Jonathan C. Dickey, partner and Co-Chair of the National Securities Litigation Practice Group at Gibson, Dunn & Crutcher LLP, has published his mid-year review of securities class action lawsuits on Harvard's corporate governance and Financial Regulation blog. Twice a year Dickey surveys the class action lawsuit landscape looking for filing and settlement trends. Thus far in 2013, his review is a mixed bag of good and not so good news for financial firms, as it reflects "business as usual" for plaintiffs' lawyers.

Filing and settlement trends continue to reflect “business as usual” for the plaintiffs’ bar—hundreds of suits and significant settlement values can be expected for the rest of 2013, based on results from the early half of the year. According to a recent study by NERA Economic Consulting, the annualized rate of new class action filings based on results in the first half of 2013 is expected to be slightly up from the prior six-year averages. Through June 2013, new securities class action filings were annualizing at 222 cases for the full year, representing an uptick from the six-year average of 219 suits.

Settlement trends are clearly a mix of good and not so good news, because though median settlement amounts are trending down, they are still higher than the six-year average.

[M]edian settlements—generally a better barometer of settlement trends—were down in the first half of Q1 2013 over the full year 2012 from $12.3 million to $8.8 million. Still, the Q1 2013 figure is higher than four of six years in the period 2007 to 2012.

The average settlement value in the first quarter of 2013 was more than double the six-year average: $78 million, versus the six-year average of $35 million. Finally, median settlement amounts as a percentage of investor losses in the first half of 2013 were 2.0%, up from 1.8% for the full year 2012, but slightly lower than the six-year average of 2.

Some "good news" is that lawsuits arising out of the credit crisis are on the decline, according to figures from NERA Economic Consulting.

The total number of new cases filed against financial institutions in the first half of 2013 reflects the dramatic decline of “credit crisis” class action cases filed in federal court. These cases were at their zenith in 2008 (with more than one hundred new cases) but were virtually zero in the first half of 2013. Despite this enormous decline in new case filings, a number of major credit crisis cases are still pending, and are expected to result in large settlement amounts in some cases.

On the "not so good news" side of the scorecard, though securities lawsuits are down, they still remain in second place in the number of suits filed.  Moreover, Dickey's figures do not reflect cases filed in state courts, and some of these cases are massive, with a few already racking up very large dollar settlements.

In addition, while credit crisis class actions may be on the decline, a new generation of cases have replaced them: single-plaintiff suits by government agencies (such as the Federal Housing Finance Agency on behalf of Fannie Mae and Freddie Mac), monoline insurers (such as MBIA), and institutional and pension fund investors who purchased a wide variety of mortgage-backed securities. A number of these have been filed in state court and involve state law claims for misrepresentation and/or breach of contract. The stakes in these cases are high; a few have already resulted in settlements in excess of $100 million.

As usual, however, lawyers in securities law suits are doing quite well.  Dickey reports that attorney's fees:

. . . continue to be in the hundreds of millions of dollars per year. Indeed, according to NERA, plaintiffs’ lawyers’ “take” in the last five years has averaged $850 million per year. In 2012, the haul totaled over $600 million. While many courts have grown skeptical about fee awards, and many plaintiffs’ firms have voluntarily reduced their fee petitions seeking a percentage of the aggregate settlement recovery, courts continue to award eye-popping amounts in some of the larger class actions.