WHEN ARE CLASS ACTIONS DISMISSED AND WHEN DO THEY SETTLE?

In the April 2013 issue of the PLUS Journal, we at Stanford Securities Litigation Analytics (SLA) published part one of two articles, When Are Securities Class Actions Dismissed, When Do They Settle, and For How Much?-An Update, exploring the timing and correlates of dismissals and settlements in recently filed securities class action cases.  In his blog, The D&O Diary, Kevin LaCroix posted his synopsis of the article.  Utilizing its extensive database, the SLA team analyzed class actions filed from 2006-2010, and resolved by the end of 2012.  We believe our analysis may benefit parties that litigate these cases, negotiate coverage with D&O carriers, and others.

Within the 652 case sample, 40% settled, 32% were dismissed with prejudice, 11% were voluntarily dropped, and 18% are still ongoing.  Despite the paradigm that frames class actions as lengthy and litigious, most cases reached a resolution relatively quickly. In fact, 58% of class actions in the study were dismissed, dropped, abandoned, or settled before the filing of a Second Consolidated Complaint.  Among cases that settled, 43% did so before a Motion to Dismiss was denied and the case moved toward discovery.

You might ask yourself: what other factors correlate with the timing of dismissals, or the size of settlements?  Does the nature of an alleged misstatement affect dismissal rates? Does the size of the settlement correlate with settlement timing or class recovery of losses?  We recommend you follow the links to our article and Mr. LaCroix’s blog post for additional analysis.  Also be on the lookout for part 2 of the PLUS article series, which explores the extent to which companies, directors, officers, and D&O insurers contribute to class action settlements.

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