Continuing their series of "trends" studies for non-US securities class actions, NERA Economic Consulting has released a study of securities litigation trends in the Australia market.

Covering the period from 1993 - 2009, the study has several notable findings, chief among them:

• New case filings have accelerated in recent years.
• The vast majority of Australian actions settle.
• Cases are concentrated in the financial industry

According to the authors (and borne out by our own SCAS data), securities class action filings in Australia set a new record in 2009, breaking the previous record set in 2008.  Moreover, the total number of new cases filed in 2007-2009  represents half of all securities class action cased ever filed in Australia.

As with US cases, a majority of Australian cases alleged either misleading or deceptive conduct, or failure by companies to promptly disclose information material to the value of their securities.

Also, more than half of all securities class actions were brought against companies in the "financial industry," though the report has a broad definition of that term, including both real estate and insurance companies for example.

The study also found that a super-majority of securities class action cases in Australia settle. Of the 12 class actions resolved by the end of 2009, 8, or 75%, were settled.  Apparently, this trend has become even more pronounced in recent years – every case filed after 2003 that has been resolved was settled.

The full report can be downloaded here.

Today NERA Economic Consulting released the 2009 update to their study, Trends in Canadian Securities Class Actions.

According to the report, securities class action filings in Canada in 2009 continued to stay above historical average filings. The report notes that eight securities class actions were filed in 2009, compared with ten filings in 2008. As with recent reports discussing trends in US securities class action case filings, the "drop" from one year to the next is not the whole story, as 2009 is the second most active year ever for Canadian securities class action case filings.

Six new cases were filed in 2009 involving allegations of misrepresentations and/or omissions by issuers, including claims brought under the new continuous disclosure provisions. This is a new high both in absolute terms and in percentage terms (75%).

The report also notes a steep drop in the overall value of settlements achieved in 2009, with six cases settling 2009 for approximately $51 million versus eight cases totaling $890 million in settlements in 2008. According to the report, the average settlement for 2009 was $8.5 million and the median settlement was $9 million.

Of interest - the majority of cases filed in 2009 were brought in relation to securities issued by companies in the minerals and financial sectors. The report notes that this is both reflective of the composition of the Canadian economy and consistent with filing trends in prior years.

The trend of "belatedly filed" cases that has been discussed with respect to US cases also appears to have permeated north of the border, with 2 of the 8 cases (25% for you non-math majors) filed in 2009 having been filed nearly two years after the end of the proposed class period.

The full report can be downloaded here.

The global economy depends on effective risk management by consumers, businesses and governments, which has helped make insurance the world's largest industry. Insurance companies generate $3.4 trillion in premium revenue, plus another $1 trillion in investment income. Still, this vast accumulation of wealth – larger than the GDP of every nation except the US, China and Japan– may not be enough to hedge against the risks of climate change.

In 2007, the sustainability-focused investors coalition Ceres released From Risk to Opportunity: How Insurers Can Proactively and Profitably Manage Climate Change. The report explained that climate change could lead to losses for every sector of the industry:

• Property insurers could face massive damages from rising sea levels and increased incidence of Katrina-like storms.
• Health and life insurers could face claims due to climate change-caused famine, drought, or disease.
• iability insurers would have to pay if companies are held liable for their greenhouse gas emissions.
• nsurance companies' portfolios would lose value if climate change lowers investment returns, threatening the stability of those insurers and reinsurers, as well.

The pain of these blows to the insurance industry could spread throughout the world economy. As claims increased and revenues decreased, insurance would become less affordable and less available. This could shift more risk to governments and individuals.

While climate change threatens the insurance industry, it also offers opportunities for innovation. KLD research finds that several companies are actively responding to the challenge of climate change:

• CNP Assurances invested EUR 15 billion in the European Carbon Fund to help European countries meet their commitments under the Kyoto Protocol and the EU Emissions Trading Scheme.
• Swiss Re, in 2001, was one of the first financial services companies to establish a business unit to explore the business opportunities associated with reduced carbon emissions.
• Aon provides customers with carbon risk management consulting services to help them enter emissions trading markets.
• Fortis offers preferential rates for consumers who purchase energy-efficient appliances and improve home energy efficiency.
• AXA provides insurance coverage for wind farms.

Since their emergence in the 17th century after the 1666 Great Fire of London, insurers have helped establish the first fire departments, building codes, and product safety standards. Now, insurers can help lead a global response to a global threat. Lloyd's of London, founded in 1688, recently put the problem in stark terms:

"The insurance industry must start actively adapting in response to greenhouse gas trends if it is to survive."

