Excerpt:
I. The Merits Matter Enormously to the Size of Recovery in
Securities Class Actions
Statistics varying all over the lot have been presented in the
debate over the value of securities class actions and whether they
genuinely compensate victims. Some say settlements represent in
most instances less than 10% of damages. Others demonstrate numbers
of over 25% up to 60% on average. Those pointing to the low
percentages conclude that "the merits don't matter" and imply or
state that only the class action plaintiffs' lawyers are well
compensated. As a practitioner of more than twenty years in the
field representing investors and investor classes, the merits
matter enormously. As a participant in hundreds of settlement
meetings, mediations and other conferences convened for the purpose
of trying the resolve a securities class action, it is obvious that
the merits not only matter, but are largely determinative of the
size of a settlement, assuming an ability to fund a
settlement.
Assuming a viable funding source (i.e. a solvent defendant and/or
adequate insurance coverage), the most important factor affecting
the size of the outcome is the strength of the factual claims. To
properly analyze whether victims are being compensated reasonably
in securities class actions, the most meaningful analysis is to
look into the facts of the cases, not just statistics of results
(settlement amounts) versus claimed damages. . . .