Class Action Lawsuits and Investment Fraud

A class action lawsuit is used when a large group of people have a common complaint, usually with a company or other large entity, and pursuing individual litigation would be financially unrealistic or repetitive. Some of the largest of all time have revolved around investment fraud, including suits against Enron, Nortel, and AOL Time Warner. In the case of a lawsuit, plaintiffs will have all suffered financial losses resulting from fraudulent investment practices.

Why a Class Action Lawsuit?

These suits are often more successful in securing awards for the group than if individual plaintiffs were involved. Usually specialized attorneys will pursue a suit against a company who has wronged investors. After forming a lead group of plaintiffs, the grievance against a company must be filed. The ponzi scheme attorney is also usually required to advertise the suit for a period of time to the public. This advertisement is to alert other individuals who may share the common grievance against the defendant during the class period.

Who Can Join a Class Action Suit?

In order to join a class action suit, you must share the complaint common to the suit, and you must have been aggrieved by this complaint during the class period -—the time set forth by the plaintiff as the time the company wronged its investors.

What Requirements Must a Class Action Suit Meet?

The suit must then be certified by the courts by meeting various requirements. In most states there are four basic requirements every class action lawsuit must meet:

• Commonality – the class members all share the same complaint against the defense
• Adequacy – assurance that the lead plaintiffs will adequately protect the interests of other class members involved
• Numerosity – the number of class members is so large that resolving cases individually would be impractical for the court system
• Typicality – the complaint of the lead plaintiffs is typical of other class members

How are Class Action Members Awarded?

If the district court approves the class action suit, a lead plaintiff is designated by the court -—usually the plaintiff is someone who has the largest financial interest in the case. The lead plaintiff must, despite other personal grievances against the defendant, agree to uphold the common interest of the other plaintiffs in the suit. When it is certified, the defendant will usually agree to settle the suit. The class members must agree on the settlement, and then the court must approve both the settlement and the way it will be distributed to class members.

Class action lawsuits are advantageous especially in matters of investment fraud because they form action against large corporations that would be financial unrealistic for individual class members to pursue on their own. investment fraud attorneys often take on a case and are only paid for it if the suit succeeds against the defendant. In many cases, these lawsuits bring financial restitution to wronged investors. In the case of AOL Time Warner, for example, the class action lawsuit was awarded $2.5 billion dollars for Time Warner’s reporting false earnings to its investors.