During the first quarter of 2013, new corporate and
securities lawsuits and regulatory enforcement actions increased slightly
compared to the fourth quarter of 2012 but remained well below annual averages
over the last two years, according to a new report from Advisen, the insurance
information firm. The April 2013 report, which can be found here,
is entitled "D&O Claims Trends: 1Q 2013," notes that "if the first quarter
is any indication, it appears that this downward trend may continue throughout
Reeders reviewing the Advisen report will want to be very
careful to note that the report uses its own terminology. In particular, the
report uses the term "securities suits" to refer to all categories of corporate
and securities litigation. Among the subsets within this larger category of
"securities suits" is what the report calls "securities fraud" suits, which as
used in the report refers to actions brought by regulatory and enforcement
authorities, as well as private securities suits that are not brought as class
actions. The category of "securities fraud" suits does not include
securities class action lawsuits, which have their own separate category of
"securities class action" suits, which part of the larger category of
"securities suits." Readers will want to be very attentive to the report's
usage of these terms.
According to the report, the first quarter, which
traditionally is a busy period for corporate and securities litigation, saw a
40 percent decrease in the number of new corporate and securities lawsuits
compared to the first quarter of 2012. Though the activity in 1Q13 was up slightly
from the fourth quarter of 2012, the quarterly total of new corporate and
securities lawsuits (313) was the third lowest quarterly total since 2009. The
leading type of new corporate and securities lawsuits during the first quarter
was what the report calls "securities fraud" suits (that is, the regulatory and
enforcement actions plus securities suits that are not brought as class
actions), which were up 13 percent from the fourth quarter of 2012 but down 33
percent from the 2012 quarterly average.
Many readers of this blog are aware that there has been
an upsurge in M&A-related litigation in recent years. Interestingly, the
report notes that although M&A activity increased during the first quarter
of 2013, the number of M&A-related suits decreased, which is, the report
notes, "a development that will require further review."
For several years, Advisen has noted in its reports that
securities class action lawsuits as a percentage of all corporate and
securities litigation has been declining, from 22 percent in 2007 to 11 percent
in both 2011 and 2012. The percentage ticked up slightly in the first quarter
of 2013, when securities class action lawsuits represented 12 percent of all
corporate and securities lawsuits. However, in absolute terms, the number of
securities class action lawsuits continued a downward trend during the fourth
quarter of 2013. During the first quarter of 2013, there were only 36
securities class action lawsuit filings, compared to 50 during the first
quarter of 2012 (representing a decline of 28 percent).
Companies in the financial sector experienced the most
new corporate and securities lawsuits in the first quarter of 2013. New
lawsuits against companies in the sector represented 26 percent of all new
corporate and securities lawsuits in 1Q13. While still the sector with the
highest level of new lawsuit activity, the percentage of suits against
companies in the sector has actually declined. For the forth quarter of 2012,
the equivalent percentage was 31 percent and the 2012 quarterly average was 28
percent. The report attributes this decline to the continuing winding down of
the subprime and credit crisis-related litigation wave.
The Advisen report concludes with a closer look at the
recent wave of "say on pay" and other compensation-related litigation.
Speakers' Corner: On
Tuesday, April 30, 2013, I will be participating in Advisen's Quarterly D&O
Claims Trends Webinar, in which, among other things, the Advisen report will be
discussed. In this free webinar, which will take place at 11:00 am EDT, I will
be participating on a panel with Paul Ferrillo of the Weil Gotshal law firm,
David Murray of AIG, and Jim Blinn of Advisen. The panel will discuss claims
trends and developments during the first quarter of 2013. Registration information
for the webinar can be found here.
PwC Releases 2012 Securities Litigation
Study: Earlier this month, PwC released its annual study of the
securities class action litigation. I had not previously linked to the study
because for a time the study was not available on the firm's website. The April
2013 study, which is entitled "At the Crossroads, Waiting for a Sign: 2012
Securities Litigation Study" now can be found here.
As other reports have previously noted, the PwC study
notes that securities class action litigation declined in 2012 compared to
prior years and compared to historical averages. The report also notes that the
decline during the year was largely concentrated in the year's second half;
while securities class action litigation filings were at or near historical
levels in the first two quarters of 2012, the number of new filings declined
sharply during the year's second half.
The PwC study also notes, consistent with prior studies
that the number and value of securities class action settlements declined in
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other items of interest from the world of directors & officers liability,
with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.
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