Securities Fraud Class Actions Leapt 31% In 2002

by Glen Shapiro, LawAndTax-News.com, New York

19 March 2003

According to a study released by the Stanford Law School Class Action Clearinghouse in conjunction with Cornerstone research, the number of securities fraud class action suits filed in the US increased by around 31% in 2002.

Reporting on the results of the survey, the Law.com news service revealed that investors filed 224 class action claims last year, compared to 171 in 2001. Companies which were sued last year reportedly lost a combined market capitalization of around $1.9 trillion.

The study also revealed that where technology companies were once the focus of the majority of securities fraud class action claims, in 2002 they represented just 9% of the total, with communications, consumer products and financial service providers receiving the lion's share of attention from plaintiffs.

Following the release of the study, Stanford Law School Professor, Joseph Grundfest explained that:

'Not all of that decline is going to be attributable to fraud. The thing that's important to recognize is that some of these complaints have merit; some of these complaints will be dismissed in the pleading stage.'

Speaking to Law.com, Seth Aronson, chairman of the securities litigation group with LA-based law firm, O'Melveny & Myers, confirmed this, revealing that:

'A lot of it also has to do with the fact that we're seeing more accounting restatements. Even though a restatement does not by itself indicate that anything was done wrongfully, the plaintiffs view a restatement as an invitation to file a lawsuit.'

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