By John Filar Atwood
The number of new securities class actions filed in 2022 declined to 205 from 210 in 2021, the fourth consecutive year of the downward trend, according to research from NERA Economic Consulting. The NERA report attributes the four-year decline from 431 cases in 2018 partly to the smaller number of merger-objection and Rule 10b-5 cases filed.
The report also notes that the number of resolved cases, both dismissed and settled, fell to 214 in 2022 from 248 in 2021. The decline in resolutions reflected the decrease in dismissed non-merger-objection and non–crypto unregistered securities cases, according to the report.
The aggregate settlement amount for cases settled in 2022 was $4 billion, nearly $2 billion higher than the inflation-adjusted amount for 2021, NERA noted. More cases settled for higher values in 2022, with the average settlement value increasing by over 70 percent to $38 million.
According to NERA, the median settlement value in 2022 increased by over 50 percent to $13 million. The largest in 2022 was the $809 million settlement against Twitter for a case filed in California in 2016.
Filing trends. The report indicates that lawsuits against defendants in the health technology and services industry and the electronic technology and services sector were the most common in 2022, each accounting for 27 percent of total cases. Over the past four years there has been a drop in the aggregate number of cases filed in the Second, Third, and Ninth Circuits, but most of the new filings are still concentrated in those jurisdictions, the report notes.
One-third of the cases filed in 2022 included an allegation related to misled future performance, which was the most common allegation for the year, according to NERA. Cases with an allegation related to a regulatory issue comprised 26 percent of 2022’s filings compared to 19 percent in 2021.
Crypto cases. The report states that there were 25 crypto-related federal class actions suits filed in 2022, up from 10 in 2021. Most of the 2022 cases (16 of 25) related to unregistered crypto securities. It was easily the highest annual total for crypto class actions since the first case was filed in 2016, the report notes.
The report briefly discusses ESG-related cases, noting that 2022 saw the settlement of a 2018 class action filed against CBS Corp. The suit, which alleged widespread workplace sexual harassment by CBS executives, settled for $14.75 million.
NERA tallied four cases related to allegations of bribery or kickbacks in 2022, and three that related to a cybersecurity breach. The number of Covid cases increased to 24 last year from 20 in 2021, while cases related to special purpose acquisition companies rose slightly from 24 in 2021 to 25 last year.
Attorneys’ fees and expenses. The report indicates that in 2022 aggregate plaintiffs’ attorneys’ fees and expenses amounted to $1.05 billion, the first time since 2018 that the number exceeded $1 billion. The total is more than double the 2021 aggregate amount of $512 million.
NERA notes that although there are year-to-year fluctuations in the aggregate fees and expenses, the trend in the median of plaintiffs’ attorneys’ fees and expenses as a percentage of settlement amount has remained stable. Fees and expenses represent an increasing percentage of settlement value as settlement value decreases, the report states. For 2022 settled cases with a settlement value of $1 billion or higher, fees and expenses accounted for 8.8 percent of the settlement value but increased to more than 30 percent for cases with a settlement value under $10 million.