On July 1, 2021, the United States District Court for the Middle District of Tennessee granted a motion to intervene brought by RKS on behalf of its asset manager client, seeking to preserve the clients’ securities fraud claims from being eliminated by the timing requirements of the Securities Exchange Act of 1934. Defrauded investors face complex timing requirements governing when and how to bring claims after their investments have lost value as a result of an alleged fraud. Many investors rely on securities class actions to “toll” their claims. But class actions at times fail to recover anything for defrauded investors, or fail to provide a sufficient recovery for a specific investor with individual claims. And the rules around “tolling” are complicated as well, and can differ by jurisdiction.
The case at issue, a class action involving allegations of fraud by Envision Healthcare Inc., is pending in federal district court in Tennessee, which is part of the Sixth Circuit covers federal courts in. The Sixth Circuit Court of Appeals (which covers federal courts in Kentucky, Michigan, Ohio, and Tennessee) currently applies the most restrictive view in the country on whether the filing of a class action tolls the statute of limitations from running on individual claims. The July 1 opinion confirms that by intervening in the class case, an individual class member can preserve its valuable individual claims while remaining a passive member of the class. The decision marks the first time a court has given full guidance on the issue, and where intervention was endorsed as a viable way to protect a class member’s individual claims.
The opinion is a win for defrauded investors. The decision allows a passive class member to maintain a viable individual claim if class certification is denied, and also preserves the investor’s right to opt-out of the class action if class certification is granted or if a settlement is reached, thereby not forcing an individual class member to accept what may be an insufficient recovery (or no recovery at all) from the class settlement. RKS is proud to partner with its asset manager clients to ensure they receive the best possible recoveries.
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