The Facts Behind Shareholder Suits

Sure, you can choose to "opt out" of the litigation and go out and file your own lawsuit against the company. But that means hiring your own lawyer, and that might not be cost-effective unless your losses reach into the millions of dollars.

And, sad but true, no lawyer will be interested in representing you unless there's the potential for a big settlement or judgment. That's why most people choose to remain in the class action case.

Below is the chronology of events in a typical securities fraud class action:

Plaintiffs' lawyers file lawsuits on behalf of shareholders, alleging that the stock declined because of some corporate fraud.

Lawyers compete for the status of lead attorney by trying to get a shareholder with the biggest losses to join their action.

A judge joins all the lawsuits together, picks one lawyer to serve as lead counsel and decides whether to grant class action status to the case.

The lawyers notify shareholders of the litigation and ask them if they want to be part of the action and be eligible for a portion of any settlement or jury award.

Shareholders can either "opt in" on the lawsuit or "opt out" and pursue their own litigation.