Whether parallel lawsuits relying on state law but arising out of federal securities class action are merely duplicative or value-adding (for shareholders) continues to attract both theoretical and empirical attention. A recent contribution to the empirical literature includes a paper by Stephen Choi (NYU) et al., Piling On? An Empirical Study of Parallel Derivative Suits. The paper presents results from a sample of public companies named as defendants in securities actions between 2005 and 2008. A summary of the paper's findings follows.
"We find that while some parallel suits are filed first, potentially providing value in identifying wrongdoing, most are filed after a securities class action (termed “piggyback” parallel suits). Most piggyback parallel suits target cases involving obvious indicia of wrongdoing, indicating that parallel suits do not add value by devoting resources to cases where a securities class action may not already provide sufficient deterrent value. Although we do find that piggyback suits correlate with the targeting of individual officers not already named as defendants in the securities class action, this expansion of defendants is not positively correlated with an increase in settlement incidence, monetary recovery amounts, or attorney fees. One possible way a parallel suit may add value is by imposing different forms of sanctions for wrongdoing. We find that piggyback parallel suits often result in non-monetary, corporate governance settlements, particularly for frequent filing plaintiffs’ attorneys filing a piggyback parallel suit. Corporate governance settlements correlate with significantly lower attorney hours and attorney fees for the plaintiffs’ attorneys. We conclude that such settlements do not represent the product of extensive work by attorneys but are instead used to justify fees in cases where there is no monetary recovery."