Press Release March 09, 2020

Technology and Communications Sectors Faced 106% Surge in Securities Class Actions Since 2017

Goodwin Publishes Report Analyzing Critical Trends in Securities Litigation Against Technology Companies 

Global law firm Goodwin today announced the release of its second annual Year In Review - Securities Litigation Against Technology Companies. Produced by the firm’s Securities + Shareholder Litigation practice, the report analyzes the most interesting securities class action decisions issued in 2019 and cases to watch in 2020 that will impact technology companies going forward.

This year’s Year in Review takes a deep dive into the most significant decisions issued by state and federal courts in 2019 in securities class actions filed against publicly traded companies in the technology and communications sectors (together, “technology companies”). Securities class actions across all sectors reached an all-time record level. Technology companies were once again the second-most targeted sector in securities class action filings in 2019 compared, as filings against technology companies increased by 32% from 2018, and 106% from 2017.

“The tech sector remained a significant target for securities class action lawsuits in 2019, likely due to the sheer number of public companies operating in the space and the inherent volatility in stock prices across this broad sector,” said Michael Jones, a partner in Goodwin’s Securities + Shareholder Litigation practice and co-author of the report. “Goodwin’s analysis of 2019 decisions and upcoming 2020 cases provides critical guidance that technology companies at various growth stages and their directors and officers should consider when making disclosure decisions in the year ahead.”

These cases were filed in both state and federal courts under the Securities Act of 1933 (1933 Act) and/or the Securities Exchange Act of 1934 by shareholders seeking to recover investment losses after a company’s stock price dropped following a corporate disclosure. The cases and decisions issued in 2019 involved disclosures concerning issues technology companies most often face, including revised or missed financial guidance, slowed growth and design vulnerabilities.

With an expanded focus on the courts in the most active technology hubs in the country — the Ninth Circuit and California and Nevada District Courts; the Second Circuit and New York and Connecticut District Courts; and the First Circuit and District of Massachusetts — the report highlights significant patterns and trends emerging in each of these jurisdictions.

The report also analyzes data published by Cornerstone Research of class action filings in 2019, and identifies key trends such as:

  • A record number of new securities class actions (428) were filed across state and federal courts in 2019
  • A significant uptick (40% from 2018) in class action filings in state courts alleging claims under the 1933 Act, a majority of which (31 of 49) were related to initial public offerings despite a drop in IPO activity
  • Approximately 11% of federal core filings against technology companies were dismissed by December 31, 2019, as compared to a 10% year-end dismissal rate in 2018 and a 19% year-end dismissal rate in 2017
  • Approximately 30% of cases filed in 2018 and 41% of cases filed in 2017 were dismissed were dismissed before the end of 2019

View the full analysis here.

As the leading law firm focused on the intersection of capital and innovation, Goodwin’s litigation practices have developed a reputation as the go-to counsel for matters involving M&A litigation and post-closing disputes; advising established and emerging technology, life sciences, private equity, financial services and real estate companies; securities class action litigation and SEC investigations; advising clients in trade secret disputes; while collar defense; and government investigations. The firm’s Securities + Shareholder Litigation practice is highly ranked in leading industry publications including The Legal 500 and Chambers.