Frequently Asked Questions

No.

No. He may either hold his stock or dispose of it as he wishes. It has no impact on his claim.

The only risk is that the case may be unsuccessful and that the plaintiff does not recover any of his losses. Otherwise, there is no risk to the investor.

If a class action is successfully prosecuted on behalf of investors, they will recover some or all of the loss that they suffered. At the successful conclusion of the class action, investors submit a “proof of claim” and recover their share of the fund available for distribution to the class.

Investors are entitled to recover their legal damages, which may not be the same as their losses. Investors generally share in the recovery on a pro-rata basis.

Each case is different, based on the facts. Generally, each investor’s out-of-pocket loss is first calculated (but only for purchases of securities during the period covered by the suit), on a first-in, first-out basis. If the total of all investor losses exceeds the recovery fund (after expenses are deducted), each investor gets a proportionate share.

Rule 23 of the Federal Rules of Civil Procedure, which are the procedural rules that govern cases in the federal courts in the United States, authorize class actions under appropriate circumstances.

An institution should consider becoming involved in a class action where its involvement can be meaningful; that is where we, after investigating the case, recommend that the institution become involved based on the quality of the case and based on the size of its losses, i.e., where the losses are such that we believe the institution may be considered by the Court for appointment as a lead plaintiff. If we believe that the case is not of institutional quality or we believe an institution’s losses are insufficient to be considered for appointment as lead plaintiff, we do not recommend that the institution seek appointment as a lead plaintiff. In cases started by other investors where we do not recommend that an institution seek to become a lead plaintiff (or if an institution applies to become lead plaintiff but is not appointed), the institution would still be eligible to receive its proportionate share of the recovery, if any.

No, an institution does not need any expertise in law or securities to become actively involved in securities class actions.

Before a lawsuit may proceed as a class action, the court must certify that it is appropriate to do so. Our experience is that when institutions are lead plaintiffs, the courts are more likely to certify the lawsuit as a proper class action. By the same token when an institution is the plaintiff, the wrongdoers are more likely to see that it is a serious case and a better result often occurs than if the plaintiff were just an individual.

Institutional clients, on a regular basis, supply us with information about their holdings in publicly traded securities for their own account and for the accounts of their parents and customers. We regularly review class action lawsuits that are filed, and we would identify cases involving securities in an institution’s portfolio. We would then investigate the case and make a recommendation as to whether or not it should seek to actively participate.

In most cases, institutions do not start the class action. Rather, once we have evaluated cases started by other investors and determined that the case is worthy of institutional consideration, we recommend to our institutional clients that they let us evaluate their transactions to determine whether they should become involved. If an institution decides to proceed, it simply signs a certification identifying its willingness to proceed. We then file a motion on behalf of the institution to become the lead plaintiff in the case.

We investigate cases and recommend that our institutional clients apply to be appointed as a lead plaintiff only in cases where we believe the institution’s participation could make a difference and would be important for the case. An institution’s involvement as a lead plaintiff could be part of a small group of other proposed lead plaintiffs. As a lead plaintiff, institutions have a say in how the case is litigated and as to whether and how much to settle it for. If an institution has a large loss, but is not a lead plaintiff, it would not be able to effectively control the course of the case on behalf of its beneficiaries and would have no role in settlement discussions.

No. An institution’s participation helps to rid the company of the cloud of fraud and move on to its business. Moreover, in many cases, the recovery comes from insurance that companies maintain and therefore has no adverse economic impact on the company. In any event, the case would proceed whether or not the institution actively participates.

The goal is to recover all of an institution’s losses to the extent they can be attributed to the defendants’ wrongful conduct.

If after our recommendation an institution decides to seek appointment as a lead plaintiff, it will be asked to sign a certification that we prepare to authorize us to proceed on its behalf.

An institution’s role in a class action in which it has been appointed a lead plaintiff is to generally remain aware of the case, to cooperate in providing information relevant to the cases to review periodic reports from us and provide guidance if appropriate, and to be consulted with, and guide us, about settlement discussions, if there are any. Beyond that, an institutional lead plaintiff can be as active as it wishes.

If an institution becomes a lead plaintiff, it will be required to provide information about its transactions in the securities that are the subject of the lawsuit. Sometimes courts require a lead plaintiff to provide certain other information about itself and about other investments. Occasionally, a representative of the lead plaintiff is asked to give a short deposition — usually no more than 2-3 hours — answering questions about the transactions and the lead plaintiff’s involvement in the lawsuit.

That depends on the law of the other countries. We are not aware of whether other countries permit class actions.

In a securities class action, the lead plaintiff selects the law firm to represent the class, subject to the Court’s approval.

No, unless the institution needs to obtain transaction documentation that the broker has. Generally, an institution’s custodial bank has all the information needed.

