FRT FAQs: Settled Class Action Recovery

1. What is the length of a securities class action litigation?

Every year, millions of dollars in settlement funds are distributed to eligible shareholders as a result of securities class action lawsuits. A securities class action litigation may last 3 to 5 years from the time of initial complaints being filed, through settlement, and ultimately to disbursement. On average, it takes roughly 15-18 months after the time of settlement for the first disbursement to take place. That said, there is a wide variability with some cases taking only a few months and others taking years. Download our Shareholder Class Action Primer to find out the four stages of the class action claims process.

2. How does the structure of trade data impact recoveries?

FRT is committed to representing each claimant’s trading history as accurately as possible. Two areas where FRT can help refine the representation of trades in a claim submission are tax-free inter-account transfers and asset owner vs. asset manager-lever trade association. These processes ensure the claimant receives the CORRECT recovery amount (i.e., the full amount to which they are entitled), not necessarily the GREATEST recovery.

  • Tax-Free Interaccount Transfers: A commonplace event in the trading histories of FRT’s clients is for one account to freely deliver some of its shares to another account, both of which are owned by the same parent entity. Such occurrences are referred to as tax-free transfers. Often this is represented within trading data as a pair of zero-priced transactions; the delivering account has a zero-priced sale, while the receiving account has a zero-priced purchase. The challenge with including such trades in a claim submission is that, without knowing the initial and final disposition of each lot of shares, the claim administrator cannot calculate recognized loss, and therefore is forced to assign zero recognized loss. This means no recovery will be possible. Therefore, it is necessary when filing claims to match free receives with free delivers and then move the corresponding initial purchase of the delivered shares into the receiving account.  This process allows the administrator to see the full picture of the claimant’s damages, ensuring the claimant receives the full amount to which it is entitled.
  • Asset Owner vs. Asset Manager-Level Trade Association: There are two levels of trade organization for entities within settlements and your choice may impact the size of the recovery. When you are a single-TIN asset-owning entity, you may be able to treat each of your individual asset managers distinct accounts, or as components of a single whole.  FRT therefore calculates, when appropriate, the recognized loss associated with each organizational strategy, and then files to maximize recoveries.

3. How do I know my recovery amount is everything I am entitled to?

FRT calculates the recognized loss of each claim before it is filed so that when the settlement checks are distributed, we can reconcile the payment amounts. Recognized loss occurs when there is inflation in the purchase and sale price of a stock. Recognized Loss is a claimant’s eligible amount determined using a formula specified in the Plan of Allocation created in connection with a securities class action settlement. FRT looks at the pro-rata percentage published by the claims administrator handling the settlement and then compares the amount to our internal calculations to ensure that the client receives all the monies they are entitled to. Download FRT’s report ‘Calculating Inflationary Losses’ to better understand the three types of losses in securities fraud cases. 

4. When should I expect to receive my settlement check?

The average recovery takes place roughly 15 months after settlement.  FRT reviews every single payment it receives for accuracy prior to disbursing the check to the client.  If no discrepancies are identified, a client can expect remittance within 30 days of FRT’s receipt of the payment.  If a discrepancy between actual and expected payment is identified during the review, it may take longer for remittance – until the administrator and FRT, both agree that the claimant will receive the full amount to which they are entitled.

5. Are all settled class action settlements alike?

No.  While the process for many class action settlements is consistent, there are many exceptions per year.  Often settlements have unusual, settlement-specific requirements for the data necessary to successfully submit a claim form.  It is important to identify any such deviations from the norm and to handle them appropriately.  For example, the recent set of cases involving FX Fees on American Depository Receipts required very atypical data to successfully submit claims. That said, the different types of class action are:

  • Antitrust class actions: Antitrust class action alleges that a company has engaged in anti-competitive practices. Some antitrust lawsuits may go on trial, but mostly they will be settled beforehand.
  • Consumer class actions: A consumer class action is when one or more consumers sue an entity or a large company for violating consumer rights.
  • Employment class actions: When multiple employees endure the same workplace discrimination, they all get together and file a complaint against the employer.
  • Securities class actions: This type of class action is filed by investors who bought or sold a company’s publicly traded securities during a class period and suffered economic loss; which as a result violates the law.

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Financial Recovery Technologies’ Shareholder Litigation Fast Five provides you with the top news in shareholder class actions. This is your exclusive summary of the latest industry developments related to settled, group and antitrust actions and recovery opportunities. Click here to subscribe.

Learn More

To learn more about how FRT can help your firm maximize recoveries in shareholder class action settlements, contact us at learnmore@frtservices.com.

