Federal securities class action activity in 2008 was dominated by a wave of litigation against firms in the financial services sector, according to Securities Class Action Filings—2008: A Year in Review, an annual report released today by the Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research.
A total of 210 federal securities class actions were filed in 2008, a 19 percent increase over the 176 such class actions in 2007, and a 9 percent increase over the average of 192 such class actions between 1997 and 2007.
Almost half of the 2008 litigation activity, or 103 class actions, involved firms in the financial services sector.
The Maximum Dollar Loss (MDL) attributable to all 2008 claims is $856 billion, a 27 percent increase over comparable 2007 data and a 23 percent increase over the $698 billion average observed between 1997 and 2007.
Financial services firms represented 46 percent of MDL in 2008. The Clearinghouse’s newly introduced Litigation Heat Map, a graphic that portrays the intensity of litigation activity within each industry over time, shows that nearly a third of all large financial firms were a named defendant in a securities class action filed in 2008.
The financial firms named as defendants in 2008 represented more than half of the sector’s total market capitalization.
“This level of litigation intensity against a single industry [financial services] is unprecedented since the passage of the 1995 Reform Act, ” noted Prof. Joseph Grundfest, director of the Stanford Law School Securities Class Action Clearinghouse, in a statement.
Other findings include:
- Of the companies included in the S&P 500 index, 9 percent were sued in a federal securities class action in 2008, compared to only 5 percent in 2007.
- The subprime crisis was associated with 97 federal securities class actions, including 21 complaints filed on behalf of holders or purchasers of auction rate securities.
- Breaking from the historical pattern, a larger number of companies listed on the NYSE and Amex exchanges were sued in 2008 than those listed on the Nasdaq. In 2008, 111 class actions were filed against firms listed on the NYSE/Amex compared to 68 against firms listed on Nasdaq.