Going It Alone vs. Joining the Crowd: Class Actions vs. Individual Investment Claims

When you’ve been harmed by investment fraud or broker misconduct, you might face a choice: join a class action lawsuit with other victims, or pursue your own individual claim. Both approaches have advantages and disadvantages, and the right choice depends on your specific situation.

Let me break down the differences so you can make an informed decision.

What Are Class Action Lawsuits?

Class action lawsuits allow multiple investors with similar claims to join together in a single lawsuit. Instead of hundreds of individual cases, there’s one big case representing everyone who was harmed in a similar way.

Common examples include:
– Securities fraud by public companies
– Mutual fund fee abuse
– Broker-dealer misconduct affecting many clients
– Investment advisor fraud schemes

Advantages of Class Actions

Shared costs – Legal expenses are spread among all class members, making it affordable to pursue claims that might not be economical individually.

Leverage – A large group of plaintiffs has more negotiating power than individual investors.

Efficiency – One case resolves claims for everyone, avoiding duplicative litigation.

Access to justice – Small investors who couldn’t afford individual lawsuits can get compensation.

Professional representation – Class actions typically attract experienced attorneys with substantial resources.

Disadvantages of Class Actions

Limited control – You don’t control the litigation strategy or settlement decisions.

Average recoveries – Settlements are typically based on average damages, not your specific losses.

Long timelines – Class actions can take years to resolve.

Lower per-person recoveries – After attorney fees and expenses, individual recoveries are often modest.

No individual attention – Your specific circumstances might not be fully considered.

Advantages of Individual Claims

Personal control – You make the decisions about strategy, settlement, and trial.

Tailored approach – The case focuses on your specific situation and damages.

Potentially higher recovery – If you have significant losses, individual claims might yield better results.

Faster resolution – Individual cases often resolve more quickly than class actions.

Direct relationship with counsel – You work directly with your attorney.

Disadvantages of Individual Claims

Higher costs – You bear all the legal expenses yourself (though many attorneys work on contingency).

Less leverage – Individual plaintiffs have less negotiating power than large groups.

Higher risk – If you lose, you get nothing (and might owe expenses).

Complexity – You need to understand and manage the litigation process.

Arbitration requirements – Many individual claims must go through FINRA arbitration instead of court.

When Class Actions Make Sense

Class actions are often better when:
– Your losses are relatively small (under $100,000)
– Many investors were harmed in the same way
– The misconduct involves public securities
– You can’t afford individual litigation costs
– The case involves complex securities law issues

When Individual Claims Make Sense

Individual claims might be better when:
– You have significant losses (over $100,000)
– Your situation is unique or complex
– You want control over the litigation
– You need faster resolution
– The misconduct involves broker-specific issues

The Opt-Out Decision

If you’re included in a class action, you usually have the right to “opt out” and pursue your own individual claim instead. This decision is crucial because:
– You typically can’t change your mind later
– Opting out means giving up any class action recovery
– Individual claims have their own risks and costs

Factors to Consider

Size of your losses – Larger losses often justify individual claims.

Strength of your case – Strong individual cases might yield better results than class actions.

Time sensitivity – Do you need money quickly, or can you wait for a class action to resolve?

Risk tolerance – Are you comfortable with the uncertainty of individual litigation?

Available resources – Can you afford the costs and time of individual litigation?

FINRA Arbitration vs. Class Actions

Most individual broker misconduct cases go through FINRA arbitration, not court. This creates some unique considerations:
– Arbitration is typically faster than class actions
– You have more control over the process
– Arbitrators understand investment issues
– There’s no right to appeal arbitration awards

Real-World Example

I represented a client who lost $500,000 in a broker fraud scheme. There was also a class action against the same broker, but the estimated recovery was only about 10 cents on the dollar.

We opted out of the class action and pursued an individual FINRA arbitration claim. We recovered 80% of his losses – much more than he would have received in the class action.

But this doesn’t mean individual claims are always better. Another client with $25,000 in losses joined a class action and received a reasonable recovery without the stress and uncertainty of individual litigation.

Getting Professional Advice

The choice between class actions and individual claims is complex and depends on many factors specific to your situation. You need experienced counsel to help you evaluate:
– The strength of your individual case
– The likely recovery in each option
– The costs and risks involved
– The timing considerations

Hybrid Approaches

Sometimes you might be able to pursue both approaches:
– Join a class action for some claims while pursuing individual claims for others
– Use class action discovery to build your individual case
– Coordinate with other individual claimants for shared costs

The Bottom Line

There’s no one-size-fits-all answer to whether you should join a class action or pursue an individual claim. The right choice depends on your specific losses, circumstances, and preferences.

Don’t make this decision alone. An experienced securities attorney like investment fraud lawyer Robert Pearce can help you evaluate your options and choose the approach that’s most likely to maximize your recovery.

Remember: the goal is getting fair compensation for your losses, whether that comes through a class action, individual litigation, or arbitration. Choose the path that gives you the best chance of achieving that goal.