On April 8, 2010, the Wall Street Journal ran an article under the headline “Banks Winning When Investors Sue.” However, that article only told part of the story.
According to Craig T. Jones, a lawyer who represents investors at the Atlanta law firm of Page Perry, “the Journal article was focused on lawsuits filed in court, primarily class actions in federal court. But the vast majority of individual investors who make claims against banks and broker-dealers do so in arbitration, and investors have won a higher percentage of securities arbitrations over the past year than they have in years past.” Jones, whose firm handles investment fraud cases all over the country, points out that recent changes in federal law have made it more difficult to sue in federal court, and class action reform legislation over the last several years has made it tougher for investors to bring such cases. “Big class actions get a lot of press,” says Jones, “and a disproportionate number of those have been thrown out on technical grounds due to new procedural requirements, but getting a case thrown out on a technicality should not be taken as a vindication of the banking industry for the abuses that led up to the financial crisis.”
Most investment account agreements with banks and brokerage firms require that investors waive their right to sue in court, requiring them to pursue arbitration instead. While arbitration affords fewer legal protections than a jury trial, it is a much more private process and is generally less expensive. “Furthermore,” says attorney Jones, “arbitrators are more concerned about equity and practicality than about legal technicalities. Some of the cases that judges are throwing out of court on procedural grounds would likely be won by investors in arbitration, but because of the economies of scale that kick in when a large number of plaintiffs have relatively small claims, you cannot blame them for trying the class action route.” The procedural grounds that result in dismissal of class actions are many, ranging from a failure to make the allegations specific enough to a failure to satisfy the requirements of a class action, perhaps because there are too many differences between the individual claims to make it practical to try them in a single case.
“If you have been a party to a class action or other lawsuit that has been thrown out of court on procedural grounds, you may still have a viable arbitration claim,” says Jones. “Many attorneys who handle large class actions do not handle individual securities arbitrations, so if your claim is substantial and you need a new lawyer, we would be happy to take a look at your case and give you our assessment.”
Jones’ firm, Page Perry, devotes much of its practice to securities arbitration. “My area of emphasis lately has been auction rate securities,” says Jones. “I have settled several auction rate securities of cases in the past several months ? all of them against big banks, incidentally.” Jones urges any investor who is still holding illiquid auction rate securities to give him a call, because statutes of limitations in some states are beginning to run out for those who were holding auction rate securities when the market froze in early 2008. “Even if you have not yet made up your mind about whether to bring a claim, says Jones, “you need to know your options, as well as how much time you have to act.” Statutes of limitations range from a little as a year to five years or more, depending on the laws of the state where the investment was made and the type of legal claim being brought. Sometimes, creative lawyering can result in the statute of limitations being extended, or “tolled” so that the clock does not begin running until the fraud is discovered or should have been discovered, but the rules vary from state to state. Investors who think they may have a claim should contact an attorney for more information, before it is too late.