The overwhelming majority of securities class actions that are not dismissed are settled, often with the assistance of a mediator. Defendants and their insurance companies want to end the litigation and any monetary exposure. The settlements contain broad releases that the parties hope will end the litigation, and they require court approval and notice to potential class members. The notice advises that class members may object to the settlement or opt out of the settlement.

As part of settlement negotiations, parties typically agree that if over a certain percentage of the putative class opts out of the settlement, defendants have the right, but are not required, to cancel the settlement. The rationale: if a large percentage of the class opts out of the settlement and the release, there is a risk that defendants will have to litigate the case anyway and it may be preferable to litigate with the entire class. These provisions are often called “blow provisions.”