The deck grows cold

November 6, 2009

It was a long hot summer for securities class action plaintiffs, and only with the cooling weather around early November have their fortunes turned back upward — a little. 

Back in May, I posted about the wins versus losses on motions to dismiss securities class actions in litigation arising out of the subprime mortgage / credit crisis.  Assigning a value of plus one for denials of motions to dismiss, minus one for dismissals with prejudice, minus 0.5 for dismissals with leave to amend, and minus 0.25 for a mixed result, I concluded that as of May 27/09, the count was actually running in favor of the plaintiffs, at plus 2.75.   I had miscalculated.  The count in favor of the plaintiffs was even better than that — it was 3.25.  Definitely back then it was the time for a Blackjack card counter to increase the size of his bets. 

At that point we were about eighteen months into this kind of litigation, and there had been 25 rulings.  Six months and seventeen rulings later, at nearly 24 months since the first ruling, it’s time for another look. 

joe pesci

Guys like these can make it very uncomfortable at the Blackjack table

What a difference six months makes.  Of these 17 further rulings, twelve favored the defendants.  Five were dismissals without prejudice, seven were outright dismissals with prejudice, and only five were denials of motions to dismiss.  If we had taken a snapshot in late September, we’d say the “house” (defendants) had roared back with a vengeance. The count at that point had hit minus 2.25, a swing of negative five and a half.  If plaintiffs were blackjack players, at that moment in time they’d be the unfortunates getting beaten up in the back room of the casino. 

It’s only by virtue of a couple of very recent wins for plaintiffs in late October and early November that we’re now back up to just over zero, at plus 0.5, and instead of being the guys with the broken hands and shattered kneecaps lying next to the garbage cans in the back alley behind the casino, the plaintiffs are still able to walk out in the sunlight on the strip, although a bit dazed.   

Right now, there’s no significant trend favoring plaintiffs, and no significant trend favoring defendants.  The current trendline (click here for TrendlineChartNov06-09) starting from day one runs at only a slight slope upward to the right, not enough to say the plaintiffs are still on a winning streak.  The angle of the trendline back in May was much steeper in the plaintiffs’ favor.  

As before, my source for these statistics is Kevin LaCroix’s excellent and authoritative blog,