Public pension funds were lead plaintiffs in nearly half the securities class actions that settled in 2013, helping to drive recovery amounts to their highest total in six years, according to a newly published analysis.
The report, issued by Cornerstone Research, said settlements totaled $4.8 billion last year, up from $3.3 million in 2012 and the highest total since 2007. The 67 settlements approved in 2013 represented a 17.5% increase over the 57 reached the previous year, “the first year-over-year increase since 2009,” according to researchers.
The average settlement, too, rose in value last year, Cornerstone said, though it attributed that increase to six “mega settlements” accounting for 84% of settlement dollars and the continuing influence of large cases stemming from the financial collapse. The median settlement amount actually declined 37%, dropping to $6.5 million in 2013 from $10.3 million in 2012. Approximately 60% of cases settled last year recovered $10 million or less.
Judging from the analysis, public funds continue to remain important players in the securities litigation area, acting as lead plaintiff in 43% of the approved settlements last year. While that number was down slightly from 47% in 2012, public pension fund participation has quadrupled since 2004, when public funds led just 12% of settled cases.
“Among institutional investors, public funds are the most active, involved as lead plaintiffs in over 55 percent of settlements with an institutional lead plaintiff since 2006,” the report stated.
Public funds also drove settlement size, according to Cornerstone. The median settlement last year for a case with a public fund lead plaintiff was $23 million, nearly eight times the $3 million median settlements for non-public-fund cases.
Though a large part of that difference can be attributed to case selection, academic studies have consistently shown that class actions with public fund lead plaintiffs settle for more money and are more likely to succeed than others, even accounting for the difference in case size.
The report by Cornerstone Research, “Securities Class Action Settlements–2013 Review and Analysis,” was released March 27.