Corporations were slapped with 224 securities class-action suits in 2002. That number was 31% higher than the 171 suits filed in 2001. The year 1998 saw 238 shareholder class action suits, still the record level since the passing of the Reform Act in 1995, according to a study by the Stanford Law School Securities Class Action Clearinghouse.
Last year’s rise in securities fraud suits coincided with an increase in financial restatements by public companies. In all, 330 companies restated their financial results in 2002, up from 2001’s 270 tally, according to a January report by financial- advisory services firm Huron Consulting Group LLC.
Shareholder class actions grew in popularity with the onset of the tech bubble in the mid-1990s and its subsequent bust in the following years. Even the restrictions imposed on such lawsuits by the 1995 Private Securities Litigation Reform Act didn’t slow the pace, the study showed. The law, designed to curb frivolous complaints, makes it easier for defendant companies to get such suits thrown out before trial.
However, the majority of these suits get settled before going to trial. In 2001, a stockholder class action averaged a collection of approximately six cents for every dollar lost.