The time is ripe for Apple REIT investors to strongly consider filing individual arbitration claims. David Lerner Associates Inc. (“David Lerner Associates”) recently won the dismissal of a lawsuit by investors who accused the brokerage firm of misrepresenting the value and returns of more than $6.8 billion worth of holdings in Apple REITs. The federal court found that the investors could not establish that they suffered a loss because the holdings continue to perform, and the possibility of changes in value, which occurred when the real estate market declined, was disclosed to investors. Although investors in the Apple REITs are appealing the lawsuit’s dismissal, an appeal is time consuming, and there is no guarantee that the appellate court will reinstate the investors’ claims. Further, while the appeal is pending, the clock is ticking, and an investor’s claims can be time barred if the investor fails to act.
Class action lawsuits are court proceedings intended to recover damages for a group or “class” of investors who sustained losses from the same cause. For example, Apple REITs investors filed their lawsuit in 2011, and alleged that David Lerner Associates misrepresented the holdings as appropriate for conservative investors. The investors also claimed that the firm never disclosed that the REITs failed to generate enough income from their operations and that investors were being paid “with their own money.”
Settlement negotiations can take place at any time during the class action litigation. A class action settlement must be approved by the court, who will order notice to be given to any class action members who will be bound by a settlement agreement or a dismissal of the case. Settlement, however, does not need approval from each class member; rather, the class member may either accept the settlement terms, or opt out of the settlement.
In contrast, a securities arbitration claim focuses entirely on the individual investor who brings the claim, and the claim may not be settled without the investor’s approval. A securities arbitration claim is filed with the Financial Regulatory Authority (“FINRA”), which is responsible for resolving disputes between investors and brokerage firms. FINRA has established rules and regulations regarding firms’ rights and responsibilities with respect to the handling of investor accounts.
An individual securities arbitration claim typically focuses upon sales practice violations and is based on facts specific to the handling of an individual investor’s account given the investor’s objectives, financial wherewithal, and risk tolerance. Securities arbitrators consider not only what the firm said to its customers in general about certain investments, but also what the individual broker said – or failed to say – to a specific investor about various investments. This focus on the individual investor is not only a key distinction from a class action, but also a distinct advantage.
In addition, a securities arbitration claim can focus not only on a single investment, but also the handling of the investor’s account as a whole. This is another advantage of a securities arbitration claim when compared to participation in a class action lawsuit. As a result, the findings made by the judge in dismissing the class action suit against David Lerner Associates regarding the Apple REITs does not bar individual investors from pursuing securities arbitration claims against David Lerner Associates for investment losses due to the Apple REITs.
Moreover, arbitration is intended to be more expeditious than court. Further, FINRA rules and policy strongly discourage the dismissal of an arbitration or claims prior to a full hearing on the merits in which both parties present evidence. By comparison, courts frequently dismiss claims in whole or in part through summary judgment procedure prior to a jury or bench trial.
If you invested in an Apple REIT, and suffered investment losses, please contact Sonn Law Group to explore your legal options. Sonn Law Group has filed claims against numerous firms for investors who suffered losses in REITS, TICs, and other high risk, illiquid investments. Sonn Law Group is a nationally recognized law firm representing individuals, trusts, corporations and institutions in claims against brokerage firms, banks and insurance companies. To learn more, please call us at 844-689-5754 or complete our “contact form.”