Hot off the presses is The 10b-5 Guide: A Survey of 2007 Securities Fraud Litigation from Weil, Gotshal & Manges.

Just as 2007 saw a substantial increase in the number of new federal securities class actions, the 2007 Weil guide needs more room (253 pages) to discuss all that is brewing in the wide world of securities class actions.

The guide is quite wide-ranging, discussing everything from pleading standards, loss causation and class certification to developments in the lead plaintiff appointment process and that ever popular cocktail party conversation topic, the Securities Litigation Uniform Standards Act of 1998, or SLUSA to the cognoscenti.

The guide, just as with the 2006 version, breaks down these the information by both topic and circuit.

Thanks again to co-author Paul Ferrillo for sending us a copy, which you can download here.

West's Corporate Practice Commentator has named the "Top 10 Corporate and Securities Articles of 2007," and the list is quite heavy with securities litigation related articles.

The full list (hat tip - Conglomerate) in alphabetical order of the initial author is below along with links to the articles.

Baker, Tom and Sean J. Griffith. The Missing Monitor in Corporate Governance: The Directors' & Officers' Liability Insurer. 95 Geo. L.J. 1795-1842 (2007).

Bebchuk, Lucian A. The Myth of the Shareholder Franchise. 93 Va. L. Rev. 675-732 (2007).

Choi, Stephen J. and Robert B. Thompson. Securities Litigation and Its Lawyers: Changes During the First Decade After the PSLRA. 106 Colum. L. Rev. 1489-1533 (2006).

Coffee, John C., Jr. Reforming the Securities Class Action: An Essay on Deterrence and Its Implementation. 106 Colum. L. Rev. 1534-1586 (2006).

Cox, James D. and Randall S. Thomas. Does the Plaintiff Matter? An Empirical Analysis of Lead Plaintiffs in Securities Class Actions. 106 Colum. L. Rev. 1587-1640 (2006).

Eisenberg, Theodore and Geoffrey Miller. Ex Ante Choice of Law and Forum: An Empirical Analysis of Corporate Merger Agreements. 59 Vand. L. Rev. 1975-2013 (2006).

Gordon, Jeffrey N. The Rise of Independent Directors in the United States, 1950-2005: Of Shareholder Value and Stock Market Prices. 59 Stan. L. Rev. 1465-1568 (2007).

Kahan, Marcel and Edward B. Rock. Hedge Funds in Corporate Governance and Corporate Control. 155 U. Pa. L. Rev. 1021-1093 (2007).

Langevoort, Donald C. The Social Construction of Sarbanes-Oxley. 105 Mich. L. Rev. 1817-1855 (2007).

Roe, Mark J. Legal Origins, Politics, and Modern Stock Markets. 120 Harv. L. Rev. 460-527 (2006).

Subramanian, Guhan. Post-Siliconix Freeze-outs: Theory and Evidence. 36 J. Legal Stud. 1-26 (2007). (NOTE: This is an earlier working draft. The published article is not freely available, and at SLW we generally respect the intellectual property rights of others.)

Psst, have I got a download for you.

Weil, Gotshal & Manges' 2006 Securities Litigation Survey, all 194 pages of it, provides a thorough review of recent securities litigation opinions, broken down by topic and circuit, and should be a valuable resource to attorneys practicing in the securities litigation field. Major topics addressed include pleading standards, loss causation and class certification.

Thanks to co-author Paul Ferrillo for sending us a copy, which you can download here.

The companion paper to our upcoming webcast is now available for public consumption here.

Some key findings:

- The first instance we were able to find of an international institutional investor seeking to serve as a lead plaintiff was in 1999, in the Network Associates litigation.

- Every year since then has seen at least one international institutional investor seeking to serve as a lead plaintiff in a class action.

- International institutional investors sought to serve as lead plaintiffs 182 times in 98 different cases during that period.

- The cases where these investors were involved were not limited to those involving non-US companies - Prominent examples included Delphi, Coca Cola, General Motors, and Dell.

- The international institutional investors that filed lead plaintiff motions were from 17 different countries. Germany, Canada, and Israel were the countries with the largest number of movants.

