Securities Litigation Update
PLSRA Filings are Generally down in 2015
Statistics for the number of new securities class actions filings for2015 are not yet fully available, but as of mid-2015, the number continues to hover at historically low levels. Plaintiffs filed 85 new seven fewer than second half of 2014, but more than the 78 filed in the first half of 2014.i Moreover, the Disclosure Dollar Loss (“DDL”) and Maximum Dollar Loss (“MDL”) remain at low levels. The total DDL was $34 billion in the first half of 2015, 43 percent below the historical semiannual average of $60 billion. The MDL was $105 billion, 65 percent below the historical semiannual average of $304 billion.ii
Of the 85 new cases filed, 24% were filed against companiesheadquartered outside of the United States. And, 50% of these cases were filed against Asian firms. Moreover, the number of filings in the 9th Circuit has increased by 90% over the last six months in 2014, while filings in the 2nd Circuit fell by one-third. These filings are evidence of a trend that cases are being brought in the technology and industrial sectors, rather than against the financial, energy, biotechnology and pharmaceutical sectors.iii
Supreme Court Roundup
Pending before the United States Supreme Court in its 2016-2017 term are several cases which could impact investors and the litigation of security class actions. The Supreme Court is poised to decide a case that may impact federal jurisdiction over state law claims involving securities. In a case involving naked short selling – the failure to borrow securities in time to deliver them to the buyer during the three-day settlement period –defendant financial institutions are challenging the Third Circuit’s decision to remand the case to state court, allowing shareholders to pursue claims that the banks engaged in illegal and manipulative short-selling.iv Defendant financial institutions had removed plaintiffs’ state court complaint to federal court, asserting that the claims were preempted by federal securities laws and, therefore, must be brought in federal court. Defendant financial institutions sought certiorari, asking the Supreme Court to resolve a circuit court split over whether Section 27 of the Securities Exchange Act of 1934 preempts this type of suit. The Securities Industry and Financial Markets Association, SIFMA, was granted leave to file an amicus. The case was argued before the Court on December 1, 2015.
The question of whether an offer to settle with the named plaintiff can moot a class action was argued in October and the questioning characteristically reflected a divided court.v A ruling in favor of defendants would effectively eviscerate Federal Rule 23’s class certification provisions as defendants would be incentivized to dispose of a suit before class certification. Plaintiffs with smaller claims would be left without a remedy because of the cost of pursuing an individual suit.The Court also denied certiorari in three cases involving claims of securities fraud.