United States: 2023 Securities Litigation Year In Review

INTRODUCTION

During 2023, securities class action case filings rose slightly, with 228 new cases filed compared with 206 cases filed in 2022.¹ The number of filings in 2023 matched the 1996–2020 annual average of 228 and reflected the first increase in four years.² The filings were nearly 53% below the 432 filings in 2018, the recent peak year for federal securities-suit filings.³

These numbers were impacted by the continuing decline in class action merger objection lawsuit filings. In 2023, only seven federal merger objection actions were filed compared with nine in 2022. Plaintiffs continue to bring merger objection lawsuits but are increasingly filing them as individual actions rather than class actions.

As has been the case for the last several years, suits alleging Rule 10b-5 claims were the vast majority of all new case filings in 2023, with 184 filings compared with 137 filings in 2022.⁴ Suits against companies in the electronics technology, technology services, and health technology and services industries were the most common, accounting for 41% of total filed cases in 2023.⁵ Tumult in the banking sector in early 2023 that resulted in several high-profile bank failures led to 12 securities fraud suit filings against financial institutions.⁶ Four of those filings related to the collapse of Credit Suisse in March 2023.⁷

Securities lawsuits relating to special purpose acquisition companies ("SPACs"), COVID-19, cryptocurrency, and other digital assets totaled 42 cases last year, representing more than 18% of all federal securities class action filings.⁸ We analyze noteworthy developments in those sectors in more detail below.

With virtually all state and federal courthouses open again following the COVID-19 pandemic, the number of settlements and dismissals of securities cases held steady in 2023, with 190 announced class action settlements and dismissals compared with 223 in 2022.⁹ Total settlements were $5.8 billion, up from $4.2 billion in 2022.¹⁰ The average settlement value was $46 million, an increase of 17% over the average settlement in 2022.¹¹ Notably, the trend of derivative suit settlements with substantial cash components continued in 2023; there were several settlements in 2023 that are among the all-time largest derivative suit settlements, including Tesla ($735 million) and CBS/Viacom ($167 million).¹² A separate direct action filed by Viacom shareholders settled for $122.5 million.¹³

Settlements in securities class actions in 2023 included nine mega-settlements in excess of $100 million—compared to 10 mega-settlements in 2022—topped by the $1.3 billion settlement in the Wells Fargo case and $450 million in the Kraft Heinz case, which was the second-largest settlement ever reported in the Northern District of Illinois.¹⁴ Wells Fargo also had the third-largest settlement last year (for $300 million) in a separate case arising out of alleged irregularities in its automobile insurance business.¹⁵ All of the cases on the 2023 top 10 list settled after years of litigation, and some, including the third-largest Wells Fargo case, settled on the eve of trial. Three of the top 10 settlements involved non-U.S. companies: Allianz Global Investors ($145 million), MicroFocus ($107.5 million), and Groupo Televisa ($95 million).¹⁶ Two of the top 10 settlements were in state courts, with the MicroFocus settlement in California Superior Court and the Newell Brands settlement ($102.5 million) in New Jersey Superior Court.¹⁷

Our 2023 Securities Litigation Year in Review focuses on significant securities-related decisions from the U.S. Supreme Court and the federal appellate courts. We discuss the Supreme Court's unanimous decision in Pirani v. Slack Technologies, Inc. resolving a circuit split about the tracing requirement for claims under the Securities Act of 1933 ("Securities Act").¹⁸ As we discussed in last year's Review, a sharply divided panel of the Ninth Circuit affirmed a district court's decision that a purchaser of shares in a direct listing who could not conclusively determine whether he had purchased registered or unregistered shares nevertheless had standing to sue under Sections 11 and 12 of the Securities Act.¹⁹ That decision conflicted with decisions in other circuits holding that Securities Act plaintiffs must allege that their securities can be traced to the registration statement alleged to be false or misleading. The Supreme Court resolved the circuit split against the Ninth Circuit based on its analysis of textual clues in the Securities Act, concluding that a Securities Act plaintiff must plead and prove a purchase of shares traceable to the allegedly defective registration statement to have standing to sue.

We also discuss the latest developments in the long-running Goldman Sachs securities case following the Supreme Court's 2021 ruling vacating class certification and remanding based on its conclusion that it was unclear whether the Second Circuit properly considered the generic nature of Goldman's alleged misrepresentations when it addressed the issue of price impact.²⁰ In 2022, the district court once again certified a class and found that the defendant had failed to show that the alleged misrepresentations had no price impact notwithstanding the genericness of the challenged statements.²¹ Last year, analyzing that decision and applying the Supreme Court's guidance, the Second Circuit concluded that the district court had erred. The Second Circuit held that the specificity of the back-end corrective disclosures did not match the genericness of the front-end alleged misstatements and thus remanded the case for decertification of the class.

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Footnotes

1. Edward Flores & Svetlana Starykh, NERA Economic Consulting, Recent Trends in Securities Class Action Litigation: 2023 Full-Year Review 2 (Jan. 23, 2024).

2. Id.

3. Id.

4. Id.

5. Id.  at 3–4.

6. Id.

7. Id. at 10.

8. Id.

9. Id. at 12.

10. Jarett Sena, Largest Securities-Related Class Action Settlements of 2023, Institutional Shareholder Services Group of Companies ("ISS") Securities Class Action Services ("SCAS") (Jan. 18, 2024).

11. Flores & Svetlana, supra note 1 at 18.

12. LaCroix, Kevin, The Top Ten Stories in D&O of 2023, The D&O Diary (Jan. 11, 2024) (last visited Jan. 25, 2024).

13. Id.

14.  Sena, supra note 10.

15. Jeff Lubitz & Jarett Sena, Investors to Recover $300 Million from Third Wells Fargo Settlement in Five Years, ISS SCAS (Feb. 23, 2023).

16. Sena, supra note 10.

17. Id.

18. Jones Day, 2022 Securities Litigation Year in Review, at 30–31 (Feb. 2023).

19. Id.

20. In 2021, Jones Day discussed Goldman Sachs Group, Inc. and the "divided panel of the Second Circuit who affirmed the district court's certification of a class based on its finding that Goldman failed to rebut the Basic presumption by a preponderance of the evidence." Jones Day, 2021 Securities Litigation Year in Review at 22–23 (Feb. 2022). 

21. In 2022, Jones Day continued the discussion of Goldman Sachs's ongoing litigation with Arkansas Teacher Retirement System. In one of the "most important class certification cases" of today, the case has continued for more than 12 years, an update is provided regarding the divided panel, the third petition for review of class certification, and oral argument. Jones Day, supra note 18 at 22–23. 

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