Global law firm Goodwin today announced the release of its third annual Year in Review: Securities Litigation Against Technology Companies. Produced by the firm’s Securities & Shareholder Litigation practice, the in-depth report analyzes data concerning securities class actions filed nationally against publicly traded companies in the technology and communications sectors (together “technology companies”) and summarizes the most interesting decisions issued by courts in 2020 and cases to watch in 2021.
“The pandemic accelerated the adoption of technology at work and at home, creating a significant boost for the technology sector,” said Michael Jones, Goodwin partner and co-author of the report. “This favorable performance is likely a contributing factor to the decline in securities class actions against technology companies for the first time since 2016.”
“Despite this decline, technology companies still had the second highest number of securities class action filings against them as compared to other sectors, likely due to the number of companies in the sector and the potential volatility in stock prices,” said Caroline Bullerjahn, partner and co-author of the report. “We anticipate technology companies will remain a target of these actions and will continue to be impacted significantly in the year ahead with several important cases still in play.”
The report also analyzes data published by Cornerstone Research concerning 2020 class action filings, and identifies key trends such as:
- Filings Decrease for First Time in Years: The number of filings against technology companies decreased for the first time in several years, from 66 class actions in 2019 to 47 actions in 2020. This 29% decrease is likely attributable to largely positive market performance by the technology sector following the initial market reaction to the pandemic.
- 1933 Act Filings Drop Despite Increase in IPOs: The total number of 1933 Act filings dropped dramatically (from 66 in 2019 to 33 in 2020), despite the fact that the number of traditional IPOs increased by 47% from 2019 to 2020. This could be due to the fact that market declines and disruption in early 2020 were caused by the unanticipated pandemic, followed by overall favorable market conditions beginning in April 2020. 1933 Act filings also shifted back to federal courts in 2020 following the Delaware Supreme Court’s March 2020 decision in Salzberg v. Sciabacucchi, upholding the validity and enforceability of federal forum selection provisions in corporate charters or bylaws that many Delaware corporations have implemented.
- Case Dismissal Rate Continues Decline: The percentage of cases against technology companies dismissed within one year of the filing date continued the downward trend observed from 2015 to present. Only 6% of federal core filings against technology companies were dismissed by the end of 2020, as compared to a 12% year-end dismissal rate in 2019. While this is partly attributable to court docket backlogs due the COVID-19 pandemic, the trend over the last several years has made it clear that there is little chance of obtaining dismissal of a class action against a technology company within the first 12 months after filing.
View the full report here.
Goodwin’s Securities & Shareholder Litigation practice handles securities class actions, shareholder derivative litigation, M&A litigation, and private equity, and portfolio company litigation. The practice is highly ranked in leading industry publications including The Legal 500, Chambers, and US News — Best Lawyers®. Goodwin was named the 2021 Biotechnology Law Firm of the Year by US News — Best Lawyers®, the 2020 Corporate and Intellectual Property firm of the year by LMG Life Sciences Awards, and 2020 Life Sciences Firm of the Year by The British Legal Awards.