U.S. Chamber Report: Securities Class Action System in Crisis with Record Lawsuits, Professional Plaintiffs

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February 26, 2019

Reforms needed from Congress, SEC, Courts

FOR IMMEDIATE RELEASE

February 26, 2019

 

Washington, D.C. — A new report released today by the U.S. Chamber Institute for Legal Reform (ILR) found that securities class action filings skyrocketed in 2018 to 420 cases—doubling the average of the prior 20 years. Containing the Contagion: Proposals to Reform the Broken Securities Class Action System details how plaintiffs’ lawyers fuel this trend by recruiting “professional plaintiffs” to bring cases, earning excessive fees, and bringing repeat “frequent filer” claims that are commonly dismissed.

The paper, which was released at a briefing at the National Press Club, calls on Congress, the courts, and the Securities and Exchange Commission (SEC) to curb an explosion of abusive securities class action lawsuits. 

“Abusive securities class actions are spreading like wildfire because they primarily enrich plaintiffs’ lawyers,” said ILR Chief Operating Officer Harold Kim. “Lawmakers and regulators ought to ensure that shareholders get paid first, and that lawyers cannot seek out ‘home field advantage’ in friendly state courts, or otherwise game the system.” 

Containing the Contagion calls for Congress to close a loophole that allows state courts to hear certain securities class actions, and for the SEC to identify meritless securities lawsuits and encourage stricter oversight by the courts. It also urges Congress to centralize merger-and-acquisition lawsuits in certain federal courts, ensure that shareholders and not lawyers control such litigation, deter redundant lawsuits, and prioritize recoveries by small investors. 

Today’s event also featured a discussion of new public opinion research from Public Opinion Strategies showing that both investors and voters believe securities class action lawsuits are a poor tool for holding companies accountable, and strongly support reforming the system. The findings also show that the public overwhelmingly believes that lawyers are the primary beneficiaries of securities class actions.

ILR also released Risk and Reward: The Securities Fraud Class Action Lottery, a paper detailing how the low-risk and high-reward potential of securities class actions incentivizes questionable claims.  

 

 


About the U.S. Chamber Institute for Legal Reform

 

The U.S. Chamber Institute for Legal Reform seeks to promote civil justice reform through legislative, political, judicial, and educational activities at the global, national, state, and local levels.

 

About the U.S. Chamber of Commerce

 

The U.S. Chamber of Commerce is the world’s largest business federation representing the interests of more than 3 million businesses of all sizes, sectors, and regions, as well as state and local chambers and industry associations.

 

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