Surge In Securities Class Action Filings Reported In First Quarter

In the first quarter of 2017 there was a record number of securities class actions filed, according to a new report by Cornerstone Research (here). In the first quarter of this year 127 securities class actions were filed compared to about half that number in the first quarter of last year – 64. In 2015 there were 38 suits filed, 36 in 2014 and 34 in 2013.

During the same period there was also a record number of M&A filings. In the first quarter of 2017 there were 45 actions filed — over four times the number brought at the beginning of 2016 when just 11 suits were filed. Similarly, in 2015 only 1 M&A based suit was filed in the first quarter while there were 3 in 2014 and 2 in 2013.

Filings were up in every sector, according to Cornerstone. For example, in the first quarter 2017 there were 56 securities class actions filed in the consumer non-cyclical sector compared to just 21 on average for 2015 – 2016. There were similar increases in other sectors compared to the average in that sector for the first quarter of 2015-2016:

• Communications: 15 suits were filed in the first quarter of this year compared to an average of 5 for the first quarter of the prior two years;
• Consumer cyclical: 12 actions were filed this year compared to the average for the prior two years of 5;
• Industrial: 12 this year compared to an average of 6 for the prior two years;
• Financial: 11 for the first quarter this year compared to an average of 7 for the same period in the prior two years;
• Technology: 9 this year compared to an average of 6; and
• Energy: 6 this year compared to an average of 4 for the prior two years.

There was also a significant increase in the number of securities class actions filed in the biotech, pharmaceuticals and healthcare sector in the first quarter of this year area compared to prior years. In the first quarter of this year 48 suits were filed in this sector compared to 16 in 2016, 7 in 2015, 11 in 2014 and just 6 in 2013.

Finally, while the increase in M&A suits can be tied to the Trulia decision, that does not account for the increase overall. What may be most noteworthy about the overall surge in filings is the lack of market volatility. Typically there is an increase in filings, according to the Report, when the markets are volatile. The markets have, however, been relatively calm and rising. Some observers believe that the uptick may be keyed in part to an increase in “emerging” plaintiffs’ law firms shopping for business and filing lower quality complaints, according to the Report.