Law Firm of Motley Rice LLC - Securities and Consumer Fraud Glossary

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Absent Class Member
A person who, under the class definition, is a class member but who is not actually named in the complaint and does not generally actively participate in the litigation.

Adequacy
Under Federal Rule of Civil Procedure 23, a term used in the context of determining whether the class is receiving proper legal representation by class counsel and the named class representative.

Attorneys Fees
The payment for legal services. In a class action, the court decides the amount of attorneys fees. In an individual suit, the fees generally are decided in advance without court approval.

Certification
The judicial process whereby a court examines whether a case should be permitted to proceed as a class action. A certified class has been allowed by the judge to proceed as a proper class action.

Claim
A basis for demanding something; a title or right.

Claim Form
An official form approved by the court to be used by active and passive class members to file any claims they may have against the sued company after a settlement. (Short for Proof of Claim and Release.)

Class
All those persons who have suffered from the same injury caused by the same conduct of the wrongdoer or wrongdoers. Whether a person is part of a class is often crucial in determining who can sue on behalf of the people who have been similarly damaged or collect his/her share if a class action judgment is rendered.

Sub-Class
A class made up of some, but not all, of the members of the class. The members of a sub-class have common characteristics that not all members of the class share.

Class Action
An action in which a representative plaintiff sues or a representative defendant is sued on behalf of a class of plaintiffs or defendants who have the same interests in the litigation as their representative and whose rights or liabilities can be more efficiently determined as a group than in a series of individual suits. The Securities Litigation Standards Act of 1998 (Uniform Standards Act) defines class action in three alternative ways and, by definition, excludes some cases from the federal venue requirement. A class action, with regard to any single suit, is an action on behalf of 50 or more persons, with a common question of law or fact, and without inquiry into individual reliance on an alleged misstatement or omission. A class action also exists when one or more persons represent an unnamed group of individuals who share a common question of law or fact that predominates over any questions affecting the individual members. When dealing with a group of lawsuits filed or pending in the same court, a class action evolves when the suits of 50 or more people, which share a common question of law, are joined or consolidated. Mass actions are included in the definition of a class action.

Class Action Settlement
An agreement reached by the parties to a class action lawsuit, usually in writing and/or read into the record in court, settling all issues. Usually there are elements of compromise, waiver of any right to reopen or appeal the matter even if there is information found later which would change matters (such as recurrence of a problem with an injury), mutual release of any further claim by each party, a statement that neither side is admitting fault, and some action or payment by one or both sides. In short, the case is over, provided that the parties act in accordance with the final settlements terms. Judges encourage attempts to settle, including requiring mandatory settlement conferences with judges or experienced settlement attorneys present. The majority of class action lawsuits end with either a ruling that the case has no merit or a settlement; very few class action lawsuits proceed to trial.

Class Certification Motion
A formal request made to a judge for an order that a lawsuit may proceed as a class action.

Class Certification Order
A court order that a lawsuit will proceed as a class action. Before the order, the court must determine whether it is appropriate for the case to be treated as a class action. This process is known as class certification.

Class Counsel / Lead Counsel
An attorney or group of attorneys appointed by the court to provide legal representation to the class.

Class Member
Each investor who traded securities of the sued company during the class period and suffered losses as a result.

Class Period
Typically, the time frame during which it is believed the alleged fraud or other securities law violations artificially inflated the price of the stock at issue in the case. Only those persons who purchased stock during this period are included in the class action suit. The class period is initially determined by plaintiffs counsel after extensive research and investigation. Sometimes the class period changes during the course of the litigation based on additional information uncovered during the discovery process.

Class Representative (Lead Plaintiff)
The named plaintiff who has been determined by the court to be a legally adequate person to represent the interests of the class.

Commonality
When at least one issue of fact or law exists whose resolution will affect all or a significant number of the class.

Common Fund
A fund established after a settlement for the distribution of the compensation to the class members.

Compensatory Class
A class in which the members seek money damages.

Compensation
The amount received after a loss, paid by the party causing the damage and/or its insurance company.

Complaint
The first document filed with the court (actually with the County Clerk or Clerk of the Court) by a person or entity claiming legal rights against a wrongdoer.

Securities Class Action Complaint
The first document filed with the court by a person or entity claiming legal rights based on US securities laws.

Contingent Fee, Contingency Fee
A payment to a lawyer that is due and payable only if there is a successful conclusion of the legal work, which usually involves winning or settling a lawsuit in favor of the client, or collecting funds due with or without filing a lawsuit. In many states, such agreements must be in writing and signed by attorney and client. The fee is generally a percentage of the recovery (money won), but may be based partly on time worked and partly a percentage of the settlement or judgment.

