Although class actions are often discussed in the news, many people are unfamiliar with what they are and how they work. Here are answers to some of the most frequently asked questions about class actions.

What is a class action?

How does a class action work?

What is a class representative?

What are the duties of a class representative?

Why should I get involved in a class action?

What does it cost to be involved in a class action?

What is a class period?

Can employee benefit funds bring class action lawsuits?

Does the Firm offer special services for institutional investors?

Q: What is a class action?
A: Class actions are lawsuits in which no more than a few named plaintiffs are permitted to represent the interests of hundreds, thousands or sometimes millions of claimants because their claims arise from the same facts and under the same legal theories. Class actions are used, for example, to address illegal price-fixing conspiracies (antitrust), the sale of defective products (consumer), or companies' fraudulent stock manipulation (securities). Because of their increased efficiency, class actions allow the litigation of individual claims that would not normally have been valuable enough to litigate one at a time.

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Q: How does a class action work?
A: The first step in a class action case is the plaintiff's filing of the complaint, a document setting out the factual and legal theories on which the claims are based. After filing the Complaint, plaintiff must also file papers demonstrating that the case is appropriate for handling as a class action. This filing will include factual and legal explanations as to why the plaintiff is an adequate class representative, the number of injured parties is sufficiently large, plaintiff's claims present common issues of fact and law, and that plaintiff's individual claims are typical of the claims belonging to absent class members. The parties will then generally engage in discovery, a process by which each side gets to uncover all of the documents and information in the possession of the other side related to the case. The defendant will normally seek to dismiss the complaint, either before or after discovery, on the ground that the facts or law do not support plaintiff's claims. If those motions fail, the case may ultimately settle or go to trial. Class actions tend to involve more complicated issues than most other civil cases, and to take longer than individual cases to resolve, because of the large number of parties involved and the broad nature of claims asserted.

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Q: What is a class representative?
A: A class representative is a regular person or business that has suffered an injury and wants to have their complaint addressed. In antitrust cases, class representatives are typically commodity-product purchasers. In consumer-fraud cases, the class representative is often a regular person who has suffered some injury from the purchase of a product or service. In securities-fraud cases, the class representative will be the person or entity with the largest financial interest in the relief sought by the class - usually an institutional investor or union pension fund, but sometimes an individual investor who has lost a large percentage of their net worth from the fraud alleged.

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Q: What are the duties of a class representative?
A: Although the duties of a class representative are important, they are not particularly burdensome. The most important thing is that a class representative act in the best interests of the class as a whole. A class representative must cooperate with his/her counsel in providing information and documents that are relevant to the case. A class representative will normally have to sit for a deposition in which lawyers for the defendant will ask questions under oath, which must be answered honestly and accurately. The lawyer works with the class representative to make sure he or she is thoroughly prepared. In addition, it is necessary for the class representative to keep up with the progress of the case and to read the updates provided by class counsel. In the event the case goes to trial, the class representative may be required to testify.

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Q: Why should I get involved in a class action?
A: Many class action plaintiffs are motivated by a charitable impulse to correct society's wrongs and help other people. By participating in a class action, you can play a part in correcting corporate wrongdoing on a large scale and achieving a recovery for thousands, or millions, of people. If the case is successful, you will receive direct benefits including: (1) an end to the improper or illegal practice that you brought the case to remedy; (2) compensation for the specific injury you sustained; and (3) an incentive award from the court to compensate you for the time and effort expended in prosecuting the claims and achieving a recovery for the class. In securities fraud class actions, incentive awards are not permitted but the class representative is entitled to compensation for the time spent in assisting class counsel in preparing the case.

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Q: What does it cost to be involved in a class action?
A: Nothing. SMBB prosecutes class actions on a contingency fee basis. This means we will pay the litigation costs, including filing fees, transcripts, travel, copying, postage and expert fees, and will not bill you for the time we spend on the case. If we recover nothing, we're paid nothing. If we obtain a recovery for the class, we will ask the court to award us a fee and reimburse our expenses out of the money we have recovered.

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Q: What is a class period?
A: The "class period" is typically the time frame during which it is believed the defendant was involved in improper conduct. The attorneys investigating and prosecuting the case will review the facts of the case and determine when the class period began and ended. Sometimes the class period changes during the case based on new information fond during the discovery process.

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Q: Can employee benefit funds bring class action lawsuits?
A: Employee benefit funds are particularly well-suited to bring class actions for securities fraud. Federal law allows large institutional investors to control securities fraud class actions so that the interests of investors would inform the litigation decisions made in the case. Many pension funds have recognized the advantages of getting involved in the litigation of claims on behalf of defrauded shareholders.

Employee benefit funds benefit in at least three ways from bringing class action suits. First, class actions demonstrate to participants, beneficiaries and vendors that the trustees are vigorously protecting the assets of the fund and will not accept overcharges or unconscionable conduct with respect to goods and services purchased by the fund. Second, by taking an active role in class action litigation, a fund's trustees gain greater control over the litigation affecting its participants and beneficiaries. Third, class action cases do not require any expenditure of fund monies, since the work is performed on a contingent fee basis, with all fees and costs paid out of the recovery.

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Q: Does the Firm offer special services for institutional investors?
A: Since institutional investors have only 60 days from the first securities filing to decide whether to seek a lead plaintiff role, they must assess a great deal of information and make several hard decisions in a relatively short period. To assist in this process, SMBB offers the following free services: (1) real-time monitoring of news sources and regulatory filings to detect potential instances of securities fraud at the earliest opportunity; (2) detailed written analyses of potential cases, including assessments of investment losses, the merits of available claims, and a recommendation about whether to get involved in the case; (3) regular notification of new securities cases with an assessment of the need to consider action on particular holdings; (4) regular notification of settled cases where the client is entitled to recover, with all of the information needed to make a claim; and (5) educational seminars on new developments in corporate governance and investor rights.

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