January 30, 2018

A surge in federal class action suits targeting companies involved in mergers and acquisitions in 2017 led to a second straight record year for the overall number of federal securities class actions, according to a report released Tuesday, a trend legal experts say could be attributed to a migration of M&A suits out of the Delaware Court of Chancery and into federal jurisdictions where the potential for success is seen as greater.

There were 198 federal filings related to M&A transactions in 2017, according to the report released by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse, accounting for nearly half of the record high total of 412 federal securities class action filings in all of 2017 and more than doubling the 85 M&A suits filed in 2016.

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Plaintiffs attorney Daniel S. Sommers, a partner at Cohen Milstein and co-chair of its securities litigation and investor protection practice group, said it's not an anomaly that securities cases, in particular M&A cases, are on the rise despite a record-setting rise in stock markets in the past year. That’s because rising financial markets have fueled a booming M&A market, he said.

“What I think will be of greatest interest is to see over time whether these additional cases are successful at the same rate as in prior years," said Sommers. "That will be a way to measure whether we’ve seen an increase in quantity without a drop in the quality of cases, or simply an increase in the quantity of cases.”

The full article can be read here.