What is an Opt Out

Opt out actions are lawsuits initiated by investors who decide not to proceed as members of class actions. Opt out actions allow investors to allege individual securities claims to recover losses caused by fraud or similar misconduct. Opt out litigation is a relatively new phenomenon that provides an alternative to de minimis class action recoveries. As documented here, class actions typically settle for 2-3% of investors' losses. Opt out cases, on the other hand, have regularly settled for between 30% and 80+% of damages.

Opt out litigation is best understood in contrast to securities fraud class actions. The class action is the predominant means by which the vast majority of defrauded investors exercise their legal rights to reclaim investment losses. Securities class actions assert claims on behalf of a wide array of damaged investors and offer class members a pro rata share of any eventual recovery. Most class members have no direct interaction with the attorneys representing the class and have no say in negotiating the amount for which the class case settles. Opt out litigants control their own cases, interact with their attorneys to assure their interests are best represented, and directly determine whether to accept or reject settlement offers.

Securities class actions are limited to certain legal claims under the federal securities laws. Opt out litigants may have the option to pursue claims under state law as well as additional federal legal claims not available on a class-wide basis.

Damages in securities class actions oftentimes amount to billions of dollars, regularly exceeding the defendants' ability to pay. In opt out cases, the plaintiff's claims are typically between several million dollars and several hundred million dollars and, therefore, more likely within the range of judgments defendants can pay.

While opt out cases are an attractive alternative to securities class actions, there are many reasons investors may want to remain a member of the class in particular cases. Dietrich Siben Thorpe LLP provides investors a free consultation to assist in determining whether opting out of a particular class action is in the investor's best interests.