Securities Class Action Settlements Reach Record Level

The dollar amounts of federal securities class action settlements reached record highs in 2006, two industry surveys have reported.

Securities Class Action Services (SCAS) estimates that the total was $18 billion, about $1 billion higher than a finding by Cornerstone, whose count topped its 2005 figure by $3.5 billion -- an increase of more than 300 percent.

However, observers who track case filings and potential legal and economic developments say those dizzying totals may drop.

SCAS attributed last year's numbers to the settlements of mega-cases involving Enron, AOL-Time Warner, Nortel Networks, European supermarket chain Royal Ahold and McKesson Corporation.

Meanwhile, there are indications that settlement totals may slow in the next few years.

In a statement accompanying the latest report, Stanford Law School professor Joseph Grundfest said the 2006 record is a peak and predicted that 2007 is virtually certain to generate a far smaller aggregate settlement amount.