April 12, 2018

The total value of securities class action settlements for 2018 has already far surpassed the total for all of 2017, according to recently released data, with legal experts saying the drop-off a year ago was mostly cyclical but also likely due to a dearth in high-profile fraud cases and a rising stock market.

The strong year shaping up in 2018 — with $3.5 billion in settlements so far, led by a $3 billion deal in January by Brazilian energy company Petrobras, according to figures compiled by ISS Securities Class Action Services — is good news for plaintiffs' firms that experienced a slight decline last year in the number of overall settlements, but a sharp decline in the amounts reached in those deals. The ISS numbers show that 162 settlements in 2017 garnered $2.1 billion, down from 199 settlements that generated $7.6 billion a year earlier.

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Cohen Milstein managing partner Steven J. Toll, while also acknowledging the cyclical nature of settlement amounts, said 2017 was likely a down year as opposed to four of the past five years, in part due to a lack of deals in high-profile fraud cases. He specifically cited the kinds of securities class actions filed in connection with residential mortgage-backed securities fraud allegations that emerged during the 2008 financial crisis, which impacted some of the largest U.S. banks.

Many of those cases, Toll said, were filed in 2007 and 2008 and then settled between 2013 and 2016. And the ISS settlement data mostly reflects that, with totals of $7.6 billion in 2016, $6.3 billion in 2015 and $7.7 billion in 2013. Meanwhile, 2014 was another down year with $2.4 billion.

“Now you just see here and there big cases, but not as big as many of those high-profile RMBS cases,” Toll said.

Toll also said the nearly decade-long bull market in stocks was another likely contributor to the 2017 decline in settlement amounts. “In a period of rising markets, there aren’t too many massive drops,” which might have led more investors to file securities class actions, he said.

Toll said Cohen Milstein is “very selective” in its case approach, focusing more on quality than quantity. “We’re pleased with our results in 2017,” he said. “Returning money to our clients, that’s what our goal is.”

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