Securities Lawsuit Filings Soar With Financial Firms The Top Target

Securities lawsuit filings leaped 30 percent in the second quarter, according to a new report by Advisen Ltd., sponsored by ACE. Every major category of securities suit, including securities class action suits, breach of fiduciary duty suits, securities fraud suits filed by regulators, and derivative actions, increased relative to the first quarter. 

Financial firms were targeted in many 2008 and 2009 credit crisis suits – and they continue to be sued more than companies in any other industry, accounting for 34 percent of second quarter filings. A spike in suits naming companies in the energy industry was triggered by the Deepwater Horizon oil spill and the Upper Big Branch mine disaster, the report found.
 
The most common type of securities suit filed in the second quarter was breach of fiduciary duty. This type of suit alleges that a company’s directors or officers violated a fiduciary duty owed to investors or other stakeholders, and often is brought by shareholders in the wake of a merger or acquisition. Many are filed in state courts. The second most common type of suit was securities fraud, a category defined by Advisen to be comprised principally of suits brought by regulators and law enforcement agencies. Securities class action suits were the third most common type of suit, accounting for about 20 percent of the total.
 
“Plaintiff attorneys seemingly took a breather in the first quarter,” noted Dave Bradford, Advisen executive vice president and the author of the report. “The second quarter was much more in line with the level of activity we’ve seen in the past several years.” Bradford added that, “Prior to 2005 securities class action suits represented more than half of securities suits filed each year. They have been falling steadily as a percentage of securities suits filed, though they still tend to be the largest suits as concerns settlements. Four of the five largest settlements in the quarter were of securities class actions.”