Securities class action filings are on the rise

Securities class action filings increased in the first half of 2024 compared to the second half of 2023, according to a recent report from Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse.

The report, Securities Class Action Filings – 2024 Midyear Assessment, shows that plaintiffs filed 112 securities class action claims in federal and state courts in the first half of 2024, an increase from the 103 class action claims filed in the second half of 2023. Core filings – those without mergers and acquisitions (M&A) allegations – in the first half of 2024 (110) were above the number of core filings in 2023 H2 (101) and the historical half-year average (96). Tracking of the Artificial Intelligence (AI) trend category has begun; there were six such filings in the first half of 2024. The number of filings in all other trend categories – including cryptocurrency – will decline in 2024, with the exception of COVID-19-related filings, which are on track to increase.

The potential for real liability from artificial intelligence is among the more interesting developments of the past six months.

“While we have seen AI-related filings in recent years, the first half of 2024 marks the start of tracking these filings as a trend category. The growing prominence of AI in many companies’ business models could lead to more sign-ups in the future,” said Alexander “Sasha” Aganin, co-author of the report and Senior Vice President of Cornerstone Research. “Meanwhile, SPAC-related filings are poised to plummet from recent years, and cryptocurrency-related filings, which have been popular in recent years, saw a sharp decline.”

The number of filings under federal Section 11 and state claims under the Securities Act of 1933 remained low through the first half of 2024. The annualized number of these filings, 22, is consistent with the number of filings, 21, in 2023. two federal mergers and acquisitions, on track to be the lowest annual total since tracking federal mergers and acquisitions in 2009.

The Maximum Dollar Loss (MDL) Index fell 9% to $908 billion in the first half of 2024, a continued decline from the inflation-adjusted record high of the first half of 2023, but remained 51% above the historical half-year average. The Disclosure Dollar Loss (DDL) Index rose to $185 billion in the first half of 2024, up 9% from the second half of 2023 and the sixth consecutive six-month period with the DDL at or above the historical half-year average of $119 billion lay.

“The potential for real liability from artificial intelligence is among the more interesting developments of the past six months,” said former SEC Commissioner Joseph Grundfest, now a professor emeritus at Stanford Law School. “But more immediately, keep an eye on the Supreme Court’s upcoming term. Important decisions will be made in the NVIDIA lawsuit regarding pleading requirements for securities fraud claims and in the Facebook/Cambridge Analytica lawsuit regarding risk factor disclosure.”

Additional key trends

• The odds of a core charge against a US public company are on track to increase to an annualized rate of 3.9%, surpassing the 3.6% average for core charges over the 2010-2023 period.
• In the first half of 2024, there were 10 mega DDL filings (those with a DDL of at least $5 billion), twice the half-year average from 1997-2023 (5) and slightly more than the number of mega DDL filings in the second half of 2023 (8). .
• The number of federal core cases in the Second and Ninth Circuits increased and represented 60% of the total number of federal core cases in the first half of 2024. DDL in the Ninth Circuit more than tripled from the second half of 2023, while DDL in the Second Circuit declined by 84%.
• Top federal filings against non-U.S. issuers as a percentage of total core federal filings in the first half of 2024 fell by nearly a quarter from 2023, reaching a 15-year low.