Do I Have To Own Stock In The Company To Benefit From A Class Action?

Class action lawsuits allow a large group of plaintiffs who have suffered similar financial losses or harm from the same source to join together in a single case. Class action cases are not limited to stockholders or investors. You can become a member of the class if you meet the criteria for the “class.” In a class action related to securities, you may be able to join a class action if you purchased shares within a specified class period.

To determine whether you can join a class action case or receive a payout from a class action settlement, speak with an experienced class action attorney.

Understanding Class Action Eligibility

Determining your eligibility for a class action case is essential to protecting your rights. In a class action lawsuit, one or more plaintiffs file a lawsuit on behalf of the class. Class members do not need to own stock in a non-securities case, such as litigation for consumer product defects, employment discrimination, and false advertising claims. However, some class action litigation, such as securities litigation, requires investor status at the relevant time.

Eligibility Criteria for Class Members

The court must certify the class before a plaintiff can have a successful class action lawsuit in non-securities cases. The lead counsel must present a case that shows that the proposed class meets the applicable requirements. The requirements for class certification include the following:

• Numerosity
• Commonality
• Adequate representation

If the class size is considerable, the plaintiffs may take the case into federal court if the plaintiff and defendant are from jurisdictions in different states.

Do You Need to Own Stock to Join a Class Action?

If you purchased shares within the specified class period, you may be eligible to join a securities class action case. It is not necessary that you currently hold the stock. Securities class action cases, such as securities fraud class action suits based upon U.S. federal securities laws violations, are typically brought in federal district court.

Class members receive notification when a judge certifies a class action case under securities laws in federal court. Class counsel notifies shareholders by mail at the address the company has on file.

In a securities class action lawsuit, a class representative brings a lawsuit on behalf of a group of investors who suffered a financial loss from a company’s stocks, bonds, or mutual funds. Common legal issues involved in securities fraud class action cases include allegations of:

• Fraudulent stock price manipulation for a company’s securities
• Materially false statements that companies make to investors in prospectuses
• Misleading statements or misrepresentations

Concerning securities class action cases, the primary regulator involved is the Securities and Exchange Commission (SEC), which oversees securities markets. They investigate potential violations of securities laws, such as Section 10(b) of the Securities and Exchange Act of 1934. There are also state regulators who enforce state securities laws.

PSLRA Litigation

Since the passage of the Private Securities Litigation Reform Act of 1995 (PSLRA), a federal securities law, securities class actions involving stocks traded on national exchanges must be litigated in federal court to promote uniformity in outcomes. Under the PSLRA, the plaintiff must publish a notice of filing that informs all potential members of the securities case.

Time Frame for Filing Securities Litigation

Like most cases, timing is vital in securities litigation. PSLRA requires securities litigation to be filed two years after the violation is discovered, but no more than five years after the violation occurs.

If you’re identified as a class member and have further questions, you should direct the questions about the securities class action to the law firm handling the case. If you are a stockholder who lost money on a security but not enough that it would make financial sense to pursue an individual claim, joining a class action could be a good option. The entire class of investors shares the attorneys’ fees and expenses in a securities action. The court must approve the securities class action settlement.

Types of Class Actions for Non-Shareholders

Some class action cases do not require class members to be shareholders or have a financial interest in the company. These are called “class actions for non-shareholders.” These are class action cases for consumers or other parties whose actions may have injured the company, but are not investors in the company’s stock.

The class representatives typically bring these lawsuits in cases involving:

• Defective products
• Employment disputes
• Environmental issues
• Data breaches
• Consumer fraud

These types of class action suits do not usually require stock ownership. If the lawsuit is successful at trial or settles, class members typically need to file a claim to receive compensation. This often involves providing proof of purchase, medical records (if injuries are involved), contracts, or correspondence with the defendants.

How Non-Shareholders Can Benefit from Class Actions

There are several benefits for non-shareholders in a class action lawsuit. When hundreds or thousands of plaintiffs join against a defendant with evidence of the same problem, it’s hard for courts to ignore.If successful, the class members can benefit from a share of the settlement fund and may be able to be part of regulatory and procedural changes impacting entire industries. This type of case can help raise the profile of issues quickly and prevent others from being harmed. Contact an experienced class action attorney to discuss whether you can join a class action case.