Word is spreading around Wall Street about some surprising news on the legal front. Banks, accounting firms, and insurance companies are mighty pleased about some statistics that came out recently, showing that one of their greatest concerns seems to be subsiding. But it’s not so clear to me that the rest of us should share their joy.

Class actions are suits pursued on behalf of groups or “classes” of affected persons. According to an annual study of such things, investor class-action lawsuits declined 24 percent in 2009, to 163, from 223 in 2008. (The study can be found here.) A year ago, when the same study showed that investor class actions climbed by 19 percent in 2008, it was expected that 2009 would become a banner year for lawsuits against firms blamed for the worst financial mess since 1929.

But 2009 was such a great year for the markets that, apparently, investor losses have been kept down, so investors were less prone to march to the courthouse. Suits against public companies were down by nearly a third. The number of credit-crisis related filings fell 47 percent from 100 in 2008 to 53 in 2009, with only 17 credit-crisis filings in the second half of the year, according to the study, by the Stanford Law School Securities Class Action Clearinghouse.

Either fraud is way down or there is reason to worry.

Class actions are not exactly new—they’ve been around since the early 19th century—but there’s no question that class-action suits have gotten a bad rap lately. Critics of this form of litigation have long maintained that they are just a form of legal extortion and that lawyers are the primary financial beneficiaries of such suits. Certainly their reputation was not helped by the widely publicized criminal case against class-action lawyer Melvyn I. Weiss (ahem, no relation) of the famed class-action firm of Milberg Weiss, now known simply as Milberg. He pleaded guilty to paying off plaintiffs to engage in securities litigation.

The vast majority are settled if they’re not thrown out of court, usually for a few million bucks, but not always—a suit against Cendant over its accounting practices led to a $2.8 billion settlement in 1999. Cendant pledged to improve its corporate governance as part of the pact and broke into four pieces in 2006.

I’m concerned by the decline in class actions because I think that any legal method that serves to limit fraud and corporate wrongdoing, particularly without expenditure of taxpayer dollars, needs to be encouraged. Class actions can’t change the way an industry operates—it takes government intervention to do that, such as the antitrust suit against Nasdaq market makers—but as the Cendant case demonstrated, lawyers aren’t the only ones to benefit from class-action suits. They have also helped even the scales when shareholders don’t get a fair shake in mergers.

Class actions ordinarily play a role in the fight against fraud in two ways. One is as a deterrent, to presumably give corporate execs second thoughts before doing stuff they shouldn’t. The second is that class actions result in the discovery process, making it possible for plaintiffs to extract documents and take testimony.

Such documents tend to remain under court seal, which is why you don’t hear about them very much, but they can be subpoenaed by regulators carrying out their own investigations. Civil discovery of all kinds has long played a role in unearthing corporate wrongdoing, notably in the litigation against tobacco companies, in which discovery proceedings unearthed thousands of damaging documents. The most prominent tobacco cases were personal-injury cases, such as one last year that resulted in a $300 million verdict against Philip Morris, but the role of discovery is the same in class actions.