Securities filings continued to grow steadily over recent years to a peak of 2,159 cases in 2020, up 89% from 2016 despite the global pandemic that affected three-quarters of that last year, according to Lex Machina's Securities Litigation Report.
"This could be a result of event-driven litigation, including pandemic-driven litigation, pushing shareholders to file securities cases," Laura Hopkins, Lex Machina's securities legal data expert, said. "This is unexpected, given the slowdown many courts experienced in 2020 due to the pandemic."
More than a fifth of securities cases launched between 2018 and 2020 were filed in the Southern District of New York, the institution sometimes referred to as the "Mother Court" for its history of hosting headline-grabbing legal battles. The home venue for the financial capital of the world, New York's Southern District has been the most active district for securities cases in the three-year span and has seen consistent growth each year, from 266 cases in 2018, to 458 the year after, and 570 in 2020.
Delaware, the second-most active district over the same three years, took on nearly 15% of all securities cases nationwide, but did not see the same steady increase, with case filings actually falling off slightly between 2019 and 2020, according to the report.
Delaware remains the home of the four most active federal judges in securities litigation for that time frame. Chief U.S. District Judge Leonard P. Stark led the pack, presiding over 242 cases — amounting to roughly 4% of all securities cases — in the three-year period.
The District of Delaware's three other federal judges — Richard G. Andrews, Colm F. Connolly and Maryellen Noreika — rank in that order behind Judge Stark, with each taking on more than 200 securities cases between 2018 and 2020, the report said.
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U.S. District Judge Paul W. Grimm from the District of Maryland takes the fifth spot, which the report says is likely attributable to his presiding over multidistrict litigation against Marriott related to a massive data breach in 2018, which spawned multiple putative class actions and derivative suits.
While New York's Southern District handles more total cases, it distributes them across dozens of federal judges, four of whom — U.S. District Judges John G. Koeltl, Edgardo Ramos, Paul A. Engelmayer and Ronnie Abrams — were ranked by the report respectively as the sixth-, seventh-, eighth- and ninth-most-active judges for securities litigation between 2018 and 2020, with each handling just under 60 securities cases apiece in that time frame.
U.S. District Judge Beth Labson Freeman out of California's Northern District comes just behind them, with her district being the third-most active both in the three-year time frame, with a total of roughly 9% of all securities cases under its purview, and in each individual year, with 2020's caseload being heavier than the previous year's.
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"Interestingly, the pandemic did not appear to have had the uniform depression impact on case filings across all districts that one might have expected," the report said. "Instead, some districts experienced a disproportionately larger dip in cases, while other districts saw a significant increase in cases."
According to Lex Machina, that trend is consistent with a "robust steady increase" in overall securities filings, with levels of shareholder derivative actions increasing in tandem.
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That rise in derivative suits could be due to a migration of securities cases away from Delaware state courts "as a result of a series of decisions in mergers and acquisitions and post-deal litigation case law," as well as an increase in incidents of shareholders suing "over events that have a negative impact on share price, such as data breaches or product liability issues," the report said.
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Securities class action filings have actually decreased year-over-year since 2017, the report said, with the biggest drop-off occurring last year, likely due to the pandemic, though shareholders continued to use derivative actions during the pandemic-induced economic volatility to "prevent mergers or evaluate decisions made by a board of directors."
Securities cases involving cryptocurrencies also rose in 2020, the report said, as they did in 2018, with both years marking periods of increased public interest in, and price volatility of, the crypto market.
--Editing by Pamela Wilkinson and John Campbell.
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