Executive
After years of dramatic increases in securities litigation activities, and a record-setting 2011, the number of new filings dropped in the first quarter of 2012 to an annualized rate more akin to the level set in 2010. In addition to the effects that an improving economy has had on company fortunes, and thus on litigation, the falloff may be attributed in part to a decline in M&A activities leading to fewer merger-objection suits. At 377 new securities suit filings in Q1 2012, the annualized level of about 1,500 was 16 percent below the high watermark set in 2011. The number of new filings in the quarter was also 9 percent below the previous quarter, and over 33 percent below a year earlier in Q1 2011.
Securities fraud cases, mostly regulatory actions, were once again the leading type of new securities-suit filing in Q1 2012; but down from the previous quarter and the first quarter of 2011. Despite this falloff, regulatory actions remained a dominant force. Securities class action suits, although down from the average quarter in 2011, was slightly up from the previous quarter, when all other major types of suits dropped. Say-on-pay issues have brought derivative actions back into the limelight over the past year. Breach of fiduciary duties suits, driven by so-called merger objection suits, became litigators’ bread-and-butter in recent years, and the level remained higher than other types of private litigation in Q1 2012, but dropped substantially since mid-2011. The drop in new merger-objection-suit filings in the first quarter was likely due in part to the falloff in M&A activities.
Globalization has had a substantial impact on securities litigation over the past years, and this trend continued in the first quarter of 2012, with filings against non-U.S. companies reaching 18 percent. The total number of suits against non-US companies increased compared to the average quarter in 2011. Considering that suits across the board dropped, the percentage of non-US company suits leaped from 14 percent in 2011, which has been on a steady upward march since 2009. A major cause of this growth in suits filed against non-US companies was the burst in suits filed against Chinese companies, which represented 29 percent of all such new suits for the quarter.
