Cornerstone Research recently published a report on the increasing prevalence of opt-outs in securities class action settlements.51 Of the 382 securities class action settlements between 2014 and 2018, there were at least 34 cases in which at least one plaintiff opted out—a rate of 8.9%. In comparison, between 1996 and 2013, the percentage of securities class action settlements with opt-outs was 3.4%.

While pension funds previously were among the most common plaintiffs in opt-out cases, they appeared in just four of the 34 opt-out cases between 2014 and 2018. Meanwhile, non-pension institutional investors, such as mutual and hedge funds, were plaintiffs in 15 of these cases.

The report notes a possible causal connection between the increasing likelihood of opt-outs and recent appellate decisions regarding the Securities Act's statute of repose. First, in Police and Fire Retirement System of the City of Detroit v. IndyMac MBS, Inc., the Second Circuit held that the statute of repose was not tolled by the filing of a class action.52 Second, in California Public Employees' Retirement System v. ANZ, the Supreme Court affirmed the Second Circuit's ruling that an individual action filed by a plaintiff that opted out of a class settlement after the expiration of the statute of repose was properly dismissed as time-barred, even though the putative class complaint was timely filed.53 Although it was anticipated that these decisions may lead to a decrease in opt-outs, Cornerstone posits that these decisions may have resulted in well-funded institutional investors opting out of classes more frequently, and filing individual actions at an earlier time than before.

To help guard against the costs and potential exposure of multiple opt-out suits, defendants may increasingly turn to "blow provisions," which allow the class action defendant to terminate or renegotiate a settlement if a threshold percentage of the class opts out.

Read the report here.


51 See Cornerstone Research, Opt-Out Cases in Securities Class Action Settlements: 2014-2018 Update (2019),

52 721 F.3d 95, 101 (2d Cir. 2013). 53 137 S. Ct. 2042, 2055 (2017).

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