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Class Action FAQ

Below are the answers to some of the frequently asked questions (FAQ) that we receive from our clients and potential clients regarding class action litigation:

What is a class action lawsuit?

Class action lawsuits allow lawyers to vindicate the rights of a large group of people where no individual party has sufficient economic incentive to bring suit on his or her own.

In a class action lawsuit, one or more parties file a complaint on behalf of themselves, as well as all other people who are “similarly situated” (i.e. people who are suffering from the same problem or have been injured in the same manner). Thus, class action lawsuits are often used when a large number of people have comparable claims.

Class actions perform a valuable social function, allowing individuals whose legal claims would otherwise prove too small to support the expense of litigation to obtain redress by way of a collective action brought in the interest of the entire “class.”

Examples of claims that are often brought as a class action include:

  • Antitrust: Consumers or merchants who paid inflated prices for products caused by the anti-competitive activities of a corporation or group of corporations
  • Commodities:  Investors or businesses who suffered financial harm by trading on commodities exchanges that were manipulated with fraudulent information
  • Consumer Protection: Consumers who purchased the same defective product or were harmed by similar unfair business practices committed by a corporation
  • Securities: Investors who were misled by false and misleading public statements disseminated by a company

What is a lead plaintiff?

A lead plaintiff is appointed by the court to act as a representative for the class. Attorneys for the lead plaintiff are generally appointed as lead counsel in the case and responsible for overseeing the prosecuting of the litigation.

In a securities fraud suit, however, you must meet certain qualifications in order to serve as a lead plaintiff:

  • You must not have purchased the security in order to participate in the litigation, or at the direction of your attorney
  • You must have actually suffered damages as a result of the fraud
  • You must be available to testify at a deposition or at trial, if necessary
  • You must agree not to accept any payment for serving as class representative beyond your pro rata share of any recovery, except for your reasonable costs and expenses (including lost wages) directly relating to the representation of the class, which must be approved by the court.
  • You must sign a certification that sets forth the above conditions and is filed with the court.

How long does a class action take?

A class action typically takes anywhere from one to four years to resolve. However, some cases can last much longer, especially if taken to trial and through appeals.

What can I expect to recover?

You are entitled to recover a pro rata share of the total settlement or judgment. Often the total funds available to pay damages in a settlement, or after a judgment, are inadequate to compensate each class member in full for what they may have lost. Therefore, it is possible that you will not recover the entire amount of your damages.

I received a printed notice that says I am a class member in a case. What do I have to do?

Read this notice carefully. It will normally explain your options and the specific steps you must take with regard to each of these options. If you approve of the settlement and want to receive your pro rata share of the recovery, you usually must file a Proof of Claim form by the listed due date. If you want to object to the settlement, or “opt out” of the settlement and pursue an individual claim against the defendant(s), the notice will also tell you how to do that.

Does it matter if I already sold my securities?

While continuing ownership of shares is a pre-requisite for certain types of shareholder litigation, including derivative claims brought on behalf of the corporation, securities fraud claims premised upon artificially inflated share prices are generally based on when a shareholder purchased the shares, rather than when they sold them or their continuing ownership.

Thus, it is possible that you may still participate and be a lead plaintiff in a securities fraud suit even if you have already sold your securities. In fact, you may sell your securities at any time. The decision to buy, sell or hold securities is an investment decision you must make, and will not affect your ability to participate. It may, however, affect the amount of damages you recover.

I see all of these notices about my securities.  Must I respond to all of them?

No. As a practical matter, all class actions against the same defendant arising from the same conduct will usually be consolidated into a single case before a single judge. The court then appoints Lead Plaintiff(s) and Lead Counsel who coordinate the litigation and represent the class together with the other firms involved. Regardless of which firm you retain to represent you, your inclusion in the consolidated class as well as your recovery should not be affected.

Who pays for the lawyers?

In most class action lawsuits, class members are represented by attorneys who work on a contingency fee basis. This means that we do not receive a fee or reimbursement of our expenses unless the lawsuit results in a recovery for the class members. In the event that a recovery is obtained, the court must approve an application for payment of reasonable attorneys’ fees and expenses incurred in connection with the suit.

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