Stephen W. Tountas

The Class-or-Direct Decision

Tountas represents hedge funds, mutual funds, family offices, and public pension funds in securities and commercial disputes. A recurring decision comes before filing: whether an investor should pursue a claim directly or remain within a class. The answer turns on the client’s transactions, available causes of action, proof, objectives, limitations periods, expected recovery, cost, and willingness to conduct separate discovery and accept trial risk.

A class aggregates common claims and reduces an investor’s individual burden, but the investor ordinarily cedes day-to-day control to court-appointed representatives and counsel. A direct action can preserve distinct claims or damages theories, yet it requires a pleading and evidentiary record built for one investor. Tountas evaluates those tradeoffs before the client selects its litigation path.

His practice includes both prosecution and defense of securities cases. Tountas has represented public companies and officers as well as investors. That dual perspective sharpens his judgment about pleading vulnerabilities, discovery cost, expert disputes, settlement pressure, and the ways a defendant may attack scienter, loss causation, class treatment, jurisdiction, or damages before a client commits to a separate direct action.

Valeant and the Opt-Out Strategy

In Valeant-related litigation, Tountas represented mutual funds, a public pension plan, and other investors pursuing direct securities claims. His team developed client-specific causes of action, transaction records, causation theories, damages analyses, and dispositive-motion strategy around each investor’s holdings and decisions.

An opt-out action requires more than reproducing a class complaint with a different caption. The investor develops its own purchases, applicable reliance theory, causation, damages, and timeliness under the claims pursued. It may also preserve state-law or statutory theories that are unavailable to the class.

The Valeant work also included a direct action for a public pension fund asserting claims under the New Jersey RICO Act. Tountas defeated Valeant’s motion to dismiss, preserving that state-law route alongside the investor-specific securities theories pursued outside the class.

Tountas’s Valeant work used that individualized architecture. The team tied each claim to the client’s actual portfolio, preserved differentiated legal routes, and prepared the direct case for dispositive review and trial. That record gave institutional investors a concrete basis for choosing a direct path, maintaining control over case strategy, and comparing class participation with a separately negotiated resolution built around their own evidence and objectives.

A direct case creates leverage only when counsel is prepared to prove the investor’s particular loss and legal theory. Tountas’s role is to preserve that route when it offers a defensible advantage while recognizing that class participation may remain the more efficient vehicle for a different investor.

Broadcom and the Auditor Claim

Before joining Kasowitz, Tountas represented the New Mexico State Investment Council in securities claims arising from Broadcom’s stock-option backdating. He appeared with Thomas Dubbs and Joseph Fonti for the public pension fund on appeal.

In 2011, a unanimous Ninth Circuit panel held that the complaint’s transaction-specific allegations supported a strong inference of deliberate recklessness at the pleading stage. The opinion focused on detailed red flags: a large undocumented option grant, grants approved when a committee allegedly lacked a quorum, participation in later corrective reforms, weak controls, and missing documentation.

The pleading moved beyond general accounting standards and identified what the auditor saw, requested, lacked, and nevertheless certified. Viewed individually and collectively under Tellabs, the allegations permitted the auditor claim to continue. Tountas’s pleading and appellate work restored a significant claim for further litigation on behalf of the public pension fund and helped carry the matter toward a later negotiated resolution.

From Securities Litigation to Creditor Recovery

Tountas also handles bankruptcy and creditors’ litigation involving fraud-related losses after an issuer enters Chapter 11. The forum, priority, defendant set, claim ownership, and available estate causes of action may change. His work identifies whether a claim belongs to an individual investor, the bankruptcy estate, or a litigation trust and determines the authorized forum and recovery vehicle. It also examines bankruptcy priorities and releases before estate causes of action are moved into committee- or trust-authorized, court-approved structures.

In the Essar Steel Minnesota matter, Tountas led an investigation for an official committee and later led litigation for a court-appointed trust against former officers and a controlling shareholder. He identified and preserved potential estate claims, transferred them into an authorized litigation vehicle, and carried them to negotiated resolution.

That work required more than tracing the underlying conduct. Counsel had to account for ownership, priority, available defendants, insurance, collectability, and the authority of the committee and trust at different stages of the restructuring. The claim could produce value only if it remained with the entity authorized to pursue it.

The restructuring work complements Tountas’s direct securities practice. In both settings, the first question is who owns the claim. The answer determines the forum, the available causes of action, the proof that must be preserved, and the party authorized to approve a resolution.

In a separate Adeptus Health matter, Tountas led an opt-out action for one of the company’s largest equity investors arising from Adeptus’s multi-billion-dollar bankruptcy, using a direct-action strategy to pursue fraud-related losses outside the class framework.

Institutional Investor Matters

Tountas’s pre-Kasowitz record includes the Schering-Plough and Merck ENHANCE litigation, Adelphia opt-outs, MF Global, and Broadcom. The matters used different vehicles: a securities class framework, direct investor actions following a class exit, claims affected by insolvency, and an auditor appeal. In those matters, he identified available defendants and recovery sources, preserved proof through changing forums, and carried complex pharmaceutical and accounting allegations through appellate and trial preparation.

In Adelphia, ten large investors opted out of a class and pursued direct claims after the company’s bankruptcy. Settlements involved officers, directors, an auditor, financial companies, and other parties. Tountas’s team separated each investor’s transactions, losses, available claims, and recovery sources while maintaining claims against different actors through insolvency.

Kasowitz Practice

Tountas joined Kasowitz as a partner in 2016. His current practice includes direct and class securities actions, opt-outs, commercial litigation, creditors’ claims, litigation trusts, and strategic case development.

Outside client matters, Tountas is a long-term member of the Securities Litigation Committee of the New York City Bar Association and serves on Law360’s Securities Editorial Advisory Board.

His experience on both sides of securities disputes informs his analysis of pleading vulnerabilities, discovery burdens, expert questions, jurisdiction, causation, and damages before an investor client commits to a procedural route. For investor and creditor representations, anticipating those challenges helps focus the complaint, preserve the necessary record, and identify the point at which a class, direct action, appeal, committee investigation, or trust-owned claim offers the strongest available vehicle.

He earned his law degree from Washington University School of Law in 2003, where he served as editor-in-chief of the Journal of Law & Policy, and his undergraduate degree from Union College in 2000. He is admitted in New York and New Jersey.

Valeant begins with investor-specific transactions. Broadcom turns on particular auditor red flags. Adelphia and MF Global require separation of direct and insolvency claims. Essar requires identification of the estate or trust as the claim owner. Tountas builds the record around the claimant with authority, the proof available, the forum, and the recovery source that remains.