Corporate Governance
Set of processes, customs, policies, laws and institutions affecting the way a corporation is directed, administered or controlled. Corporate governance also includes the relationships among the many players involved (the stakeholders) and the goals for which the corporation is governed. The principal players are the shareholders, management and the board of directors. Other stakeholders include employees, suppliers, customers, banks and other lenders, regulators, the environment and the community at large.

Damages
Loss/injury/harm suffered by reason of a corporations or individuals breach of duty.

Damages Class Action
A class action lawsuit seeking compensation for accrued losses.

Decertification
An action taken by the court to reverse a previous decision that permitted a case to proceed as a class action.

Declaratory Judgment
An action in which the primary thrust of the litigation is an attempt to persuade a court to specify the rights and obligations of the respective parties in the litigation. Declaratory actions are relatively rare.

Defendant
The party sued in a civil lawsuit or the party charged with a crime in a criminal prosecution. (The wrongdoer.)

Deposition
The taking and recording of testimony of a witness under oath before a court reporter in a place away from the courtroom before trial. A deposition is a component of pre-trial discovery that is obtained by attorneys on behalf of any of the parties to a lawsuit. The purpose of a deposition is to obtain sworn testimony from an opposing party (defendant or plaintiff), a witness to an event, or an expert intended to be called at trial by the opposition. The testimony is recorded by the court reporter, who will prepare a transcript that assists in trial preparation and can be used in trial either to contradict (impeach) or refresh the memory of the witness, or be read into the record if the witness is not available.

Derivative Action
A lawsuit brought by a shareholder of a corporation against the directors, management and/or other shareholders of the corporation, for a failure by management. In effect, the suing shareholder claims to be acting on behalf of the corporation itself, because the directors and management are failing to exercise their duties and responsibilities for the benefit of the company and all of its shareholders. This type of suit often arises when there is fraud, mismanagement, self-dealing or dishonesty that is being ignored by officers and the board of directors of a corporation.

Determination of Damages
Based on the loss due to the securities law violations alleged.

Discovery
The entire efforts of a party to a lawsuit and the partys attorneys to obtain information before trial through demands for production of documents, depositions of parties and potential witnesses, written interrogatories (questions and answers written under oath), written requests for admissions of fact, examination of the scene and the petitions and motions employed to enforce discovery rights. Broad rights of discovery ensure that neither party to a case will successfully conceal pertinent information (except when such information falls under the constitutional protection against self-incrimination), thus allowing cases to be pursued with as much knowledge as possible.

Exclusion Request
A document filed with the court indicating a class member does not want to participate in pending litigation.

Executive Committee
A group of lawyers representing a party, usually the plaintiffs, who collectively meet, assign work, and make strategic decisions in complex litigation. Often lead counsel oversees or heads this committee.

Fairness Hearing
A court hearing in which the fairness of a proposed settlement is evaluated by the court and any objections to a proposed settlement are heard.

FIFO (First In - First Out)
Loss analysis method of accounting for the purchase and sale of securities in which the securities are assumed to be sold in the chronological order in which they were purchased.

Hearing
Any proceeding before a judge or other magistrate (such as a hearing officer or court commissioner) without a jury in which evidence and/or argument is presented to determine some issue of fact or both issues of fact and law. While technically a trial with a judge sitting without a jury fits the definition, a hearing usually refers to brief sessions involving a specific question at some time prior to the trial itself, or such specialized proceedings as administrative hearings.

Injunction
A writ (order) issued by a court ordering someone to do something or prohibiting some act after a court hearing.

Institutional Investor
Large investors (such as mutual funds, pension funds, and insurance companies) that largely invest other peoples money.

Interlocutory Appeal
The process whereby a pending case may be reviewed by an appellate court to determine if a ruling made by the trial judge was correct. This type of appeal may occur in federal court under Rule 23(f) to allow an appellate court to determine whether a judges ruling on class certification was correct.

Intervene
An action in which a party not named to the litigation seeks court approval to join in the suit as a named party.

Lawsuit
A common term for a legal action by one person or entity against another person or entity, to be decided in a court of law, sometimes just called a suit.

Individual Lawsuit, Individual Action
Single lawsuit of a person or entity, as distinguished from a class action.

Lead Counsel
Attorney or attorneys approved by the court to be responsible for overseeing all aspects of the litigation for a party or class, usually the plaintiff.

Lead Plaintiff
A person, group of persons, or entity that is appointed by the court to be a legally adequate person to represent the interests of all class members. The lead plaintiff generally has the largest financial interest in the outcome of the case. The lead plaintiff works with the court-appointed lead counsel in determining how the litigation should proceed and eventually be resolved.

Lead Plaintiff Motion
A formal request made to a judge for an order of appointment as lead plaintiff.

