During a May 2014 trip to London, I had the pleasure of meeting with various attorneys who do work with institutional investors such as pension funds. While I did not have a chance to convene with Attorney David Seidel, our guest interviewee for this blog post, I did meet with his colleague, senior attorney and Chairman of the Institutional Investors Tort Recovery Association (“iiTRA”), Robin Ellison. Robin was kind enough to describe the fluid and important pension governance happenings in the United Kingdom (“UK”) and Continental Europe. Having done work with multinational corporations and knowing that numerous plan sponsors have cross-border retirement plan concerns, Robin’s insights were extremely enlightening.

In a subsequent conference call with Robin and his colleague, General Counsel Robin Ellison, I was the beneficiary of information once again. Both Robin and David shared news about UK and European litigation trends, notably in the investment fiduciary duty and shareholder rights areas. It seems that there is a lot going on. In the spirit of knowledge-sharing (since Good Risk Governance Pays is an educational blog), Attorney Seidel agreed to talk about one such important happening, notably class action opt-outs. Check out his comments below.

Q: Would you please explain the nature of a class action opt-out?

A:  In a class action lawsuit, the Court defines who qualifies as a member of the class and who would therefore be entitled to participate in any settlement or judgment. In a class action opt-out, a member of the class elects not to participate in the class action and instead initiates a separate lawsuit for its own benefit.

Q: In your experience as a solicitor in England and Wales, a barrister and solicitor in Ontario, Canada and now an executive with the iiTRA, when is an institutional investor likely to opt out of a class action settlement?

A: A pension fund, endowment, foundation or other type of institutional investor would only do this if that organization believed that an opt-out would result in a higher payout. In our experience an institutional investor is likely to consider opting out of a class when the estimated recognised losses are significant, i.e. at least in the tens of millions of dollars.