U.S. Securities Class Action Lawsuit Filings Soared In 2007

Following two years of decline, the number of companies sued in U.S. securities fraud class action lawsuits increased by 43% in 2007, according to a joint study released this week by Stanford Law School and Cornerstone Research. Filings increased by an even greater 87% in the courts encompassing New York and the other courts within the federal Second Circuit. The finance sector bore the brunt of the proliferating litigation as 47 companies were sued in 2007, more than quadrupling the 11 such companies sued in 2006. Moreover, the share of cases in which an underwriter was named as a defendant surged from 4% in 2006 to 11 percent in 2007.

The substantial rise in securities class action filings followed quickly on the heels of the collapse of the subprime mortgage market and coincided with an uptick in stock market price volatility. Indeed, the report observes that, on average, a 10 point increase in the