Class members in a securities class action (see 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.
The securities attorneys at Glancy Prongay & Murray LLP are willing and able to provide guidance to investors who are considering opting out of a class action, or pursuing a direct action.