Private Action vs. Class Participation: Recent Developments

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FRT Admin
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January 10, 2013

Upon receiving notice regarding a class action claim filing opportunity, large shareholders generally have two options: remain part of the class, submit their paperwork and receive their share of the settlement fund, or opt out of the class and pursue their own legal action. In recent years, the instances of institutional investors opting-out of class actions have increased. Spurred by cases where they had significant damages and settlement pools that they deem insufficient, investors are choosing to take matters into their own hands, opting out because they perceive they can recover more privately than as a member of the class.

Despite several settlements with big dollars attached to them, like the $624 million Countrywide settlement and the $590 million Citigroup settlement, many firms still are choosing to opt out, as the damages far exceeded these settlements, and there were so many damaged investors that a $100 million loss might only result in a $1 million recovery. According to Kevin LaCroix of the D&O Diary, several large public pension funds and mutual fund families opted out of the Countrywide case, and multiple public pension funds and mutual funds have filed a separate lawsuit against Pfizer.

Opt OutOpt-out claimants choose to proceed outside of the class with the expectation of increasing their recovery beyond what would be owed to them as part of the class. Firms that opt out also avoid the complex class action litigation and settlement process. Institutional investors that have resolved private lawsuits indicate that they received settlements significantly greater than what they would have recovered as part of the class, and often in less time.

Before a firm chooses to opt-out of a class action, it is important for them to have a good understanding of what they are likely to recover, either by staying within the class or by opting out and proceeding individually. This can be a difficult process due to the complex nature of class action settlements, which includes reviewing plans of allocation, examining historical data, and estimating pro-rata payouts. Financial Recovery Technologies (FRT) partners with hundreds of institutional investors to assess their class action recovery prospects and advise them as to how best to proceed.

Contact FRT today to learn more about this important new trend in class action recoveries.

See #6 in Kevin LaCroix’s article for more details regarding opt-out claimants.

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Founded in 2008, Financial Recovery Technologies (FRT) is a 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.