U.S. securities class action settlement activity held up in 2020 despite the disruptive effects of the Covid-19 pandemic, according to a new report from Cornerstone Research.
There were 77 court-approved class action settlements in 2020, representing $4.2 billion (all figures in U.S. dollars) in damages, the firm reported. This compared with 74 settlements, amounting to $2.1 billion in damages, in the previous year.
While the onset of the pandemic initially disrupted settlement activity in April 2020, that pause proved temporary, the report noted.
“It will likely be at least a couple of years before we learn whether Covid-19-related allegations have had an impact on other settlement trends,” said Laura Simmons, senior advisor at Cornerstone Research, in a release.
The report said class action cases typically take about three years to reach the settlement stage.
Based on case filing activity, future settlements may well involve allegations related to Covid-19, along with other recent market trends, such as cases involving cryptoassets, special purpose acquisition companies (SPACs) and cybersecurity issues.
The report also noted that the jump in settlement amounts in 2020 was largely due to the effects of six “mega” settlements (of at least $100 million) during the year.
Excluding settlements worth over $1 billion, total settlement values declined by 4% year over year in 2020, the firm said.
Additionally, the median settlement amount in 2020 was 13% lower than in 2019. However, both the median and average settlement in 2020 were well above recent historical levels (over the past nine years).