Opting Out of Class Actions: Advantages, Risks, Procedural Pitfalls, Settlement Leverage

Description

Opt-outs are cases in which at least one putative class member excludes itself from the class in order to pursue a separate lawsuit against the defendant. Though staying in the class may seem simpler, it is not always in a party's best interests. Recent studies and reports show that more and more plaintiffs are opting out of securities, antitrust, and other business practices class actions. Properly and carefully approached, opt-out actions can give individuals more options and more direct control of their case.

The most compelling reason for opting out is the chance to recover a significantly larger amount than if remaining in the class. Opt-out plaintiffs also hope to resolve the matter more quickly than remaining in the class, but the decision must often be made years before a settlement is proposed or approved. The threat of opting out can also be a powerful tool for plaintiffs in getting a larger recovery, whether through litigation or a separate settlement.

But a prospective larger recovery must be weighed against the defendants' incentive to litigate long and hard against opt outs. Other key considerations an opt-out plaintiff must confront include where it would need to file its separate case, the facts of the case, and whether other aggregate proceedings such as MDL cases are pending. After an individual suit is filed, the opt-out plaintiff may still be dragged into discovery in the class action.

Listen as our experienced panel discusses the key considerations in deciding whether a plaintiff should remain part of a class or bring its own claims, how to use the threat of opting out as leverage in settlement, and recent decisions about the procedural pitfalls of not properly opting out.