REIT Insurance Experts Report Sharp Increase in Securities Class Action Litigation

Michael Chu, vice president and national practice leader, REITs, at Arch Insurance Group and Howard Sider, underwriting manager at Arch Insurance, participated in a video interview at Nareit’s REITwise: 2018 Law, Accounting & Finance Conference in Hollywood, Florida.

Based on data from Cornerstone Research, Chu noted that the number of securities class action filings at the federal level continued to surge in 2017. The 412 federal filings in 2017 is a “staggering” number, according to Chu, and represents a 52 percent increase year-over-year and a 113 percent increase over the historic 20-year average.

Roughly 48 percent of the 412 filings were mergers and acquisitions (M&A)-related, Chu pointed out. The rate of litigation has increased in each of the past five years and currently sits at record highs, he said. “The frequency is significant and is something we’re going to continue to watch.”

Turning specifically to REITs, Sider noted that M&A litigation moved from state court to federal court in 2017. Other notable trends in 2017 included increased activity for derivative demand letters, particularly those focused on executive compensation, and activist investors.