Phenomenon Of Securities Class Action Opt-Out Cases May Be Back

Settlement opt-outs have been always been a feature of securities class action litigation. However, as part of the settlements of the huge cases filed during the era of corporate scandals at the beginning of the last decade, opt outs became more prevalent and they represented an increasingly significant part of the case resolution. Many of the opt out recoveries during that period were substantial, both in absolute dollars and in terms of recovery percentages, a phenomenon that occasioned much commentary and even some discussion about whether the rise in class action opt outs represented a fundamental change in the securities class action lawsuit paradigm.

But after a seeming cascade of opt out settlements as the securities cases associated with the corporate scandals were resolved, the phenomenon seemed to die down, or at least fade into the background. However, it seems that in connection with the larger cases associated with the credit crisis, the phenomenon of significant opt out cases may be back, at least if recent developments in one case are representative.

The securities lawsuit in question is the case filed by shareholders of Countrywide, which previously settled for $624 million. One of the questions I asked at the time was whether or not the class settlement, as large as it was, would be "enough" to keep the class intact. As it turned out, a number of large institutional investors opted out of that settlement and on July 28, 2011, they filed their own collective action against Countrywide and certain of its directors and officers in the Central District of California. (A copy of their massive 425-page complaint can be found here.)

The lengthy list of plaintiffs is interesting. The list includes the California Public Employees Retirement System (CalPERS). There are pension funds from Guam and Montana; Dutch pension funds; and investment funds from the Nuveen, American Century, T.Rowe Price, BlackRock and TIAA-CREF fund families; and many others. The list of plaintiffs alone is seven pages long. So if this isn't a class action, then it is a group action of sorts, for sure.

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Read other items of interest from the world of directors & officers liability, with occasional commentary, at the D&O Diary, a blog by Kevin LaCroix.

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