Class Action Opt-Outs Up: More Money, More Problems

Bloomberg BNA Securities Law Daily
October 11, 2016

Michael W. Stocker discusses opt-out alternatives due to new provisions mandated by companies

Many investors opt out of securities class actions cases due to seeking a larger settlement, however a larger settlement isn’t always a guarantee. Partner Michael W. Stocker spoke with Bloomberg BNA  and explained that firms representing investors “have to be much more wary of applicable statutes of limitation, and must be proactive in assuring that clients understand their options at an early stage of the litigation.” 

The increase in opt-out cases has motivated companies to include provisions in settlement agreements that allow them to cancel or renegotiate the contract if too many class members opt out. Stocker stated that this trend “isn't surprising” since individual investors with relatively small losses have less financial incentive to pursue individual actions than large institutional investors.

The increase in opt-outs means that big corporations may have to defend themselves in numerous cases based on the same underlying conduct, costing them more time and money, Stocker said. The increased prevalence of opt-outs is driven, in part, by case law limiting class members' ability to delay deciding whether to opt out until later in the proceedings, he added. Now, they often have to make the decision “soon after a case is filed.”