Securities Fraud

WHAT IS A SECURITIES CLASS ACTION?

The modern securities class action was born of economic necessity.  Despite the existence of laws protecting individual investors from corporate misfeasance, the costs of seeking judicial redress on an individual bases often outweighed the potential recovery.  A shareholder with relatively small losses would quickly be consumed by legal fees, making individual actions economically unfeasible. The class action solved this problem. 

Using the class methodology, an individual securities holder may pursue litigation on behalf of a group of similarly situated investors aggregating their losses and spreading the costs of recovery.  Generally, one or more members of a class may sue as representative parties if: (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.  Most courts have concluded that a class proceeding is the best method for the fair and efficient adjudication of securities fraud claims.  

HOW DO I KNOW IF A CLASS ACTION HAS ALREADY BEEN FILED?

Federal Rules require that the first plaintiff to file a securities class action must publish notice in a widely circulated national business-oriented publication or wire service advising members of the purported plaintiff class of the pendency of the action, the claims asserted therein, and the purported class period. By checking recent news stories on companies you own, you will quickly determine if a particular company is subject to a class actions suit. 

HOW DO I KNOW IF I AM A PART OF THE CLASS ACTION?

The first thing to do is read the notice and determine the following: (1) whether your purchases are the type of security covered by the action (i.e. stock, bond, etc…) and (2) whether you purchased or acquired securities during the given time frame. If both prongs are satisfied, you are automatically a member of the putative class. 

In addition to information about the suit, the announcement will offer every class member the opportunity to petition the court to become a “lead plaintiff.” by a certain date. To do so, you will typically have to contact the law firm responsible for the announcement to get a shareholder packet. The packet will include a copy of the complaint and a certification which needs to be signed under penalty of perjury and returned.  The certification will require a declaration that you: (1) reviewed a version of the complaint; (2) did not purchase shares for the purpose of suing the company; (3) are willing to serve as a representative party on behalf of the class, including providing testimony at deposition and trial; (4) list transactions in the underlying security; (5) attest that you are not a professional plaintiff (i.e. served or sought to serve as a representative party on behalf of a securities class more than five times in the past three years); and (6) will not accept any payment for serving as a representative party on behalf of the class beyond plaintiff’s pro rata share of any recovery, except as ordered or approved by the court.  

Class members interested in becoming a lead plaintiff have 60 days from the date of the first filed action to petition the court.  The court will entertain all petitions and typically will appoint the investor(s) with the largest financial interest (i.e. losses) in the litigation.

DO I NEED TO JOIN THE ACTION TO BENEFIT FROM THE LAWSUIT?

No.  As a purchaser of securities during an announced period, you are automatically a member of the class unless you decide at a later date to opt out. If the case is resolved in favor of the plaintiff class, you will receive notice of the terms of the resolution in the mail. Make sure to keep your trading records because they will be needed in demonstrating your membership in the class.  Also, if you own the stock in street name, (i.e. through your broker), make sure the brokerage has your current contact information.

WHAT ARE THE FEES AND EXPENSES ASSOCIATED WITH THE LAWSUIT?

Fortunately, most class actions attorneys operate on a continency fee basis. This means that a shareholder does not have to pay for a lawyer out of his or her pocket, but rather, attorneys’ fees are paid out of the resulting settlement or verdict. The exact amount of those fees will be determined by the court at the end of the case. Attorneys’ fees typically range from 20-33% depending on the amount and quality of the work done. If the class does not prevail on the merits, the attorneys do not get paid and will typically assume all costs associated with the litigation..

HOW LONG WILL IT TAKE TO RESOLVE THE CASE?

This frequently asked question is the hardest to answer because it is based on a number of variables including: the complexity of the case, litigation goals of the parties and disposition of the court. The average action is resolved within two years, but there are no guarantees. 

WHAT CAN I EXPECT TO GET FROM A CLASS ACTION? 

The ultimate goal of a securities class action suit is twofold: (1) stop the company from continuing fraudulent conduct and prevent similar such conduct from occurring in the future; and (2) seek remuneration for aggrieved shareholders. 

Kuzyk attorneys have successfully litigated numerous securities class actions on behalf of investors and would be happy to assist with your claim.