Choosing Counsel In a Securities Class Action Choosing Counsel In a Securities Class Action

Choosing Counsel In a Securities Class Action

Under the Private Securities Litigation Reform Act (“PSLRA”), Congress implemented specific procedural requirements to help ensure that institutional investors, such as public pension funds, are more likely to be named a Lead Plaintiff in large securities class actions. Once an investor has chosen to take a leading role in a securities class action, the next critical decision is choice of counsel. Lead Counsel in a securities class action is critical to every decision in the prosecution of a securities class action, and can have a significant impact on a successful Motion for Lead Plaintiff. Here are several factors that funds may wish to consider in choosing Lead Counsel for a large securities class action.
First, does the counsel have significant experience in leading a large class action? Class actions, and especially securities class actions, are a relatively specialized field and prior experience will ensure familiarity with legal doctrines, and other issues. Ideally, Lead Counsel will have an established track record litigating and settling securities class actions or other large class actions.  
Second, does the counsel have the resources to prosecute large scale litigation on a contingency basis for a number of years? A securities class action is an intensive and expensive effort that is typically brought on a contingency fee basis. Plaintiff’s counsel must have the resources necessary to litigate – without pay -- for a number of years, and cover the costs of out-of-pocket expenses such as expert witnesses, travel, and transcript costs. 
Third, is the counsel amenable to aggregating investors for the purposes of cooperating in the Lead Plaintiff process? Under the PSLRA, the primary factor in determining the Lead Plaintiff for the class action is the investor or group of investors which have the largest loss. In large class actions, it is common for a group of investors to cooperate in order to establish Lead Plaintiff status, and file an appropriate motion.
Fourth, is the counsel agreeable to negotiations regarding the contingency fee rate? Because attorneys’ fees and costs are deducted from any class settlement, a large lawyer’s fee has some impact on the recovery by the class members. Accordingly, institutional investors have negotiated contingency fee rates, with a graduated increase based on the stage of the litigation.
Fifth, is local counsel necessary to help manage the litigation process where the Institutional Investors are located? Many large securities class actions retain a law firm from the region or state to assist in discovery obligations, depositions, and other litigation support as the case proceeds. Typically, these firms have an ongoing relationship with the institutional investor, and can help manage any internal dynamics that arise due to the litigation. 
After deciding to initiate litigation, choosing your Lead Counsel is among the most important decisions an institutional investor can make relating to a securities class action. These factors can help your fund make a decision that will increase the chances of success. 
For additional information, contact Albert Lin at (614) 462-2233 or, or any member of Ice Miller's Litigation Group.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.


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