Author: Walker Newell
At any given time, several thousand companies trade publicly on US securities exchanges. Each of these companies is a potential target for securities class action litigation.
Every year, plaintiffs bring securities class actions against about 3% to 5% of these companies. Over the past decade, this has meant that plaintiffs brought an average of about 200 securities class actions annually. While this number has fluctuated a bit year over year, it's never gone below 168 (2022) or above 268 (2019). And, apart from those two years, every other year from 2015 to 2025 saw total annual securities class actions in a tight range between 182 and 223.
Over the same time, more than 40% of securities class actions have ended in a monetary settlement. When cases settle, victorious plaintiffs' lawyers receive a fee award. In recent years, plaintiffs' firms have often been awarded more than $1 billion annually.
Plaintiffs have a Ted Williams batting average: A strong chance of being awarded a settlement on behalf of clients and a strong chance of earning a large fee award every time that they file. Given this winning record, why don't plaintiffs' lawyers file more class actions?
Possible structural throttles on securities class action filings
The lawyers in the securities plaintiffs' bar are smart. What are the key factors causing them to conclude that it only makes sense to file 200 securities class actions per year and not 400?
Here's a non-exhaustive list of a few possible reasons.
Possible structural throttles on securities class action filings
In federal securities class actions, plaintiffs need to comply with the Private Securities Litigation Reform Act (PSLRA). The PSLRA creates more rigid pleading standards than found in other areas of the law.
Among other requirements, plaintiffs must "specify" all allegedly misleading statements, the reasons why the statements are misleading and the particular facts on which a belief that the statements are misleading is based. The complaint also needs to create a "strong inference" of scienter (i.e., intent). The PSLRA includes a provision for a mandatory sanctions review against plaintiffs when defendants prevail in litigation.
Sometimes, plaintiffs' lawyers take a hard look at a company's disclosures and conclude that they've done a bang-up job. In these cases, filing suit doesn't make sense because the allegations won't meet the PSLRA's pleading standards.
The question of whether a case will meet the PSLRA's pleading standards, however, is very much in the eye of the beholder in the early stages. Judges have tons of discretion, and historically plaintiffs and defendants each bat about .500 at the motion to dismiss stage. Also, even among the roughly 200 cases filed each year, weak securities class actions are relatively common. And judges don't award sanctions against lawyers just because they filed a weak case. So it's not clear that plaintiffs' lawyers should be super worried about filing weak cases that have a higher-than-average risk of being dismissed.
Plaintiffs' lawyers engage in a nuanced calculus when deciding which cases to file, and some of that calculus is surely based on the quality of the company's disclosures. From a pleading perspective, though, the incentives would seem to weigh in favor of more filings, even if that means filing a higher number of weaker cases.
Potential throttle #2: Stock drop magnitude
A plaintiff's decision to file or not to file is in significant part a function of three things: the magnitude of the market cap decline, its duration and whether it can be persuasively attributed to particular corporate disclosures.
If a $100 million market-cap company experiences a 20% stock drop, the maximum potential recovery available is $20 million. If a $1 trillion market cap company experiences a 20% drop, the maximum potential recovery available is $200 billion. In reality, both cases will settle for a fraction of the potential total loss.
Because securities class action fee awards are calculated based in part on the amount the company pays in settlement, a mega-cap stock drop is, all else equal, a more attractive case to plaintiffs.
These incentives show up clearly in the data. Large- and mid-cap companies are considerably more likely than micro-cap companies to be hit with securities class actions. A few major settlements against large-cap companies often make up the lion's share of the billions that companies pay in settlements each year.
The total pool of large-cap companies, however, is relatively small. Around 100 public companies are currently valued at $100 billion or greater. Expanding the aperture to mid- and large-cap companies, we are talking about 1,300 public companies in total with a market cap of $5 billion or greater.
With these numbers in mind, maybe the key throttle is case availability. Maybe plaintiffs are efficiently filing the most potentially viable cases that exist in the wild, and for the past decade that number has always been about 200. There could be some other potentially viable cases in the small- to mid-cap range, but these cases are less attractive, so they aren't always pursued.
I think there's some truth to this thesis, but there's still more to the story. Significant earnings-related stock price declines are quite common, and yet most of these events aren't followed by a securities class action filing. Market conditions differ significantly in different years, but we don't see years with 400 filings and years with 100 filings.
We are getting closer to the answer. Some of the 200 annual cases trend is due to the need to make a plausible case. Some of it is due to factors related to case selection. And other factors are probably also at play.
Potential throttle #3: Resource constraints
Like many areas, the securities plaintiffs' bar is top-heavy. A handful of highly successful firms dominate the high-profile, large-dollar securities class action litigation against large-cap public companies. These firms have the resources to litigate long, bitter cases against well-resourced opponents.
Still, compared to defense shops, even the largest securities plaintiffs' firms are relatively small. Bernstein Litowitz (one of the most prominent plaintiffs' firms), for example, seems to have about 100 lawyers.
Litigation costs are high for both plaintiffs and defendants. If a plaintiffs' firm loses a case, they don't get paid. And while cases continue, often for several years, unpaid fees and expenses pile up.
Each securities class action filing carries risk and expense. Sophisticated plaintiffs' firms can only make so many bets every year. Smaller firms have even less bandwidth. These resource and structural constraints also certainly impact the number of annual filings.
Is AI a boon for plaintiffs' lawyers?
The motion to dismiss is the critical event in federal securities litigation. If plaintiffs win, a case is very likely to settle eventually. If defendants win, the case goes away.
Briefing a motion to dismiss can be time intensive. Plaintiffs' lawyers have to read a bunch of securities filings, find shareholders to serve as plaintiffs, draft and file a complaint, oppose the company's motion to dismiss, recruit confidential witnesses, draft an amended complaint, oppose a second round of motion to dismiss and then — if things go well for the plaintiffs — enter into a long and costly discovery battle. This process includes reviewing document productions, conducting depositions and engaging in more motion practice over months or years.
If AI proves to be a significant boon to legal productivity, plaintiffs' firms may be some of the biggest beneficiaries. Defense firms are paid by the hour, win or lose. Plaintiffs' firms eat what they kill. Plaintiffs' fees are usually calculated with at least some check on the lodestar — i.e., the hours the lawyers actually spent on the case — so billings are important to them, too. But really, plaintiffs mainly just want to win.
An AI model tailored to securities class action practice could, in theory, save plaintiffs a ton of time during the motion to dismiss stage. If the motion to dismiss stage becomes considerably cheaper and less human-intensive, plaintiffs may be incentivized to file more cases.
If this theoretical new batch of cases has a lower hit rate, no big deal. The marginal cost of each filing has gone down, so plaintiffs are comfortable with a higher failure rate If plaintiffs file 400 cases per year and settle 30% — instead of 40% — of those cases, that would seem to be an attractive proposition.
I don't have a high degree of confidence in this thesis. It's easy to see how generative AI tools could be a boon to plaintiffs' lawyers' productivity, creating more headaches for corporations. At the same time, we don't have enough evidence to know exactly how the most effective AI adopters in the legal space will use the technology, and whether it will prove to be truly transformative or just a powerful adjunct to existing workflows.
For now, the seasons will change, the world will turn, and — if past performance is predictive of future behavior — plaintiffs' firms will file about 200 securities class actions this year.
Published March 2026
