The Litigation Lifecycle

1-2 Years

Event causing shareholder damages

In practical terms, the seed for a securities class action lawsuit is planted with a significant drop in a company’s stock price.

Company sued in district court Notice of Pending Action mailed to shareholders (in some cases)

A securities class action lawsuit formally commences when the Company is sued in district court for alleged violations of federal securities laws. Typical accusations include issuing materially false and misleading statements, material omissions, improper disclosures and/or accounting.

Notice of Pending Action mailed to shareholders (in some cases)

In some cases, a Notice of Pending Action- Class Action Complaint is mailed to shareholders. This is to inform the shareholders that a case has been filed against the company. If the case results in a settlement, a Notice of Settlement of Class Action containing the Proof of Claim form is mailed to shareholders.

Lead plaintiff appointed

The court then appoints a Lead Plaintiff and Lead Plaintiff Counsel. The Lead Plaintiff is one or more persons appointed by the court to represent the class and in turn, the Lead Plaintiff Counsel is the law firm/attorney that serves as counsel on behalf of the class. In response to the initial complaint, the defendant files a motion to dismiss.

6 Months - 1 Year

Class Certified - Motion to dismiss denied or case goes to trial

There are three potential outcomes: 1) the case is dismissed 2) the motion to dismiss is denied and the case goes to trial or 3) the motion to dismiss is denied and the case is settled. The vast majority of cases that are not dismissed are settled, with very few going to trial. Following the survival of a motion to dismiss, the ‘class’ is certified by the court.

1.5 - 2 Years

Court approves settlement - Notice of settlement of class action mailed to shareholders

There are three potential outcomes: 1) the case is dismissed 2) the motion to dismiss is denied and the case goes to trial or 3) the motion to dismiss is denied and the case is settled. The vast majority of cases that are not dismissed are settled, with very few going to trial. Following the survival of a motion to dismiss, the ‘class’ is certified by the court. Notice of Settlement of class action mailed to shareholders

Members of the class are mailed a "Notice of Settlement of Class Action" which provides investors who held shares during the class period with the details of the settlement and the information the claimant will need to provide to the claims administrator in order to file a claim for a share of the settlement funds. This notice contains several critical components:

Qualifications for Eligibility  determine who is eligible to file.

Plan of Allocation  details how damages, or "Recognized Loss, " will be calculated.

Proof of Claim  form to be used to make the actual filing.

The settlement notice also contains key dates, including the Opt- Out/Object and the class action claims filing deadlines.

Claims administrator approved by court

Once a settlement has been approved by the court, the court will appoint a claims administrator to manage the distribution of settlement funds to members of the class.

Claimants file for settlement funds. Opt-out/object and claims filing deadlines. Bar date (if applicable)

Claimants file for settlement funds.  Opt-out/object and class action claims filing deadlines.  Bar date (if applicable)

Eligible claimants but complete Proof of Claim forms and submit to the claims administrators for validation and to receive their portion of the settlement fund.  Claimants must adhere to various deadlines for opting out, objecting, filing claims and in the event that the court accepts late claims, the final date for which claims will be honored, known as the bar date.

An investor can choose to Opt-Out of a class action, whereby s/he will no longer be considered as a member of the class, and as such, will not be entitled to any recovery obtained for the settlement class. An investor who chooses to be excluded from the class reserves the right to file an individual claim against the company, separate from the class. Investors may choose this path if they believe the class action does not accurately represent their interests.

Administrator files Affadavit for Distribution with court

After the claims administrator has received and processed all claims made for the settlement, they will file an affidavit with the court, illustrating the results of the claims filing processing and the plan for initial distribution. Once the affidavit is approved by the court, the claims administrator determines the percent of loss to be paid, known as the proration, and distributes the awards due to individual claimants.

6 Months - 2 Years

Initial distribution/ payment, Holdover Distribution, Secondary and Tertiary Distributions (if applicable)

The claims administrator distributes settlement funds to eligible claimants via an initial distribution.  The case is terminated after the entire settlement fund is distributed. In a perfect world, this would occur after the first distribution, however, most class action settlements have secondary, and in some cases, tertiary distributions.

Holdover distribution (if applicable)Secondary/ tertiary payouts (if applicable)


If the case is large enough, the administrator may choose to hold back a portion of the settlement funds in order to pay on late claims. This is known as a holdover and occurs after the initial distribution.  Secondary and tertiary payouts distribute the remaining settlement funds among all eligible claimants.