Opt-Out Rate in Securities Class Action Settlements More Than Doubles in Most Recent Four-Year Period


Opt-outs remain more likely in higher-dollar settlements.

New York—Out of 382 securities class action settlements between 2014 and 2018, there were at least 34 cases in which one or more plaintiffs opted out to pursue separate litigation against the defendant, according to a report released today by Cornerstone Research in conjunction with Latham & Watkins LLP. The 8.9% opt-out rate during this period was more than double the 3.4% rate of opt-outs prior to 2014.

The report, Opt-Out Cases in Securities Class Action Settlements: 2014–2018 Update, also found that opt-outs remain more likely to occur in larger-dollar securities class action settlements.

Class settlements greater than $20 million between 2014 and 2018 were over 10 times more likely to have opt-outs than settlements of less than $20 million.

Between 2014 and 2018, 28% of cases with class action settlements over $20 million had associated opt-outs. Conversely, for class action settlements below $20 million, the opt-out rate was only 2.1%. Between 1996 and 2018, 15% of cases over $20 million had associated opt-outs, while for those under $20 million the rate was only 1.3%.

“Over recent years, anecdotal conversations revealed an expectation that opt-outs would increase. The data now show that this is, in fact, the trend,” said Brendan Rudolph, a Cornerstone Research principal and report coauthor. “Furthermore, and continuing prior trends, class settlements greater than $20 million between 2014 and 2018 were over 10 times more likely to have opt-outs than settlements of less than $20 million.”

The report provides a comprehensive, quantitative analysis of publicly available information regarding opt-out securities cases. The database of 1,775 class action settlements from January 1, 1996, to December 31, 2018, contains 82 cases with opt-outs.

Institutional investors, including mutual funds, hedge funds, and other investment management firms, played a significant role and were parties in 15 of the 34 opt-outs between 2014 and 2018. Pension funds, which previously were involved in almost half of the pre-2014 opt-outs, appeared in only four opt-out cases between 2014 and 2018 in which parties were able to be identified.

“Recent rulings on tolling the statute of repose in the Securities Act of 1933 inadvertently may have increased the number of opt-outs,” said Christopher Harris, a Latham & Watkins partner and report coauthor. “Instead of making it harder for investors to opt out of settlements, they may have resulted in more preemptive opt-outs by large investors that are able to afford bringing separate lawsuits.”

Opt-Out Cases in Securities Class Action Settlements: 2014–2018 Update

Key Findings
  • All four class actions between 2014 and 2018 with settlements of $500 million or greater had associated opt-out cases, compared to 7.4% of cases with settlements below $500 million.
  • The largest set of opt-out settlements related to a single case between 1996 and 2018, in terms of total dollar value, remains AOL Time Warner Inc., where the $764 million of opt-out settlements represented 30.6% of the size of the class action settlement.
  • The largest opt-out settlement amount as a percentage of the class action settlement was Qwest Communications International Inc., where the $411 million opt-out settlement represented 92.4% of the final class action settlement.


Jason Milch
Elisabeth Gaubinger
Cornerstone Research