Retailers are the target of only a small portion of securities litigation brought each year. But the number of cases is rapidly growing — and the number of ways retailers and other companies can end up being named in a securities lawsuit is growing along with it.
“There is really a cottage industry of plaintiffs’ firms that have emerged in the securities class action space,” said Susan Saltzstein, co-deputy chair of the nationwide securities litigation practice at Skadden. “It’s a business.”
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Saltzstein spoke during the March 4-6 NRF Retail Law Summit. In other sessions, the head of claims consulting at Marsh McClennan said retailers should settle more claims before they turn into litigation; attorneys from Venable outlined a “patchwork” of new state-level privacy laws taking effect; and the head of the Consumer Product Safety Commission said the end of exemptions from tariffs and inspections for small purchases from China will make safety enforcement easier.
There has been a 20% increase in securities litigation since 2022, Saltzstein said, with 229 federal class actions filed this year, driven by $3.8 billion paid to settle cases last year.
“No industry is immune,” she said. “If you looked 10 years ago, you would’ve seen the financial industry really heavily focused (but) plaintiffs’ firms have branched out, looking at emerging technologies, health care, consumer (and) commercial.”
The retail industry accounts for about 5% of cases.
Securities lawsuits are typically filed when a publicly traded company makes statements about financial expectations but then hits a “snag” or “bad quarter” and stock prices decline. Materially false or misleading statements are clearly illegal, “but it could be just a mistake” that leads to litigation, Saltzstein said.
Statements prompting a lawsuit don’t have to be in Securities and Exchange Commission filings, quarterly reports or on calls with analysts. Remarks at an industry conference, on a website or even in a newspaper interview can all become problematic.
Restatements, inaccuracies and failures to abide by laws and policies were the mainstays of securities cases years ago. But with a growing number of companies adopting environmental, social and governance policies and diversity, equity and inclusion policies, alleged failures to comply with those policies can provide new grounds, Saltzstein said. Even uncontrollable events such as cyberattacks or wildfires can find a company in court.
When a company has such a policy and is hit with a discrimination suit or a claim that it “wasn’t actually as environmentally friendly as it claimed to be,” then “as night follows day, the plaintiffs file a securities lawsuit saying, ‘your DEI commitments or environmentally friendly practices were actually false or misleading,’” she said.
“Greenwashing” suits claiming companies have made false or misleading claims about environmental benefits of products have become a “big category,” Saltzstein said. Companies have also been sued for insufficient diversity on boards.
Litigation and executive branch actions could change DEI and ESG-driven cases, according to Lara Flath, a Skadden partner who joined Saltzstein in the presentation.
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In December, the 5th U.S. Circuit Court of Appeals said NASDAQ exceeded its authority by requiring companies listed on the exchange to disclose the number of board members and how they self-identify regarding race and ethnicity categories and LGBTQ status. And “as the landscape continues to change,” she said, it would be “remiss to not mention” recent executive orders from President Donald Trump, which might not directly impact securities litigation but could affect federal contractors.
Saltzstein said the executive orders come when the Supreme Court has recently overturned the Chevron doctrine, which said courts should defer to federal agencies’ interpretation of ambiguity in statutes passed by Congress.
“I think there’s a lot of interesting things that are going to happen this year from an agency standpoint, from an executive order standpoint, that will have an impact on the civil litigation landscape for sure,” she said.