New Report Highlights $3.26 Billion in 2020 U.S. Securities Class Action Settlements

ISS Securities Class Action Services – New Report Highlights $3.26 Billion in 2020 U.S. Settlements

The world was truly turned upside down in 2020 when the novel Coronavirus became the world’s deadliest pandemic in more than a century. The global turmoil over the last year also affected investor opportunities to address allegations of fraud against publicly traded companies.

With different environmental and health factors affecting global economics, United States Federal and State Courts adapted quickly to the new norms and remained adamant in performing its functions. Despite the dramatic decline in newly filed cases of investor complaints in both Federal and State courts throughout 2020, the quantity of traditional class action settlements remained steady, while the settlement amounts increased nominally by 3 percent from $3.17 billion in 2019.

Looking back at the full year of 2020, ISS Securities Class Action Services verified 99 approved monetary class action settlements in the U.S. These cases amounted to $3.26 billion of settlement funds available for distribution to eligible members of the settlement classes.  

Of the 99 U.S. settlements in 2020, 76 cases received judgment in the Federal Courts amounting to $3.04 billion, while 23 cases received judgment in the State Courts amounting to $229.7 million. The timing of settlements is of note, as the first quarter of 2020 had 18 settlements, while the final three quarters of 2020, amid the COVID-19 pandemic, averaged a higher quantity at 27 settlements per quarter.

An analysis of the 76 Federal settlements, 72 were alleged with Employment of Manipulative and Deceptive Practices (or Rule 10b-5 of the Securities and Exchange Act of 1934). It is important to take note that 13 of the 76 Federal settlements were concurrently alleged with Civil Liabilities on Account of False Registration Statement (“Section 11” of the Securities Act of 1933). In addition, only three settlements were focused on Section 11 claims, while one received judgment related to claims resulting from a corporate action settled in the Federal Courts. Of the analysis from 23 State settlements, 15 were related to corporate transactions and seven were alleged with Section 11 claims.

With regard to the 99 settlements in 2020, ISS SCAS identified:

§  23 settlements related to companies that completed their stock offerings

§  16 settlements which stemmed from corporate transactions

§  Nine settlements with alleged violations of Generally Accepted Accounting Principles (“GAAP”)

Furthermore, two companies identified restated their financials, and eight companies noted insider trading related settlements. Interestingly, two companies, which settled during 2020, had previously filed for bankruptcy and five companies are listed in the S&P 500 index.

In terms of court locations, it’s not surprising that the most active Federal court was the U.S.D.C. New York (Southern) with 15 settlements, including two of the three largest settlements of 2020. The next most active location was the U.S.D.C. New York (Eastern) and U.S.D.C. New Jersey, with seven and six settlements, respectively. In State court, the most active locations were the Delaware Chancery Court, which rendered judgment to nine settlements, followed by the New York Supreme Court (New York County) and Nevada District Court, with two each.

Four of the settlements in 2020 delivered significant settlement amounts to be included within a newly published Top 100 publication of largest U.S. settlements of all-time, including:

§  American Realty Capital Properties, Inc. – $1.025 Billion

§  First Solar, Inc. – $350 Million

§  Signet Jewelers Ltd. – $240 Million

§  SCANA Corporation – $192.5 Million

Interestingly, the top four settlements noted above all were alleged with Rule 10b-5 violations. The top two cases noted above were both led by lead counsel, Robbins Geller Rudman & Dowd. The third and fourth largest cases of 2020 were both led by lead counsel, Bernstein Litowitz Berger & Grossmann, with Labaton Sucharow as co-lead counsel on the SCANA Corp. action. The top four settlements from 2020 surpassed $1.8 billion in shareholder recoveries or 55 percent of the total value from all traditional U.S. class action settlements in 2020.

For eligible investors who filed claims in 2020, A.B. Data was the most widely court appointed claims administrator with 23 settlements and Gilardi & Co. was the second most active claims administrator with 18 settlements. In terms of highest dollar value of settlements, Gilardi & Co. handled claims worth $1.57 billion, while JND Legal Administrator was second with $631.3 million.

As of this publication, 15 U.S. settlements have now surpassed the $1 billion threshold.

Looking ahead, it appears likely that 2021 will have continued activity in driving shareholder recoveries. A few 2021 high profile settlements have already occurred, including a $1.21 billion settlement with Valeant Pharmaceuticals International and a SEC disgorgement for $500 million with Wells Fargo & Company. Other prominent actions are making their way through the legal process and scheduled settlement hearings show a handful of actions above the $100 million threshold, including Snap, Inc. at $187.5 Million (combining both the Federal and State settlements). Both Valeant and Snap are large enough settlements to enter next year’s Top 100 report.

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