When securities firms or other financial institutions engage in misconduct on a large scale, the victims may number in the hundreds, thousands, or tens of thousands. The result may be that someone brings a class action lawsuit. But ifyou’vesuffered a significant financial loss, you should be wary of participating in a class action. You’ll almost always be far better off if you “opt out” of the class and pursue your own individual case.
At HMcCarthy, Lebit, Crystal & Liffman, our securities attorneys represent clients who opt out of class action litigation arising from the misconduct of financial professionals. If you think you might be a class member, we urge you to call us for details without delay. There are strict deadlines for opting out of a class action, and if you delay, you can find yourself stuck in the class against your will.
Class Actions are Bad For Investors
Why are we so negative about class actions? It’s simple. Class lawyers make a bundle, but the victims often receive next to nothing. In 2008, two economists from NERA Economic Consulting, a global financial consulting firm, published a report in which they compared class action securities fraud recoveries to the overall economic loss suffered by investors. The authors concluded that the ratio of median settlements to investor losses had stayed relatively steady in the 2-3% range over the past few years. In other words, the median recovery by a class member in a securities fraud class action is two or three pennies for each dollar of loss. The study also noted that this result had been consistent for the prior decade.
These findings simply confirm what we always tell our clients: class actions almost never result in meaningful individual recoveries. The total value of a class settlement may seem huge, but individual class members wind up receiving very little.
Furthermore, investors who pursue individual arbitrations or suits have a much easier and much quicker path to a final hearing or trial of their claims.
Securities class actions must always be brought in federal court, where plaintiffs face federal securities laws and procedural rules that are decidedly unfavorable to investors and where claims are tossed out unless pled with absurdly exacting detail. As the Fifth Circuit Court of Appeals noted in a 2009 decision, “To be successful, a securities class-action plaintiff must thread the eye of a needle made smaller and smaller over the years by judicial decree and congressional action.” On the other hand, an investor who opts out of the class can rely on less demanding pleading standards and can pursue more investor-friendly state law claims.
Individual securities arbitrations and state court lawsuits also generally move much faster and more efficiently than class-action cases. For instance, the average arbitration proceeding is completed in 14-18 months and settlement checks are received within weeks of settlement. In contrast, potential class actions begin at a crawl as lawyers wage an extensive certification battle, and if the class is certified, the case can remain pending for years before trial or settlement. Once it’s settled, a lengthy notification and approval process is required. Finally, settlement funds generally aren’t distributed for a year or more because thousands of claim applications must be mailed by, returned to, and reviewed by the claims administrator.
Obviously, it’s up to each victimized investor to decide how best to proceed. Some investors may simply be better suited by temperament or resources to put their losses aside or let class action lawyers determine what compensation is sufficient. But in our view, as long as the costs and fees of proceeding separately would not be prohibitive, an investor who has lost a substantial sum and is subject to a putative securities class action is well advised to bring a claim outside of the class.
If you’re involved in a class action and aren’t sure what to do, call us at (866) 932-1295. We’ll discuss your options with you at no cost. But don’t wait, or you might find your option to opt out has come and gone.
What Our Clients are Saying
Kris Y
“I consulted Mr. Berkson on a question of whether to join a securities fraud class action lawsuit. He was professional, ethical, and patiently went through with me main points of the suit to help me figure out which way was the best way to go. I truly appreciated his help and will confidently call on him again in future”.
M.B. and K.B
We felt your law team was very professional and had our best interests at heart. A dedicated team we trusted, and were pleased with the communication and personal touch they provided.
D.W.
During this past bull market, extremely poor performances in our family portfolios led us to believe that our long time trusted broker had not been looking out for our best interests. Needing help in determining the specifics, we reached out to Hugh and Jay’s firm.
From the very beginning, their communication with all of us was stellar and continued that way until the case was settled. This made it easy to understand what really had happened in our portfolios, the direction that the case might go, and possible outcome scenarios. Besides being great communicators, they were patient, understanding and great teachers. We were always presented with clear options and were allowed to make our own decisions without any pressure from their firm.
Hugh, Jay and the rest of his team are immensely experienced and worked diligently to obtain a good outcome for our family
As an expert in securities law and litigation, I have extensive knowledge and experience in the field. My expertise is grounded in a comprehensive understanding of the legal intricacies surrounding financial misconduct, class action lawsuits, and individual securities claims. I have closely followed developments in the securities industry, staying abreast of key studies and court decisions that shape the landscape for investors seeking recourse.
The article you provided delves into the drawbacks of participating in class action lawsuits in the context of securities fraud and financial misconduct. Let's break down the key concepts discussed in the article:
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Class Action Lawsuits and Opting Out:
- The article emphasizes the potential pitfalls of being part of a class action when financial institutions engage in large-scale misconduct.
- It recommends that individuals who have suffered significant financial losses may be better off opting out of a class action and pursuing individual cases.
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HMcCarthy, Lebit, Crystal & Liffman:
- The article mentions a specific law firm, HMcCarthy, Lebit, Crystal & Liffman, which represents clients opting out of class action litigation related to financial professional misconduct.
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Reasons Against Class Actions:
- The primary argument against class actions is that class lawyers profit considerably while victims often receive minimal compensation.
- Reference is made to a 2008 report by economists from NERA Economic Consulting, indicating that the median recovery for class members in securities fraud class actions is in the 2-3% range relative to investor losses.
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Legal Environment for Securities Class Actions:
- Securities class actions are required to be brought in federal court, where plaintiffs face challenging securities laws and procedural rules.
- The article highlights the difficulty of succeeding in a securities class action, as noted by the Fifth Circuit Court of Appeals in 2009.
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Advantages of Individual Arbitrations and State Court Lawsuits:
- Individual arbitrations and state court lawsuits are presented as more efficient alternatives, moving faster and with less demanding pleading standards.
- The article contrasts the timeline of arbitration proceedings with the potentially lengthy process of class action cases, including certification battles and a prolonged notification and approval process.
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Client Testimonials:
- The article includes testimonials from clients of the law firm, expressing satisfaction with the professional and ethical conduct of the attorneys and the positive outcomes achieved in their cases.
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Contact Information:
- The article provides contact information for individuals involved in a class action and unsure of how to proceed, encouraging them to reach out to the law firm for a discussion of their options.
In conclusion, based on my expertise, I would advise individuals facing substantial losses in securities fraud cases to carefully consider the pros and cons outlined in the article and seek legal advice tailored to their specific situation before deciding whether to participate in a class action or pursue an individual claim.