About FRT

SETTLED CLAIMS  I  PASSIVE GROUP  I  ANTITRUST  I  FUTURE CLAIMS  I  OPT-IN MONITORING  I OPT-OUT MONITORING

Founded in 2008, Financial Recovery Technologies (FRT) is the leading technology-based services firm that helps the investment community identify eligibility, file claims and collect funds made available in securities and other class action settlements. Offering the most comprehensive range of claim filing and monitoring services available, we provide best-in-class eligibility analysis, disbursement auditing and client reporting, and deliver the highest level of accuracy, accountability, and transparency available. For more information, go to www.frtservices.com.

This communication and the content found by following any link herein are being provided to you by Financial Recovery Technologies (FRT) for informational purposes only and do not constitute advice. All material presented herein is believed to be reliable but FRT makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Opinions expressed in this communication may change without prior notice. Firms should always seek legal and financial advice specific to their unique situation and objectives.

FRT’s Fast Five: Week Ending October 18, 2019

Financial Recovery Technologies Fast Five provides you with the top news in shareholder class actions. Stay up-to-date on the latest developments in settled (U.S./Canada) claims filing opportunities, Antitrust settlements, Global Group Litigation matters and more. For more information, contact your Financial Recovery Technologies representative or email us.

1. Banks Must Face Bond Price-Fixing Suit Post-Deutsche Deal

A New York federal judge ruled Tuesday that banks he’d previously dismissed from a bond price-fixing lawsuit cannot escape claims again in light of information investors gleaned from a settlement with Deutsche Bank. U. S. District Judge Jed Rakoff said new chatroom excerpts contained in the investors’ third amended complaint finally ties banking behemoths like Barclays Capital Inc. and Credit Suisse Securities LLC to an alleged conspiracy among securities units of the world’s largest financial institutions to fix bond prices for government-sponsored entities. The case is In re: GSE Bonds Antitrust Litigation, case number 1:19-cv-01704, in the U.S. District Court for the Southern District of New York. Click here to read the full article (subscription may be needed).

2. N.Y. Climate Case Against Exxon on Track for Trial After Hearing

A lawsuit accusing Exxon Mobil Corp. of defrauding investors on the risks the company faces from climate change is set for a courtroom showdown, as scheduled, after a judge, Oct. 16 tossed a set of pretrial motions from both sides. After a 30-minute hearing, Justice Barry Ostrager of the New York Supreme Court for the County of New York denied Exxon lawyers’ challenges to an expert and a witness the state plans to call for a trial. Click here to read the full article (subscription may be needed).

3. Defending Against U.S. Trading-Related Investigations and Litigation: Do the U.S. Securities and Commodities Laws Reach Foreign Conduct?

Two recent appellate court decisions shed light on the limited circumstances in which regulators and private plaintiffs can pursue claims for violations of the U.S. securities and commodities laws for conduct occurring outside the United States. Click here to read the full article.

4. Litigation Risk Spurs Firms’ Earnings Openness: Study

“The securities class action system is spinning out of control,” warns the U.S. Chamber of Commerce in a recent report ominously entitled “A Rising Threat.” Citing a more than 50% one-year increase in filings against companies in 2017 (to a level that was sustained in 2018), the Chamber complains that “the number of lawsuits is skyrocketing, and has reached levels not seen before the enactment of the Private Securities Litigation Reform Act.” Has the time arrived, as the Chamber and others contend, for major action to further limit securities litigation? Those who believe so will do well to consider research in the current issue of The Accounting Review. While by no means taking a stand on calls for action, the research offers what is arguably the most persuasive evidence to date on a persistent question highly relevant to that issue: Does the risk of shareholder securities litigation spur corporate disclosure and the benefits to investors that accrue from it, or does it inhibit disclosure? Click here to read the full article.

5. Litigation Abroad and Need Evidence in the United States? Second and Sixth Circuits Lend a Hand

Two very recent federal appellate decisions have substantially expanded the ability of foreign litigants to obtain evidence in the United States under 28 USC §1782(a) for use in their proceedings abroad. In Re Application of Del Valle Ruiz 2019 WL 4924395 (2d Cir. Oct. 7, 2019); In re Application to Take Discovery, 2019 WL 4509287 (6th Cir. Sept. 19, 2019). Click here to read the full article.

 

Subscribe to FRT’s Monthly Newsletter

Financial Recovery Technologies’ Shareholder Litigation Fast Five provides you with the top news in shareholder class actions. This is your exclusive summary of the latest industry developments related to settled, group and antitrust actions and recovery opportunities. Click here to subscribe.

Learn More

To learn more about how FRT can help your firm maximize recoveries in shareholder class action settlements, contact us at learnmore@frtservices.com.

