More Securities Cases, Higher Damages Predicted By Accounting Firm Experts
More securities class actions, as well as increased efforts to obtain redress abroad, were predicted today by experts from the PricewaterhouseCoopers accounting firm. They also said that the growing presence of unions and pension funds as plaintiffs in such cases is apparently driving up damages awards.
Speaking today at a meeting at Chicago’s Ritz-Carlton hotel, a few days after a new PWC written report (PDF) on the accounting firm’s 2007 securities litigation study was released, Grace Lamont, a PWC partner from the New York City office, noted that the 163 federal securities class actions filed last year are less than the 180-suit annual average over the last 12 years. However, the 2007 total is up significantly from the record low during that 12-year period of 109 securities class actions filed in 2006. (Lamont attributes that low to the large number of stock-options cases filed that year, which are routinely brought in state court rather than federal court.)
“I think in 2008 what we’re going to see is a further increase,” Lamont told an audience made up largely of lawyers, accountants and insurance company executives, predicting that the subprime mortgage crisis is surely going to bump up the number of filings. Already, halfway through 2007, the number of federal subprime-related securities class action filings rose sharply, she said.
The growing role being played by unions and pension funds as plaintiffs in securities class actions is apparently driving up damages awards, Lamont said, probably because of the fact that these institutional plaintiffs are well-funded and can afford to pursue cases aggressively.
Another PWC partner from New York, Patricia Etzold, predicted that foreign governments will step up and require accountability from foreign securities issuers if it is not available in the United States or another jurisdiction.
Last year’s $350 million settlement by Royal Dutch Shell PLC, according to Etzold, offers an instructive example of how foreign governments can find a way, if they wish, to establish a fair compensation figure and then require a company to pay any difference between redress obtained in another jurisdiction and what the government in which the company is located believes to be appropriate.
Read the full report (PDF) from PWC on 2007 securities class actions.
Another report (PDF) on 2007 securities class actions has been issued by Stanford Law School’s Securities Class Action Clearinghouse.
Most federal securities class actions are filed either in the New York City-based 2nd U.S. Circuit Court of Appeals or the San Francisco-based 9th U.S. Circuit Court of Appeals.
Related coverage:
ABAJournal.com: “Securities Class Actions Up Thanks to Subprime Mess”
Wall Street Journal Law Blog: “2007 Was Record Year for Securities Settlements; Milberg on Top”
Financial Week: “Restatements up, but fraud rarely the cause, Treasury finds”
