Report Offers New Analysis of Securities Class Actions

A majority of large securities class action settlements are subject to opt-out cases.

October 06, 2016

Between 2012 and 2014, at least one plaintiff opted out of the settlement in the vast majority of securities class actions valued over $500 million, according to a new report by Cornerstone Research in conjunction with Latham & Watkins. The report, Opt-Out Cases in Securities Class Action Settlements: 2012–2014 Update, adds new information to a 2013 study that provided the first comprehensive analysis of how and when opt-out cases arise and are resolved.

As class action settlements get larger, the propensity of plaintiffs to bring an opt-out case increases. For class actions between 2012 and 2014 with settlements of $500 million or greater, 75 percent had at least one related opt-out case, compared to 4 percent of cases with settlements below $500 million.

Institutional investors such as pension funds, sovereign wealth funds, and hedge funds remain the most frequently observed type of opt-out. Pension funds—the most common plaintiffs in opt-out cases—were present in almost half of the opt-out cases where plaintiffs were identified.

“Based on our analysis of 19 years of data, it appears that defendants need to recognize the potential for opt-out cases in securities class actions, particularly in larger settlements,” said Cornerstone Research Vice President Amir Rozen, coauthor of the report. “In the average case with an opt-out from 1996 to 2014, almost 13 percent more was paid to plaintiffs who opted out, and in six cases, more than 20 percent was paid to these plaintiffs.”

“We are seeing the impact of the Second Circuit’s 2013 ruling in Police & Fire Ret. Sys. v. IndyMac MBS Inc., in which the court ruled that the deadline to file an individual claim cannot be suspended,” noted Christopher Harris, a securities litigation partner with Latham & Watkins and a coauthor of the report. “In the new report, we identify 10 opt-out cases that occurred between 2012 and 2014. In two of those cases, the opt-out plaintiffs did not recover anything—because they were time-barred under the reasoning of the IndyMac decision.”

Key Findings

  • Out of 186 securities class action settlements in 2012–2014, publicly available data show 10 cases in which at least one plaintiff opted out of the class action settlement and pursued a separate case against the defendant. For the entire dataset that spans 1996 to 2014, the corresponding number of opt-out cases is 48.
  • Among cases with information available between 1996 and 2014, the average total value of opt-out settlements was $85.4 million, or almost 13 percent of the average class action settlement amount. The average is heavily skewed by the larger opt-out settlements—the median value of opt-out settlements was only $3.9 million, or slightly less than 4 percent of the related class action settlement amount.'
  • Across all cases from 1996 to 2014, 58 percent of class actions with settlements of $500 million or greater had at least one related opt-out case, compared with 3 percent for cases with settlements under $500 million.
About Cornerstone Research

Cornerstone Research provides economic and financial consulting and expert testimony in all phases of complex litigation and regulatory proceedings. The firm works with an extensive network of prominent faculty and industry practitioners to identify the best-qualified expert for each assignment. Cornerstone Research has earned a reputation for consistent high quality and effectiveness by delivering rigorous, state-of-the-art analysis for over 25 years. The firm has 600 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington. See:

About Latham & Watkins LLP

 Latham & Watkins is a global law firm with approximately 2,200 lawyers in its offices located in the world’s major financial, business, and regulatory centers in Asia, Europe, the Middle East, and the United States. Among the firm’s wide scope of transactional, litigation, corporate, and regulatory capabilities, Latham’s Securities Litigation & Professional Liability Practice Group has successfully advised on some of the most high-profile actions filed since passage of the 1995 Private Securities Litigation Reform Act, handling more than 1,000 such cases during the past decade. For more information on Latham & Watkins, please visit the website at

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