Cornerstone Report Shows Stockholder Settlements (Largely) Return to Trend in 2020

According to Cornerstone’s 2020 review of securities class action settlements, settlements in 2020 generally kept pace with trends seen in recent years, notwithstanding COVID-19 and brief lulls in March and April 2020.

There were 77 securities class action settlements in 2020, up 4% from 74 in 2019, but generally in line with or below numbers in recent years (77, 85, 80, and 78 in each year from 2015 to 2018). Of particular interest to readers of this blog, 55% of 2020 settlements involved parallel derivative actions, nearly the highest percentage in the last 10 years, though in line with 2018 and 2019 trends. Of those, Cornerstone reports that 40% involved actions filed in Delaware, again the highest rate in a decade.

The median settlement amount was $10.1 million in 2020, down 13% from $11.6 million in 2019, but still 19% above the inflation-adjusted median from 2011 to 2019. The average settlement was $54.5 million in 2020, nearly double the $27.8 million average in 2019 (driven by substantial increases from large settlements compared to 2019), and 15% higher than the 2011-2019 average. The vast majority of cases settled for less than $25 million, however. In 2020, 45% of settlements were between $5 million and $24.9 million, and another 31% were less than $5 million. But according to Cornerstone, defendants with settlements that involved a parallel derivate action paid a premium: among 42 instances in 2020, the median settlement was $15.3 million, almost twice the $8.5 million for settlements without a derivative action.

We expect that securities settlements will continue at these levels in 2021, and perhaps increase in number or dollar value. As Cornerstone’s recent report on securities class action filings highlighted (discussed in our prior post, here), new filings reached peak levels from 2017 to 2019, and remained well above historic levels in 2020. With an average time from filing to settlement of about three-and-a-half years, the bulk of those cases are now likely within, or closely bracketing, a window where settlements are likely to materialize.

To review Cornerstone’s complete report on 2020 securities settlements:

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.