The Securities Litigation Expert Blog

$0.03 on the $1 No Longer Good Enough

Posted by Jack Duval

Jan 2, 2013 1:38:56 AM

Institutional investors have figured out the pennies-on-the-dollar model of class action settlements is a bad deal when they have the resources to pursue individual claims.  This self-evident fact has led to increasing numbers of "opt-outs" of class action claims, InsideCounsel reports.  (IC)

Not insignificantly, pursuing an individual claim can open up more legal avenues.

One such advantage is that opt-out plaintiffs can pursue broader legal theories and remedies. Under the Securities Litigation Uniform Standards Act, federal securities laws preemept claims arising under state common law or statutory schemes in any class action involving more than 50 plaintiffs. Likewise, certain federal theories—such as claims premised on the plaintiff’s actual reliance on the defendant’s alleged misrepresentation—cannot be litigated in a class action. 

“Those claims are nearly impossible to litigate on a class basis because it’s an individual question of fact regarding each plaintiff’s reliance,” Nicholas says. “In a class, you can’t take advantage of those claims. In the Countrywide case, we filed a state law case on behalf of CalPERS under the California Corporations Code.”

Ironically, my guess is that this will actually help those who are part of class claims as defendants will be faced with multi-front wars and thus more amenable to settle.
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Topics: Securities Litigation Uniform Standards Act, litigation, opt-out, class action

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