Securities Class Actions Surge in 2024 Driven by AI and Market Shifts

Securities class action filings surged in 2024, driven by a notable rise in AI-related litigations, despite a decline in filings under the 1933 Act.

In 2024, the number of securities class action lawsuits surged, marking the second consecutive year of growth.

This trend was spotlighted in a recent report from Cornerstone Research, produced in partnership with the Securities Class Action Clearinghouse at Stanford Law School.

One of the most striking findings was a dramatic increase in litigations related to artificial intelligence (AI), which saw its figures more than double compared to 2023.

Trends and Insights

Curiously, the overall rise in lawsuits came despite a decline in filings related to the Securities Act of 1933, both at the federal and state levels.

Titled Securities Class Action Filings—2024 Year in Review, the report noted that 225 securities class actions were filed in 2024, up from 215 the previous year.

Of these, 220 were classified as “core” filings—excluding those tied to mergers and acquisitions—showing a 14% rise from the historical average of 193 from 1997 to 2023.

The report highlighted an increase in AI-related filings, jumping from seven cases in 2023 to 15 in 2024.

Additionally, COVID-19-related claims rose by 36%, although they still fell short of the peak figure of 20 seen in 2022.

In contrast, lawsuits concerning special purpose acquisition companies (SPACs) and cryptocurrencies decreased by over 50% from the previous year, with cybersecurity-related claims also continuing on a downward trend.

Financial Stakes and Filings by Sector

Alexander “Sasha” Aganin, a senior vice president at Cornerstone Research and a coauthor of the report, pointed out a significant 34% drop in filings under the Securities Act of 1933, reaching the lowest level since 2013.

On the other hand, there was a notable increase in federal Section 10(b) filings, driven in part by the surge in AI and COVID-19-related claims, leading to an overall uptick in securities class action lawsuits.

The financial stakes of these core filings also escalated.

The Disclosure Dollar Loss Index (DDL Index) for 2024 soared by 23%, reaching $438 billion—far exceeding the historical average of $237 billion.

Conversely, the Maximum Dollar Loss Index (MDL Index) for aggregate filings saw a significant decline, falling 52% to $1.6 trillion from $3.3 trillion in 2023.

  • In the 15 AI-related lawsuits filed in 2024, eight came from the Technology sector, with four from Communications, two in the Industrials, and one in Consumer Non-Cyclical.
  • The Consumer Non-Cyclical sector witnessed a jump in filings, increasing from 54 in 2023 to 67 in 2024, driven largely by actions against Biotechnology companies in the year’s latter half.
  • The proportion of core filings against U.S. exchange-listed companies rose to 3.9% in 2024, up from 3.2% the previous year.

    Meanwhile, the likelihood of S&P 500 companies facing core federal lawsuits dipped by one percentage point to 6.1%.

A record 27 mega DDL filings were recorded in 2024, positioning the total index value among the third highest on record.

For the second year in a row, core federal filings in the Ninth Circuit surpassed those in the Second Circuit, totaling 69 to 64.

While filings in the Ninth Circuit stayed constant compared to 2023, the Second Circuit experienced a growth from 49 to 64 filings.

Finally, core federal filings asserting Rule 10b-5 claims reached their highest proportion in over five years.

This report provides a detailed look into the shifting terrain of securities class action litigation, emphasizing how emerging technologies and ongoing market trends shape the landscape.

Source: Insurancejournal.com