Securities Class Action Lawsuits
For Clients Facing Significant Financial Losses, a Consultation with Securities Class Action Lawyers is Encouraged
A “class action” is a lawsuit brought by one plaintiff (or a small group of plaintiffs) on behalf of all persons who are situated similarly to the plaintiff (i.e., the “class”). In a financial class action lawsuit, the plaintiff works with securities class action lawyers to prosecute the action against the defendants, and the class may take part in any settlement or judgment against the company that the plaintiff obtains.
As our securities class action lawyers will explain, membership in the class is usually defined according to a certain time period or stock offering. Typical class definitions include: “all investors that purchased the company’s securities between mm/dd/yyyy and mm/dd/yyyy” or “all investors that purchased the company’s securities in the IPO.” Investors that meet the class definition are automatically included in the class action. However, class members have the right to opt out of the class action and pursue a claim against the company individually. Class members interested in working directly with the securities fraud attorneys, and being a “class representative,” may request that the court appoint them as such. Typically, the request must be made within two months after the class action is initiated, and the court will usually appoint the investor with the largest financial loss to be the class representative.
For Investor Suits Under the Federal Securities Laws, Class Actions Allow for Recovery
Class actions provide greater leverage to investors. While publicly traded companies may have thousands or hundreds of thousands of investors, some with small losses and some with large losses attributable to the company’s misconduct, the class action device allows all members of the investor class to collectively pursue compensation for their losses at the same time, represented by the same attorneys. As such, the company faces a much larger potential judgment than it would if it were defending itself from a handful of much smaller claims. This can drive the company to the negotiating table, and increase the likelihood of a recovery for investors.
Second, class actions make claims by smaller investors economically feasible. While investors with small losses are unlikely to hire securities attorneys and pursue actions against companies on their own due to the high cost associated with hiring experienced securities class action lawyers, it costs investors virtually nothing to be members of an investor class. The costs associated with litigation are borne by the class action attorneys and their firm, and the attorneys’ legal fees are covered by a portion of the proceeds of any settlement or judgment they may obtain. As such, class members with relatively small losses may have their rights vindicated at practically no personal cost.
Understanding Direct Action and Opt-Out in Securities Class Action Lawsuits
Class members in a securities class action have the right to opt out of the class action, even after a settlement is reached, and pursue a direct action against the company, which is separate from the class action. Opting out means that the investor is not bound by the court’s decisions in the class action, but it also means that the investor does not get a share of any recovery obtained in the class action. Instead, in the direct action, the investor pursues his or her own securities case against the company.
Direct actions may provide substantial benefits, including greater control over the litigation, and a larger potential recovery than that achievable in the class action.
Opting out is a difficult decision to make, but it may be the right decision for an investor with substantial losses that determines he or she would like to pursue the benefits of a direct action. Many factors should be considered when determining whether to opt out, including: the existence of additional theories of recovery not alleged in the class action, the existence of additional defendants not named in the class action, and the unique trading history of the potential opt-out investor.
Contact an Experienced Securities Class Action Lawyers at Our Firm
The securities class action lawyers at Glancy Prongay & Murray LLP have substantial experience pursuing class actions on behalf of injured investors. If you would like more information about filed class action cases, or ongoing investigations into potential class actions (listed on our website here), please reach out to Glancy Prongay & Murray LLP, as we are happy to answer your questions.