TPLF, Short-Seller Use Undermines Securities Class Actions

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August 26, 2020

Two factors in the securities class action arena are exacerbating the potential for conflicts of interest according to an expert analysis by Nessim Mezrahi in Law 360. According to Nessim’s analysis, the use of and reliance on activist short-seller reports as a basis to initiate securities class action claims, and privileged third-party litigation funding (TPLF) agreements have increased the chances of conflicts of interest in securities class actions.

While looking at the issue of TPLF in securities class actions, Nessim cites ILR's recent research paper "Selling More Lawsuits, Buying More Trouble: Third Party Litigation Funding a Decade Later.” “Allowing TPLF to fester in the class action setting will not only reduce the downside risk to mounting frivolous class actions but also guarantee that such proceedings deliver even less money for the actual class members."