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10 Warning Signs
you may have a Problem with your stockbroker, financial planner or investment advisor.
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You lose more money than you thought you were risking.
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Investment losses negatively impact your retirement or or lifestyle
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Your broker won't return your calls
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Your broker is good at telling you what to buy, but not what to sell
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You are losing money in an IRA or retirement account
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Your broker has more excuses than ideas
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Your broker suggests an annuity for your IRA account
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"Risk" is never part of the conversation
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Your broker says it's "safe", but your gut says differently
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Your "investment professional" loses a lifetime of your savings
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Will Class Action Settlements
Recover My Investing Losses?
If you are thinking about waiting out a class
action rather than filing your own claim in arbitration, against your broker
dealer, you should read about this recent class action award.
In truth,
class actions are great for two out
of the three parties involved, namely the defendants and the attorneys.
The clients / victims end up not much better off, to speak of, than
if they did nothing.
On average
our clients obtain settlements in
the 30-70 cents on the dollar range, and sometimes all their losses are
returned to them. Class
actions result in awards of generally less than 10 cents on the dollar.
Read this article and find out why.
McPhail v. First Command Financial Services, Inc., No.
05cv179-IEG-JMA, 2009 U.S. Dist. LEXIS 26544 (S.D. Cal., 3/30/09). Class
Actions, Effect of (Settlement Fairness; Objectors) * FRCP (Rule 23
“Attorney Fees”).
A determination of whether a class action settlement is fair and
reasonable is based on, among other things, 1) the strength and risks of the
plaintiffs’ case; 2) the amount offered in settlement; 3) the extent of
discovery completed and the stage of the proceedings; and 4) the reaction of
the class members.
Plaintiffs brought a securities fraud class action against defendants
seeking $175 million in damages.
After the claim was certified as a class action and after extensive
discovery and appeals to the Ninth Circuit and Supreme Court,
the matter was settled for $12
million, including $3.5 million in attorney fees for plaintiffs’
counsel. The parties now seek court approval of the settlement. There
are five objectors. The settlement is approved.
First, the Court examines the strength of plaintiffs’ case. It notes the
strong defense asserted, to wit, that there were no misrepresentations, that
the commission charges which gave rise to the suit actually worked to the
advantage of the class members, and that there was no reliance on the
claimed misrepresentations.
Next, the Court assesses the risk of collecting a full recovery. It notes
that defendants have available assets of only $30 million to $60 million,
which inherently limits the total funds available to satisfy a judgment.
Given these reduced assets, the settlement is approximately 20 to 40% of the
maximum recoverable judgment. A $175 million judgment would force the
defendants into bankruptcy, delaying and limiting plaintiffs’ recovery.
Finally, class counsel rated the risk of prevailing at no less than 50%.
Thus, $12 million today is worth more than a 50% chance of recovering $30
million or less after three to five years of appeals or bankruptcy
proceedings. The settlement amount also falls within range of similar
settlements in the Ninth Circuit and it compares favorably to a $12 million
SEC settlement with closed account holders in another case involving
defendants. The settlement is also the result of extensive litigation and
negotiation. The class was certified and, at the time of settlement, the
parties were finishing expert discovery and class counsel was preparing for
trial.
The reaction of the class members also favors settlement. Class members
timely submitted 60,515 claims out of 207,412 potential claims, representing
29.18% of the entire class. This rate is roughly equal to the claims rate
experienced in the settlement of the SEC action. In addition, there were
only five objectors and, in four cases, it was the view of the objector that
plaintiffs did not have a viable cause of action. Thus, there was only one
real objection to the amount of the settlement.
Finally, the Court turns to the amount of the attorney fees contained in
the settlement and it approves the amount that was negotiated. In doing so,
the Court evaluates five factors to determine if the fees are reasonable: 1)
the results achieved; 2) the risk of litigation; 3) the skill required and
the quality of the work; 4) the contingent nature of the fee and the
financial burden carried by counsel; and 5) fee awards made in similar
cases. All of these factors weigh in favor of approving the requested fee.
The result
achieved, a 7% recovery of the estimated damages, falls within the range of
typical recoveries in complex securities class actions. In similar
cases, the Ninth Circuit and its associated district courts have approved
fees of nearly 30% of the fund. In addition, the proposed
attorneys’ fee award is less than class counsel’s lodestar calculation,
buttressing the court’s finding of reasonableness. In the instant case,
class counsel expended more than 11,592 hours prosecuting the action on
behalf of the class. These hours, when multiplied by class counsel’s
customary hourly rates, corresponds to a total lodestar amount of more than
$4.8 million. (P. Dubow) (SLC Ref. No. 2009-15-06)
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