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
A class action is a type of lawsuit in which a person, entity or group seeks to sue on behalf of a larger group – the class – harmed by the same or similar unlawful activity. Securities class actions are typically brought on behalf of shareholders alleging that a company’s fraudulent activity caused them to lose money in their investments. The lawsuit, often filed by a securities litigation lawyer, is designed to stop the unlawful conduct and to compensate class members for their injury.
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.
Taking Action Against Securities Fraud
Broadly, securities fraud is the dissemination of false or misleading information, or the concealment of material information, regarding a business. Such misrepresentations may inflate a company’s stock price. Investors that purchased shares at an inflated price may later be injured when the truth regarding the company’s misrepresentations are revealed. Such investors may have a viable securities fraud claim.
Accurate information is an essential element of a healthy marketplace. An investor who makes decisions based on incomplete, misleading or outright false information may buy, sell or hold stocks or stock options in a way he or she would not if the truth regarding a company were known. As such, fraud causes investors to lose money on their investments through no fault of their own.
Our Securities Class Action Lawyers Answer Your Questions
Does it cost anything to start or join a securities class action?
Anyone considering starting or joining a class action is well advised to consult an experienced securities litigation lawyer. At Glancy Prongay & Murray, we offer clients a number of fee arrangements to ease or even eliminate the cost to investor plaintiffs of pursuing legal action.Typically, we do not receive a fee unless we successfully resolve the case in court or at the negotiating table.
What is the benefit of a class action?
A class action gives individual investors certain leverage that they may not otherwise have going up against a large company individually, in separate lawsuits. It allows investors to collectively obtain compensation for the harm caused by a company’s fraud, and can serve as a deterrent against similar unlawful conduct in the future.
If I own stock in a company, can I join a securities class action lawsuit against it?
It depends. You must have purchased or acquired stock in the company during the specific “class period” during which the company or an official misled or otherwise defrauded investors. The securities attorneys at Glancy Prongay & Murray can help you determine if you are part of the class.
What is a “lead plaintiff” in a securities class action?
The lead plaintiff acts as representative of the class, helping direct the litigation and considering any settlement offers. The lead plaintiff position in securities class actions is usually reserved for persons or entities with a large financial interest in the outcome of the case.
Can I sell my stock and still participate in the class action?
Typically, you do not need to hold on to your shares in order to be a class member. You must, however, be able to show that you purchased shares during the class period.
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.