Securities Class Actions Climb Amidst Market Turmoil

According to a recent  report issued by the U.S. Chamber Institute for Legal Reform (IRL), 58% more securities-related class actions were filed in 2007 than were filed in 2006.  Further, according to a recent study conducted by Cornerstone Research and Stanford Law’s Securities Class Action Clearinghouse, 63 class action suits were filed against the financial services sector in just the first six months of 2008.  This number exceeds the total number of filings in 2007. 

The Stanford report also shows that about half of the 110 filings between Jan 1 and June 30, 2008 were related to the U.S. subprime mortgage crisis and global credit crunch; moreover, the increased filings have caused defendant firms’ market capitalization losses to skyrocket. 

Do these securities class action filings threaten average shareholders’ assets?  According to a recent report issued by the Institute for Legal Reform (IRL), compelling evidence shows that such filings are putting U.S. businesses in peril, and threaten the economic health of individual investors.  Lawsuit-related monetary losses in 2007 doubled since 2006, and settlement costs may even exceed litigation costs as more companies hope to salvage some of their stock price and reputation.  The ILR report urges Congress to investigate fraud and abuses in the securities plaintiffs’ bar, and suggests legislative changes.