No.

No. To the extent communications with class members are necessary, we handle the communications.

There are two types of services we can perform for institutional investors, both of which at no cost. First, we monitor class action settlements and obtain from institutional investors trading information in the securities covered by the settlements. We then prepare and file proofs of claim and follow up to assure that an institutional client receives its appropriate share of the recovery. In addition to performing all of an institutional client’s settlement administration functions, we identify newly filed cases and evaluate an institutional client’s loss in them and then recommend to the institution that it should either actively participate by seeking to become a lead plaintiff or remain a passive member of the class covered by the class action.

In securities class actions, the court is required to appoint a lead plaintiff from among investors who are in the class and who ask to be appointed. The lead plaintiff can be one or more individuals or entities. The Court will usually appoint the investor who suffered the largest loss as a result of the misconduct that is the subject of the case. Institutions are favored to be lead plaintiffs.

A plaintiff is the person or entity named in a lawsuit as the person making a claim. In a class action, there may be a number of plaintiffs who each file their own lawsuit covering the same claim. In that case, the court will appoint one or more of the plaintiffs to be in charge, i.e., the lead plaintiff. It is the lead plaintiff, through its counsel, that controls the litigation on behalf of the class.

The basic duty of the lead plaintiff is to select experienced counsel and monitor the litigation on a periodic basis. The lead plaintiff must cooperate with counsel to provide relevant transactional information and occasionally may be asked to give a short deposition. If there are settlement discussions, we would consult with the lead plaintiff before agreeing to a settlement.

All securities are eligible to be covered by a class action. There are times, however, when securities that are not traded in a well-developed, active market (e.g., NYSE, NASDAQ) will not be covered by a particular case. There are legal technicalities that make cases involving thinly traded securities not suitable for a class action.

BR&B prosecutes securities class actions on a contingent-fee basis. This means that the firm receives a fee only if it is successful in obtaining a recovery for the class. If the case is concluded successfully, we will apply to the court for an award of attorneys’ fees and for reimbursement of our expenses. The court generally awards the fee based on a percentage of the recovery. It is entirely up to the court to decide how much we get paid. If there is no recovery, we receive no fees and no reimbursement of our expenses.

Each case is different, and it is hard to generalize. You should expect a case to take anywhere from one to four years.

The lead counsel undertakes the responsibility for prosecuting a class action.

Lead counsel, working with accounting firms that have handled these types of matters, using methods developed over the years, are responsible for locating and, at the appropriate time, notifying class members about the case.

We cannot speculate as to why some countries allow class actions and others do not. Our judicial system believes it is appropriate to allow class actions to provide relief on behalf of a group for claims that might not otherwise be pursued individually, where there are common questions that predominate in a case.

Claims under the federal securities and antitrust laws are particularly well-suited for treatment through class actions. Class actions are also generally suitable in other fields of law where the claim is based on a common nucleus of facts and where all claimants suffered the same type of harm.

To “participate” in a securities class action can have several meanings. All investors who purchased securities during the period covered by a class action lawsuit (called the class period) participate in the case if there is a recovery; all class members receive their proportionate share of the recovery. They do not have to do anything to participate at this level. If there is a recovery, they will receive a notice and will be required to submit a claim form listing their covered transactions. Investors with larger losses may seek to participate actively by seeking appointment as a lead plaintiff.

Investors who wish to be considered for appointment as a lead plaintiff generally must apply within 60 days after notice of the case is first published. Aside from that date, there is no set schedule for a class action. An institution can expect cases to last from one year to several years.

If an institution seeks to apply for appointment as a lead plaintiff, we would prepare a certification to that effect. The certification lists the institution’s transactions in the securities covered by the case and authorizes us to seek appointment of the institution as lead plaintiff.

Lawsuits in the United States courts are a matter of public record. Securities class actions, however, do not usually get the attention of the general press. Certain information in lawsuits can be kept private if there are good reasons for confidentiality.

Once a class action is commenced, it cannot be abandoned absent court permission. In the unlikely event that an institution were to be appointed lead plaintiff and later decide not to participate as a lead plaintiff, the court would appoint another investor as lead plaintiff.

Under the bankruptcy laws, if a bankruptcy case is commenced by or against a company, all lawsuits against the company are stayed. The stay does not ordinarily apply to other defendants in the lawsuits, such as officers and directors, but a court can extend the stay to cover them if they are deemed necessary for the company to reorganize itself in the bankruptcy proceeding. In most cases, if there is a bankruptcy, investors can expect to receive nothing from the company. Generally, the recovery will be limited to other sources, such as insurance, if any.

Very limited information about class action lawsuits is available on the Internet.

Yes.

Leonard Barrack, the firm’s senior founding partner or BR&B partner Leslie Bornstein Molder.