| March 27
March 27 The number and size of U.S. securities
class-action settlements rose in 2013, a new study shows, but
the gains may not last if the U.S. Supreme Court limits
investors' ability to band together to bring lawsuits.
Sixty-seven settlements worth $4.77 billion, the highest
dollar amount in six years, won court approval in 2013, up from
57 settlements worth $3.26 billion a year earlier, according to
the study released on Thursday by Cornerstone Research.
Large settlements skewed the data, with more than half of
the payout attributable to Bank of America Corp's $2.43
billion settlement of claims it misled shareholders when buying
Merrill Lynch & Co in late 2008.
The peak years remain 2005 and 2006, when accords over
WorldCom Inc's and Enron Corp's collapses led to respective
overall settlement totals of $10.93 billion and $19.89 billion.
But the median settlement - meaning half were larger and
half smaller - was just $6.5 million in 2013, down from $10.3
million a year earlier, reflecting the diminishing impact of
lawsuits related to the global financial crisis.
Settlements over $50 million were three times more likely to
have corresponding U.S. Securities and Exchange Commission
enforcement actions, and four times more likely to have public
pension plans as lead plaintiff, than smaller accords.
Cornerstone said the number of settlements is unlikely to
decline much soon, reflecting the "relatively high" number of
recent lawsuits alleging misrepresentations or inadequate
disclosures. The number of securities lawsuits seeking class
action status rose 9 percent last year to 166. [D:nL2N0L1170]
But the Supreme Court could change much of that.
In Halliburton Co v. Erica P. John Fund, the court is
weighing changes to a 1988 precedent that said shareholders may
pursue class actions by relying on a presumption that company
stock prices reflect all publicly available information.
This "fraud on the market" theory frees shareholders from
showing individually that they relied on false statements, and
underpinned the subsequent boom in securities class actions.
At oral argument on March 5, some justices showed sympathy
for what Justice Anthony Kennedy called a "midway position," in
which the court would not overrule the precedent but instead
require investors to show that a particular misrepresentation
meaningfully affected a stock's price.
"If the ruling in Halliburton severely limits investors'
ability to get large-scale class actions certified, the future
of such cases is up in the air," Joseph Grundfest, a Stanford
Law School professor who works with Cornerstone, said in a
Grundfest is also a former commissioner of the U.S.
Securities and Exchange Commission.
(Reporting by Jonathan Stempel; Editing by David Gregorio)