Detailed information of the prosecution, defense, and settlement of federal class action securities fraud litigation are being provided by the Securities Class Action Clearinghouse and an Index of Filings of 2392 issuers that have been named in federal class action securities fraud lawsuits since passage of the Private Securities Litigation Reform Act of 1995 is also being maintained by it.
It Clearinghouse also contains copies of more than 13,600 complaints, briefs, filings, and other litigation-related materials filed in these cases. The Clearinghouse offers regular updates identifying companies that have recently been named as defendants in federal class action securities fraud complaints.
While vigorous debate continues to swirl regarding the merits of class action securities fraud litigation, certain patterns appear to characterize litigation behavior during the five-year period since adoption of the PSLRA. In particular:
* The absolute number of issuers sued does not appear to have changed dramatically since passage of the Act, once the effects of the IPO Allocation Litigation are excluded. Litigation activity declined in 1996, but that decline was likely a transition effect;
* Since passage of the Reform Act, a larger percentage of litigation activity centers on allegations of accounting fraud, with revenue recognition issues emerging as particularly significant causes of litigation;
* Since passage of the Reform Act, a larger percentage of litigation activity also alleges trading by corporate insiders during periods when frauds are allegedly “alive” in the market;
* The dollar magnitude of settlement has increased noticeably, particularly in the settlement of “mega-cases.” There have been seven post-Reform Act settlements in excess of $500 million: the WorldCom and Enron litigations are still pending, but have already reached settlement agreements of $6.128 and $4.760 billion, respectively; the Cendant litigation was settled for $3.525 billion ($3.185 billion in the common equity settlement and $340 million in the PRIDES settlement.); the IPO Allocation Litigation settled for $1 billion; McKesson is in the process to settle its class actions for $960 million; Lucent Technologies settled for $673 million; and Raytheon Corporation for $535 million.