Hal S. Scott & Leslie N. Silverman, Stockholder Adoption of Mandatory Individual Arbitration for Stockholder Disputes, 36 Harv. J.L. & Pub. Pol'y 1188 (2013).
Abstract: Federal Rule of Civil Procedure 23 and the Private Securities Litigation Reform Act of 1995 (PSLRA)1 together govern securities class actions. These regimes provide that a class representative may bring a claim against a corporation on behalf of all investors who owned a security at a time when there was an alleged misstatement or failure to disclose a material fact that caused loss. By default all potential members of a class—all investors who owned the security during the relevant time (before the misstatement or omission was corrected)—are included in the class unless they take the affirmative step of opting out. Inertia, therefore, works to expand the class.