- The lead plaintiff movants were represented by 23 different law firms. The law firm that represented international institutional investors most often – Milberg Weiss, followed by Schiffrin Barroway Topaz & Kessler, Bernstein Litowitz, Berger & Grossman, and Grant & Eisenhofer.

We hope to update this research on an annual basis, so stay tuned...

It all started back in December 2005, when Prof. James D. Cox (Duke) and Randall S. Thomas (Vanderbilt) posited, in their latest article on the failure of institutional investors to file claim forms in securities class action settlements, Letting Billions Slip Through Your Fingers: Empirical Evidence and Legal Implications of the Failure of Financial Institutions to Participate in Securities Class Action Settlements, that they could:

find no recorded case where a bank, mutual fund, or insurance company has served as a lead plaintiff in a securities class action.

A few months later, I blogged on the issue, here, here, and here, and noted that there were a number of instances where private institutional investors had indeed served as lead plaintiffs in securities litigation.

Prof. Cox and Thomas then posted a draft of their latest paper, An Empirical Analysis Of Institutional Investors' Impact as Lead Plaintiffs in Securities Fraud Class Actions, where they repeated their earlier conclusion:

we find no recorded case where a bank, mutual fund or insurance company has served as a lead plaintiff in a securities class action.

Then, Prof. Stephen J. Choi (New York University School of Law) and Robert B. Thompson (Vanderbilt University School of Law) authored a paper, Securities Litigation and Its Lawyers: Changes During the First Decade After PSLRA that reiterated the myth, stating:

There has been a substantial increase in participation of public pension firms, a group that includes well-known public employees' funds such as Calpers, NYCERS and funds related to various unions. At the same time, there has not been any substantial involvement by private investors, such as mutual funds, banks, and insurance companies.

Recently, Prof. Charlie Silver (University of Texas School of Law) and an economist, Sam Dinkin, published a draft paper, Incentivizing Institutional Investors to Serve as Lead Plaintiffs in Securities Fraud Class Actions, that cites to the same Cox / Thomas myth, as part of the underlying premise for the need to incentivize private institutional investors. They do go on to try and make some sense of the conflicting information out in the marketplace now with respect to private institutional investor involvement in securities class actions. The paper has some thought provoking proposals, and I fear that the repetition of the myth in the very first paragraph may take something away from the discussion that I hope their paper stimulates. Indeed, at a later date, we'll dive into the underlying proposals.

OK, listen up Academia. For the last time, private institutional investors (mutual funds, banks, and insurance companies) do seek to serve as lead plaintiffs.

Here are a few examples.

Mutual Funds:

In the Lucent Technologies (NYSE: ALU) securities class action, two mutual funds, The Parnassus Fund and the Parnassus Income Trust/Equity Income Fund were appointed as co-lead plaintiffs. The Lucent securities litigation is the ninth largest securities class action settlement of all time according to data from my team at ISS' Securities Class Action Services.

Insurance Companies:

In the Laidlaw (NYSE: LI) bondholder class action, four insurance companies, John Hancock Life Insurance Co, New York Life, Insurance Co, American General Annuity Insurance Company, and Variable Annuity Life Insurance Co., were appointed as co-lead plaintiffs.

Banks:

In the Honeywell International (NYSE: HON), securities class action, which settled in 2004 for $100 million, Jefferson State Bank, was appointed as co-lead plaintiff.

You've been warned...

I'm no criminal defense lawyer and I have no sense for whether this is a likely result or not, but an article yesterday by Pam Smith in The Recorder flagged an issue related to the Milberg Weiss indictment that I had not focused on before.  With respect to the $216.1 million in attorneys fees that Milberg Weiss was awarded in settlements involving allegedly improper kickbacks to plaintiffs, well, the DOJ wants this "tainted" money to be forfeited to the United States.  All of it. 

As stated in paragraph 83 of the indictment,

Pursuant to Title 28, United States Code, Section 2461(c), Title 18, United States Code, Section 981(a)(1)(C), and Title 21, United States Code, Section 853, each of defendants MILBERG WEISS, DAVID J. BERSHAD, STEVEN G. SCHULMAN, and SEYMOUR M. LAZAR convicted under Count One of this Indictment shall forfeit to the United States any and all property, real or personal, which constitutes or is derived from proceeds traceable to such offense, including the following:

a. with respect to MILBERG WEISS, the more than approximately $ 216.1 million in attorneys' fees obtained by MILBERG WEISS in the Lawsuits and litigation resolving the Lawsuits (the "tainted attorneys' fees").