D&O Claim Settlement Size Increased in 2018

According to the latest report from Cornerstone Research, a source widely followed in the D&O world, aggregate, average, and median securities class action lawsuit settlement amounts all rose in 2018. The 2018 total settlement amount of just over $5 billion dollars is substantially higher than the prior year total and in fact is the third-highest total in the past 10 years – this total was fueled by a relatively few huge settlements, including and especially the $3 billion Petrobras case.

There were 78 securities class action settlements approved in 2018, down slightly from the 81 settlements approved in 2017. But while the number of settlements during the year was down slightly, the total settlement value of $5.064 billion was more than three times above the near record low total settlements of $1.511 billion in 2017. The $5 billion total in 2018 was 50 percent higher than the annual average of the prior nine years.

The average settlement amount in 2018 was $64.9 million, which also was more than triple the average settlement amount in 2017 of $18.7 million. The 2018 average was 44 percent higher than the average for the prior nine years. The median settlement amount more than doubled in 2018 to $11.3 million, compared to $5.1 million in 2017. The $11.3 median settlement amount in2018 is also 31 percent above the 1996-2017 median settlement amount of $8.6 million. Besides Petrobras and other large cases driving up these amounts, the number of settlements under $5 million declined from 40 cases in 2017 to 25 in 2018. Also, the settling defendant firms were 50% larger in 2018 over 2017. This decrease in smaller cases and larger size of defendants both likely factor into these numbers as well. Data contained in the report can be used to draw conclusions, some statistical and some anecdotal, about many other claim characteristics as well. Cornerstone Research’s March 26, 2019 press release regarding the report can be found here.

Considering the rise in equity markets and corresponding size of market capitalization losses in securities suits filed in the past 12 months, as well as the emergence of phenomena such as event-driven litigation, which we have written about previously, many experts are predicting that large settlements will continue for the next year or two.

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