|
|
| The failure of several major institutions last year helped stoke an increase in subprime-related lawsuits. One-third of last year’s cases were filed in just one state, while one-quarter involved noncompliance or discrimination.Last year, 576 new subprime-related cases were filed in U.S. courts, according to Subprime Mortgage and Related Litigation — 2008 Seeking Relief published by Navigant Consulting. The study did not reflect 100 percent of related lawsuits, though it was presented as a comprehensive overview.
In 2007, just a revised 290 lawsuits were filed, while the Resolution Trust Corporation handled a total of 559 cases during the entire savings-and-loan crisis. The RTC cases each lasted around two years on average. Securities brokers, dealers and flotation companies were named as defendants in nearly one-third of 2008’s lawsuits. One-quarter of the defendants were labeled as “other,” while another 11 percent were mortgage bankers and loan correspondents. At the end of 2008, 69 percent of the 866 cases filed in 2007 and 2008 were still active. Most of the inactive cases were dismissed. Securities cases accounted for 38 percent of last year’s lawsuits, the biggest share of any category. More than one-third of the securities cases were securities fraud class actions. Individual directors and officers were named as defendants in 70 percent of the cases. Also targeted were issuers and underwriters. Mortgage bankers and loan correspondents were named as defendants in just 2 percent of these cases. Driving the securities filings were the collapse of Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers and Washington Mutual, according to report author Jeff Nielsen. In addition, Citigroup received emergency funding, AIG fell under government control and several firms were either acquired or became bank-holding companies. “The year 2008 was, by any measure, historic — a year in which ‘once in a lifetime’ financial calamities took on an almost routine quality,” the report said. The three most active law firms in securities litigation were Coughlin, Stoia, Geller, Rudman & Robbins, LLP; Schiffrin, Barroway, Topaz & Kessler, LLP; and Girard, Gibbs & De Bartolomeo, LLP. Nearly one-quarter of 2008’s activity involved borrower class actions over inadequate disclosures and discriminatory lending practices. But these cases tapered off in the second half of the year. Truth In Lending Act violations were alleged in nearly three-quarters of borrower class actions tied to disclosures, and violations of the Equal Credit Opportunity Act were alleged in 88 percent of discrimination cases. The top three law firms suing lenders in class action cases were Arbogast & Berns, LLP; Kiesel, Boucher & Larson, LLP; and Bonnett, Fairbourn, Friedman & Balint PC. Nearly one-third of defendants in these cases were mortgage bankers and correspondents. Commercial contract claims made up 17 percent of last year’s cases. More than one-quarter of these cases were tied to repurchases on loans with early payment defaults. About 16 percent were filed by mortgage bankers and loan correspondents — while that same group accounted for 14 percent of defendants. Employment class actions were responsible for 8 percent of last year’s lawsuits, and bankruptcy-related cases accounted for 5 percent. One-third of all subprime-related lawsuits last year were filed in a federal court in New York, 17 percent were filed in California and 5 percent were filed in Florida. Illinois account for 5 percent of the filings, and Ohio’s activity involved 4 percent. During just the fourth quarter — which was the second highest on record –138 cases were filed, higher than a revised 132 in the third quarter and 95 in the fourth-quarter 2007. Activity included two dozen cases tied to the bankruptcy of Lehman Brothers on Sept. 15, 2008. Navigant noted that the most recent activity suggests “subprime-related filings are showing signs of maturation,” though the pace remains persistent. |
|
