To opt-out, that is the question. An opt-out action is when an investor chooses to remove itself as a class member of a securities class action suit with the intention of filing a direct action against the defendant. There are many reasons why it may be advantageous for an investor to proceed in this manner. As we have had an abundance of experience with direct action opt-outs, if the damages are large enough, this will likely be the best course of action for the institutional investor.
The most important statutes in US securities cases are the Securities Act of 1933 (the ’33 Act) and the Securities Exchange Act of 1934 (the ’34 Act). Whereas the ’33 Act regulates issuers making an initial public offering (IPO), the ’34 Act regulates the secondary market. Thus, largely due to trade volume and investor exposure, the ’34 Act in many respects has much greater reach than the ’33 Act.
As we have just entered 2019, we here at DRRT would like to provide a quick overview of the trends we noticed in our work as a claims filing provider during 2018. This year had major developments, and we are still waiting to see how this will play out in terms of recoveries for many of the cases. However, the increase in Australian actions, the complexities of the antitrust settlements such as FX and LIBOR, and the evolution of new jurisdictions prove that having a robust claims filing provider, with an extensive legal background, can make a major difference in terms of maximizing recoveries and ensuring all opportunities are explored.
Redress - Generally
In modern legal proceedings, different countries and jurisdictions have all had to confront a need to administer a large volume of cases that can arise out of a common set of facts. Often these cases involve relatively few defendants with many thousands of plaintiffs. In the context of investor recovery proceedings, a common circumstance is that a business entity and its directors are accused of wrongdoing (the defendants). Often the defendants’ conduct is alleged to have caused recoverable harm against many injured investors (the plaintiffs). The many investor-plaintiffs largely all share the same injury caused by the related conduct of the same relatively few defendants. In resolving this and similar situations, countries have developed a number of approaches.
History and expansion of arbitration in the United States
The U.S. Federal Arbitration Act (FAA) was passed on 1925. Since then, the Supreme Court has interpreted it on a number of cases, finding that the FAA prevents state legislation from prohibiting or limiting the use of arbitration clauses in all sort of contracts, even those designed to protect workers’ rights (Epic Systems Corp. v. Lewis 584 U. S. ____ (2018)), or consumer’s rights (AT&T Mobility v. Concepcion, 563 U.S. 333 (2011)). Consequently, arbitration clauses have become more common. It has become almost impossible to challenge arbitration clauses, even if they hinder access to justice and while challenges may still be brought, the arbitration panel itself must examine them.