation is particularly valid for very large cases.
Fifth, the Cornerstone also assesses
settlement values relative to what it calls Disclosure Dollar Loss, which
compares the defendants company's stock prices on the days before and the days
after the corrective disclosure. The study reports that settlements as a
percentage of the disclosure dollar loss generally decline as the loss
Cornerstone Releases Study of 2009 Securities Lawsuit Settlements in its entirety at D&O Diary, a blog by Kevin LaCroix.