Securities class action cases in the US increase for the second consecutive year
The US witnessed a surge in securities class action filings for the second consecutive year in 2024, accompanied by a notable increase in claims related to artificial intelligence (AI). The “Securities Class Action Filings—2024 Year in Review” report by Cornerstone Research and Stanford Law School Securities Class Action Clearinghouse highlighted the escalation in overall filings despite a decrease in Securities Act of 1933 claims. The data showed that 225 securities class action lawsuits were initiated in both federal and state courts throughout 2024, a rise from the 215 cases recorded in 2023. This uptick was mainly driven by core cases while mergers and acquisitions (M&A) filings were excluded, reaching 220 in 2024, a 14% increase compared to the 1997–2023 historical average of 193 filings.
One of the notable trends observed in the 2024 data was the substantial spike in AI-related claims. The number of AI-associated filings more than doubled from seven in 2023 to 15 in 2024, while pandemic-related filings experienced a 36% increase as compared to the previous year. In contrast, claims linked to Special Purpose Acquisition Companies (SPACs) and cryptocurrency plummeted by more than 50% from 2023 figures. Cybersecurity filings also exhibited a decline during this period.
An expert highlighted the ongoing shift in securities litigation dynamics, emphasizing the transformation observed in the nature of securities litigation. The data also indicated a significant change in the size of core filings. The Disclosure Dollar Loss Index (DDL Index), measuring total investor losses, surged by 23% to USD 438 billion in 2024, surpassing the historical average of USD 237 billion. On the other hand, the Maximum Dollar Loss Index (MDL Index) experienced a sharp decline by 52% from USD 3.3 trillion in 2023 to USD 1.6 trillion in 2024. Nevertheless, mega-filings with an MDL exceeding USD 10 billion accounted for nearly 80% of the total MDL in 2024, amounting to USD 1.3 trillion.
Examining the broader context of securities litigation, a former Securities Exchange Commission (SEC) Commissioner raised concerns about the escalating uncertainty surrounding securities cases. Joseph Grundfest from Stanford Law School noted the selectivity in deciding which securities cases to hear by the US Supreme Court, signaling potential challenges for practitioners in the future.
Key trends from the report offered deeper insights into the evolving dynamics of securities litigation. The majority of the 15 AI-related filings in 2024 were concentrated in the technology sector, followed by the communications, industrial, and consumer non-cyclical sectors. The consumer non-cyclical sector observed a noticeable rise in total filings, climbing from 54 in 2023 to 67 in 2024. Moreover, the report highlighted a record-high of 27 mega DDL filings in 2024, with the total value of these filings ranking as the third highest on record, hinting at a shift towards higher-value cases. Additionally, the prevalence of core federal filings with Rule 10b-5 claims, which pertain to securities fraud, reached its highest level in more than five years, reflecting the evolving landscape of securities litigation and the dwindling traditional 1933 Act claims.
