Securities litigation rose sharply in the second quarter this year, reversing a first-quarter decline and returning to the trend of recent years, according to an analysis.

New York-based Advisen Ltd. said Monday that second-quarter securities litigation was 30% higher than the first quarter this year and 19% higher than the second quarter last year. Suits related to the Deepwater Horizon oil spill contributed to the trend, the report said.

“A surge in securities litigation in the second quarter of 2010 was driven by short-term reactions to headline-grabbing events as well as what are shaping up to be longer-term shifts in litigation trends,” Advisen said in the report sponsored by ACE Ltd.

The number of suits filed against energy companies jumped 82% over the first quarter, driven by the Deepwater Horizon spill and the April 5 fatal explosion at the Upper Big Branch mine in West Virginia, Advisen said. The Deepwater Horizon also drove a near doubling in derivative suits in the second quarter compared with the first quarter, the report said.

Meanwhile, the report found that credit crisis-related filings this year have been far below previous years, but financial firms still represent the most popular target—named in about 34% of securities litigation in the second quarter. Investment bank Goldman Sachs Group Inc. or its directors and officers were named in five of the seven new credit crisis-related suits during the quarter, Advisen said.

One piece of favorable news for defendants is that the average settlement during the first half this year fell to $18.9 million, more than $10 million below the average settlement in 2009.

Still, the average securities class action settlement has risen sharply from $10.4 million in 2009 to $49.6 million in 2010, aided by eight proposed or final settlements of $100 million or more, Advisen said.

Download D&O white paper But securities class action suits may be becoming less frequent. Securities class action suits accounted for almost half of all securities suits before 2006, but represented only 23% of such suits in 2009 and only 19% through the first half this year, the report said. Instead, breach of fiduciary suits now account for 33% of all second-quarter securities suits. Two-thirds of the suits were filed in state courts.

Securities fraud suits, a category in which Advisen counts suits brought by regulators or law enforcement agencies, increased slightly over the first quarter. Such filings accounted for 29% of all second-quarter suits compared with 36% in the first quarter and 38% in second quarter last year.

In the first half of 2010, 13% of securities litigation was filed against non-U.S. companies. Advisen said litigation against foreign companies is likely to dip after the U.S. Supreme Court's June 24 decision in Robert Morrison et al. vs. National Australia Bank Ltd. et al., which appeared to outlaw foreign shareholders of foreign companies with shares traded on foreign exchanges from suing in U.S. courts.

Copyright © 2010 Crain Communications, Inc.