About FRT

SETTLED CLAIMS  I  PASSIVE GROUP  I  ANTITRUST  I  FUTURE CLAIMS  I  OPT-IN MONITORING  I OPT-OUT MONITORING

Founded in 2008, Financial Recovery Technologies (FRT) is the leading technology-based services firm that helps the investment community identify eligibility, file claims and collect funds made available in securities and other class action settlements. Offering the most comprehensive range of claim filing and monitoring services available, we provide best-in-class eligibility analysis, disbursement auditing and client reporting, and deliver the highest level of accuracy, accountability, and transparency available. For more information, go to www.frtservices.com.

This communication and the content found by following any link herein are being provided to you by Financial Recovery Technologies (FRT) for informational purposes only and do not constitute advice. All material presented herein is believed to be reliable but FRT makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Opinions expressed in this communication may change without prior notice. Firms should always seek legal and financial advice specific to their unique situation and objectives.

Case Spotlight: American Realty Capital Properties, Inc. (ARCP)

COMPANYAmerican Realty Capital Properties, Inc. (ARCP)
SETTLEMENT AMOUNT$1,025,000,000 (tentative settlement)
INDUSTRYFinancial - Diversified
CLAIMSMisleading financials
RELEVANT PERIODFebruary 28, 2013 - October 29, 2014
CLAIM DEADLINEJanuary 23, 2020

The proposed settlement resolves claims that ARCP, now called VEREIT, misrepresented its financial performance for fiscal year 2013 and the first two quarters of 2014.

The settlement is noteworthy for its size.  According to Cornerstone Research,[1] since 1996, less than 2% of securities class action settlements have exceeded $1 billion.  If approved, ARCP will be the tenth largest since the PSLRA was passed.[2]

It’s also noteworthy for the amounts contributed by defendants other than the issuer.  ARCP is paying $738.5M.  The rest – $286.5M – is coming from AR Capital and others ($225M); ARCP’s ex-CFO ($12.5M); and ARCP’s auditors ($49M).

Finally, the settlement is noteworthy because post-class distribution, it will give a basis for comparing recovery rates to class members and opt-outs.  According to InvestmentNews,[3] last year the REIT paid $175 million to 9 institutional investors – including Vanguard – that had exited the class to pursue their own claims.

Something similar happened in last year’s mega-settlement with Petrobras ($3 billion, #5 on the top 10 list).  As here, the company there settled opt-out suits before resolving the class suit.  In both matters, the reduced class size likely enhanced the parties’ ability to reach resolution of the class action and given the outsized recovery, may well result in higher than average payouts to class members.

In any event, assuming the opt-out returns are significantly higher than class member recoveries, the ARCP settlement will further fuel the trend we’re seeing of large investors opting-out of high profile fraud matters.

CLASS DEFINITION

All persons and entities that purchased or otherwise acquired the common stock, preferred stock, or debt securities of American Realty Capital Properties, Inc. or ARC Properties Operating Partnership, LP during the period between February 28, 2013 and October 29, 2014.

IMPORTANT DATES AND DEADLINES

  • Final Approval Hearing; January 21, 2020
  • Deadline for Objecting to Settlement: December 31, 2019
  • Claim Filing Deadline: January 23, 2020
  • Exclusion Deadline: If you did not exclude yourself after the Notice of Pendency of Class Action, you are a Class Member and cannot exclude yourself at this point.

[1] Cornerstone Research, Securities Class Action Settlements, 2018 Review & Analysis.

[2] Securities Class Action Clearinghouse, Top Ten by Largest Settlement.

[3] Bruce Kelly, Settlements at old Schorsch REIT could cost shareholders $730 million (10/13/2018).

Subscribe to FRT’s Monthly Newsletter

Financial Recovery Technologies’ Shareholder Litigation Fast Five provides you with the top news in shareholder class actions. This is your exclusive summary of the latest industry developments related to settled, group and antitrust actions and recovery opportunities. Click here to subscribe.

Learn More

To learn more about how FRT can help your firm maximize recoveries in shareholder class action settlements, contact us at learnmore@frtservices.com.

About FRT

SETTLED CLAIMS  I  PASSIVE GROUP  I  ANTITRUST  I  FUTURE CLAIMS  I  OPT-IN MONITORING  I OPT-OUT MONITORING

Founded in 2008, Financial Recovery Technologies (FRT) is the leading technology-based services firm that helps the investment community identify eligibility, file claims and collect funds made available in securities and other class action settlements. Offering the most comprehensive range of claim filing and monitoring services available, we provide best-in-class eligibility analysis, disbursement auditing and client reporting, and deliver the highest level of accuracy, accountability and transparency available. For more information, go to www.frtservices.com.

This communication and the content found by following any link herein are being provided to you by Financial Recovery Technologies (FRT) for informational purposes only and does not constitute advice. All material presented herein is believed to be reliable but FRT makes no representation or warranty with respect to this communication or such content and expressly disclaims any implied warranty under law. Opinions expressed in this communication may change without prior notice. Firms should always seek legal and financial advice specific to their unique situation and objectives.