Liaison Counsel
An attorney responsible for facilitating communications between the respective parties and the court in complex litigation.

LIFO (Last In - First Out)
Loss analysis method of accounting for the purchase and sale of securities in which the securities are assumed to be sold in the reverse chronological order in which they were purchased.

Limited Fund
The money available is inadequate to fully compensate all class members. Class actions may also be filed to resolve disputes over a limited fund.

Litigation
A lawsuit along with all of its proceedings.

Lodestar
A term used in connection with a court-ordered award of attorneys fees that is based on time spent on the case and an hourly fee. In some instances the lodestar may be adjusted according to circumstances underlying the services performed.

Lookback Period
A provision in the Private Securities Litigation Reform Act (PSLRA) that limits a plaintiffs damages to the difference between the purchase price and the mean trading price of the stock during the 90 day period following the end of the class period. In effect, this provision can affect damages when the stock price bounces back after a corrective disclosure.

Motion
A formal request made to a judge for an order or judgment. Most motions require a written petition, a written brief of legal reasons for granting the motion (often called points and authorities), written notice to the attorney for the opposing party, and a hearing before a judge. However, during a trial or a hearing, an oral motion may be permitted.

Motion to Dismiss
A motion that asks the court to decide that a claim, even if true as stated, is not one for which the law offers a remedy.

Multiplier
A factor, sometimes used by a judge, to calculate the attorneys fees. In some instances the lodestar will be multiplied by that factor, if the judge finds that the attorneys seeking the fee performed very well.

Named Plaintiff
A person or entity whose name appears in the lawsuit and who works with the attorneys during the course of the lawsuit.

Notice of Settlement
A court ordered document that informs class members about a settlement that has been reached.

Numerosity
A finding by the court that the number of class members involved is such that it is impracticable to name them all in the complaint and have them all actively participate in the litigation. Numerosity is required for an action to proceed as a class action.

Objector
An individual who opposes some aspect of a proposed settlement of a class action.

Opt In
In the language of class actions, plaintiffs have the choice to opt in or opt out of the class. If a potential class member chooses to opt in, he has elected to include himself in a class proceeding.

Opt In Class Action
A class action that binds all class members who opt in.

Opt Out
If a class member chooses to opt out, then he elects to exclude himself from a class proceeding. This action generally has the effect of not binding the class member to any judgment in the case. It also has the effect of excluding a class member from being able to participate in any settlement or favorable judgment.

Out-of-Pocket Expenses
Direct outlays of cash; an expense paid from ones own funds.

Plaintiff
The party who brings suit in a court of law by filing a complaint against the defendant(s) demanding damages, performance, and/or a court determination of rights.

Pleading
Every legal document filed in a lawsuit, petition, motion and/or hearing, including the plaintiffs complaint, defendants answer, motions, declarations and memoranda of points and authorities (written arguments or briefs citing precedents and statutes).

Proof of Claim and Release
An official court-approved form that active and passive class members use to file any claims against the sued company and to receive compensation from a settlement.

Private Securities Litigation Reform Act (PSLRA)
The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation, fees, and expenses.

Recovery
The amount of money and any other right or property a plaintiff receives in a lawsuit.

Securities
Securities, in their most common form, are simply shares of stock representing an investors ownership interest in a corporation. Other types of securities include bonds, debentures, options, promissory notes, certificates of interest in profit-sharing agreements, fractional undivided interests in mineral rights, and investment contracts.

Securities Case
Lawsuit claiming legal rights based on violations of US securities laws.

Securities Class Action
A class action claiming legal rights based on a violation or violations of US securities laws.

Settlement
The resolution of a lawsuit (or of a legal dispute before a complaint is filed) that occurs prior to a final court judgment. Most settlements are achieved by negotiation in which the attorneys (and sometimes an insurance adjuster with authority to pay a settlement amount on behalf of the companys insured defendant) and the parties agree to terms of settlement. Most lawsuits result in settlement.

Steering Committee (Executive Committee)
A group of lawyers representing a party, usually the plaintiffs, who collectively meet, assign work, and make strategic decisions in complex litigation.

Standing
The right to make a legal claim, file a lawsuit, or seek judicial enforcement of a duty or right.

Summary Judgment
A court order ruling that no factual issues need to be decided and therefore that all or a part of the case can be decided without a trial. A judge may issue a summary judgment order after one of the parties files a motion arguing that all necessary factual issues are settled or so one-sided that they can be decided without a trial.

Trial
A formal examination of facts and law in an adversary proceeding. A trial is presided over by a judge with authority to hear the matter (jurisdiction).

Typicality
A nexus between the class representatives claims and the questions of fact or law that is` common to the class. A sufficient nexus is established if the claims or defenses of the class and those of the class representative arise from the same events or practice and are based on the same legal theory.

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