Nathan Koppel at the WSJ reports today, under the headline "Securities Lawsuits Leapt in '08":
Securities-fraud lawsuits rose in 2008 due largely to a rash of filings against financial firms by investors who sustained losses from the mortgage meltdown.
A total of 210 prospective securities class actions were filed last year, a 19% increase over the previous year and more than 80% above the 2006 total, according to a report issued jointly Tuesday by Stanford Law School and Cornerstone Research. The 2008 suits allege more than $800 billion in damages, although suits often settle for a fraction of claimed damages.
On the same day, the Fourth and Seventh Circuits affirmed dismissals of — you guessed it — securities fraud class actions.
The Fourth Circuit held that the allegations didn't raise a "strong inference of scienter" on the part of Deloitte & Touche in failing to detect fraudulent accounting practices at Royal Ahold, N.V., and U.S. Foodservice, Inc. Public Employees' Retirement Ass'n of Colorado v. Deloitte & Touche LLP, No. 07-1704 (4th Cir. Jan. 5, 2009). The court's decision turned largely on its crediting the audit firm's insistence on gullibility.
Up in Chicago, Judge Posner positively blistered the whole litigation process in concluding that the plaintiffs' long and rambling complaint pleaded no plausible basis for believing they actually relied on the allegedly false statements. His snippy opinion concluded thus:
Defendants are not to be subjected to the costs of pretrial discovery in a case in which those costs, and the costs of the other pretrial maneuvering common in a big case, are likely to be great, unless the complaint makes some sense. If after 85 pages of huffing and puffing in the complaint, and another 83 pages of appellate briefs, sophisticated investors cannot make their case seem plausible, the litigation must end then and there.
Stock Trading v. Falconbridge Ltd., No. 08-1327 (7th Cir. Jan. 5, 2009).
Hulk says: Puny human! and You're making me angry. You wouldn't like me when I'm angry.