SECURITIES CLASS ACTIONS IN THE UNITED STATES
CD: Could you provide an overview of the current securities class actions landscape in the US? What levels of activity have you seen in the last 12 months or so?
Tuttle: After a small decline following the peak of the financial crisis cases, securities class actions seem to have returned to more normal levels, and there does not appear to be any signs that there have been any significant shifts in class action levels. The US Securities and Exchange Commission’s renewed focus on accounting and financial reporting cases has, predictably, spurred greater focus in the area by companies, their auditors and investors, and, as a result, has triggered a number of securities class actions in the wake of disclosures of restatements, internal control issues or other accounting-related developments. Similarly, cases arising from cyber security breaches seem likely to add to the volume of class actions in coming years as more and more companies fall victim to attacks and more plaintiffs claim that the companies’ risk and other disclosures around cyber security efforts are misleading.
Fumerton: Filing activity for securities class action litigation appears to have held steady over the past three years. We’ve seen predictions that the total number of new federal securities class actions filed in 2015 will be only slightly lower than the annual average of such filings seen in the years 2005 through 2014. One new trend that we’ve been seeing is that large shareholders, including major investment funds, are opting-out of securities class actions on a more frequent basis. One possible explanation for this trend is that it is a reaction to the Second Circuit’s decision in IndyMac, which held that the two-year statute of repose in the Securities Act of 1933 cannot be tolled for absent class members by the commencement of a class action. We have also seen increased efforts by plaintiffs to file Securities Act claims in state court in order to avoid many of the hurdles imposed by the Private Securities Litigation Reform Act.
Jan-Mar 2016 issue
Debevoise & Plimpton
Morgan Lewis & Bockius LLP
Skadden, Arps, Slate, Meagher & Flom LLP