ARS class actions have no class

Implications: It should be no surprise that the subprime/ARS collapse has generated waves of class action lawsuits by shareholders.  And that they appear to have merit.  But that doesn't mean courts will give the plaintiffs the WMD of a class action status.  Ten years ago that would have been a certaintly; today it is increasingly a rarity.

Analysis: Federal courts have done a major turnaround in recent years by refusing to liberally grant class action certifications.  Most tellingly, the most liberal circuit in the federal judicial system, the 2nd Circuit Court of Appeals in New York, where most major securities related lawsuits are filed, in recent years has adopted one of the most stringent standards against certification.  In doing so, it was following warning signals from the Supreme Court, as well as a growing scholarly consensus that knee-jerk certifications violate due process requirements.  Class action approvals might also falter because of the Supreme Court's strict position that contracts between businesses and their shareholders, employees and customers that provide for resolution of disputes via arbitration must be honored by courts.  Presumably, some of the various subprime agreements had such clauses.  If so, the class must go.