When Are Securities Class Actions Dismissed, When Do They Settle, and For How Much?
by Michael Klausner, Jason Hegland and Matthew Goforth Michael Klausner is the Nancy and Charles Munger Professor of Business and Professor of Law at Stanford Law School. He can be reached at klausner@ stanford.edu. Jason Hegland is a Fellow and a Director of Securities Litigation Analytics at Stanford Law School. He can be reached at jhegland@ law.stanford.edu. Matthew Goforth is a Research Fellow at Stanford Law School. He can be reached at mgoforth@law. stanford.edu. As part of its educational mission, the PLUS Foundation supports research important to professional liability at top insurance universities across the country. This article is a product of that funding. Two years ago, we published two articles in the PLUS Journal that reported data on the timing of dismissals and settlements in securities class actions and on the extent to which D&O insurance protects corporations and their officers and directors from liability in these cases. This article is the first of two updates of those reports. This article will cover dismissal timing, settlement timing, and the relationship between settlement timing and the size of settlement payments. In the next issue of the PLUS Journal, we will publish an update on the protection that D&O insurance has provided to officers and directors in securities class actions. These articles are based on a database that we have collected and will continue maintaining on securities class actions and SEC enforcement actions beginning in 2000. In this article, we address the following questions:
How long are securities class actions litigated before they are either dismissed or settled?
How many times do courts give plaintiffs an opportunity to amend a complaint before finally dismissing a case with prejudice?
How often do cases settle during the pleading stage—that is, before a final ruling on a motion to dismiss?
For cases that are not dismissed, how long do the parties continue litigating before settling?
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