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Securities Class Action

There is strength in numbers and a class action lawsuit can be a powerful litigation strategy against investment firms that engage in securities fraud. A securities class action lawsuit incorporates similar claims of numerous investors in a single case. Class action lawsuits are particularly effective when the individual amounts in controversy are relatively small, making it economically impossible to bring individual claims.

In 2008, 97 federal securities class actions were filed in connection to the subprime liquidity crisis, with 21 of these actions filed on behalf of holders or purchasers of auction rate securities, according to Securities Class Action Filings—2008: A Year in Review, an annual report by Stanford Law School Securities Class Action Clearinghouse in cooperation with Cornerstone Research.

Why Class Action May Be Beneficial

Each year, investors lose billions of dollars as a result of the unethical, conflicted and fraudulent practices of Wall Street financial institutions. Oftentimes, investors simply assume there is nothing that can be done to recover their financial losses. Class action litigation may be a viable option for victims of financial fraud.

A securities class action lawsuit allows individuals to legally join with other individuals who have similar experiences. Generally, investors elect a class action lawsuit because the collective injuries of the plaintiffs are much more significant when taken together versus an individual filing a single claim.

In recent years, federal securities class action activity has been dominated by a wave of litigation against the financial services sector. According to Securities Class Action Filings 2008: A Year in Review, a total of 210 federal securities class actions were filed in 2008, a 19% increase over 2007, and a 9% increase over the average of 192 such class actions between 1997 and 2007. About half of the litigation activity, or 103 class actions, in 2008 involved firms in the financial services sector.

The Class Action Process

The rules governing all class actions are dictated by the Federal Rules of Civil Procedure, Rule 23. Once a class action suit has been filed, a federal court will determine whether the complaint fulfills the necessary requirements to move forth as a class action lawsuit. In securities class actions, the court approves a Lead Plaintiff under the Private Securities Litigation Reform Act of 1995. The role of the Lead Plaintiff is to represent the interests of the other plaintiffs in the case. Typically, a Lead Plaintiff has the largest financial interests sought by the complaint. In some instances, depending on the size of a class action case, the court may appoint Co-Lead Plaintiffs.

Our Class Action Experience

Maddox Hargett & Caruso, P.C. has built a national reputation by representing victims of securities abuse and corporate fraud. We have brought cases against Wall Street's biggest firms.

In 2002, Maddox Hargett & Caruso, P.C. made national headlines when it secured a recording-setting $262 million jury verdict in a class-action lawsuit against Prudential Securities, Inc. The verdict, which included $250 million in punitive damages, is considered one of the largest jury verdicts in the state of Ohio and, at the time, the single-largest securities class-action jury verdict in U.S. history. Prudential later appealed the jury's decision. Ultimately, however, the Ohio Court of Appeals upheld the ruling by a Marion County Court on behalf of Maddox Hargett & Caruso's clients – some 300 retirees – against Prudential, awarding the retirees a judgment of just more than
$30 million for their case based on unauthorized trading and breach of fiduciary duty.

Remember, investors have rights when an investment firm, brokerage firm or registered financial advisor is negligent, fraudulent, violates the State and Federal securities laws or breaches fiduciary duties to clients. State and Federal securities laws, including the rules and guidelines governing self-regulatory organizations, exist to provide protection for investors. Keeping this protection intact is the very reason that the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and individual states provide regulation over the securities industry.


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