Securities Class Action Filings Rise in First Half of 2024, AI Cases Emerge
Securities class action filings increased in the first half of 2024 compared to the second half of 2023, according to a midyear report by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse.
The report found that 112 securities class actions were filed in federal and state courts in the first half of 2024, marking an increase from the 103 class actions filed in the second half of 2023.
Core filings — state and federal securities lawsuits without merger and acquisition allegations — accounted for all but two of those lawsuits, with only two federal M&A filings in the first half, the report found.
The survey tracks core filing activity in various categories of liability trends, with artificial intelligence (AI)-related claims a new category with this report.
“While we’ve seen AI-related filings in recent years, the first half of 2024 marks the beginning of tracking these filings as a trend category. The growing prominence of AI in the business models of many companies may lead to more filings in the future,” said Alexander “Sasha” Aganin, the report’s coauthor and a Cornerstone Research senior vice president. “Meanwhile, SPAC-related filings are on pace to decline steeply relative to recent years, and cryptocurrency-related filings, which have been hot for the past several years, experienced a sharp decline.”
Trend Categories of Core Federal Filings
AI Claims
The report began tracking AI-related class action filings in H1 2024. There were six AI-related federal filings in the first half of 2024, the same level as in all of 2023 and 2022, the report shows.
“While AI related filings are not new, the growing prominence of AI in the business models of many companies may lead to an increase of such filings in the future,” the report’s authors stated.
“The potential for real liability resulting from artificial intelligence is among the more interesting developments of the past six months,” stated former Securities and Exchange Commission commissioner Joseph Grundfest, professor emeritus at Stanford Law School.
COVID-19
There were seven COVID-19-related filings in the first half, compared to 11 in all of 2023 and 20 in 2022, the report found.
“The number of COVID-19 filings in 2024 is on track to exceed the number of such filings in 2023,” the report noted. “These COVID-19-related filings often include allegations related to issues resulting from the pandemic’s impact on product demand.”
Cyptocurrency
Only three cryptocurrency-related class actions were filed in the first half, down from 14 in 2023 and 23 in 2022.
“The number of cryptocurrency-related filings in 2024 H1 (three) was in line with 2023 H2 (three), but down sharply from 2023 H1 (11),” the report noted.
Cybersecurity
“There were no cybersecurity-related filings in 2024, representing a continued decline from the 2021 high of seven filings,” the report stated. In 2023, there were three cybersecurity-related filings, while 2022 had four.
SPACs
Filings related to Special Purpose Acquisition Companies (SPACs) are expected to decline, with five filings in the first half, compared with 25 in all of 2023 and 28 in 2022.
Impact of Class Actions on Market Capitalization
The report tracks changes in the dollar value of a defendant’s market capitalization between the trading day immediately before the end of the class period and the trading day immediately afterward. The Disclosure Dollar Loss (DDL) Index® reached $185 billion in the first half of 2024, a 9% increase from the second half of 2023. The H1 value marked the sixth-consecutive quarter that the index’s value exceeded the 1997-2023 semiannual average of $119 billion.
The report also tracks changes in a defendant company’s market capitalization between the trading day with the highest market cap during the class period and the trading day immediately following the end of the class period. The Maximum Dollar Loss (MDL) Index® decreased by 9% to $908 billion in the first half of 2024, compared with the record high set in the first half of 2023. The H1 MDL value remains 51% above the historical semiannual average of $600 billion.
The two indexes “should not be considered an indicator of liability or measure of potential dates,” the report explained. “Instead, it estimates the impact of all information revelated during or at the end of the class period, including information unrelated to the litigation.”
View the full report on Cornerstone Research website. &