|  | | 2007 News and Press Releases | | |
HEADLINE NEWS:
Individual Suits Likely Over Subprime Losses; Some Investors Expected To Opt Out Of Class Actions
Dave Lenckus
Business Insurance. November 19, 2007
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EXCERPT: Financial institutions hit hardest by the subprime mortgage meltdown should expect individual lawsuits in addition to securities class actions as some shareholders gamble they can recover far greater damages on their own, a leading plaintiffs attorney says. Having to defend individual, or ``opt-out,'' litigation in addition to a class action lawsuit drives up potential losses for any defendant involved in securities fraud litigation, defense and insurer attorneys note. But if investors file individual lawsuits immediately rather than taking the typical course of waiting until after a class action is settled, defendants' losses should be smaller, the attorneys said. Mortgage lenders, securities brokers and other financial institutions in recent weeks have announced colossal earnings write-downs to account for losses from their subprime mortgage lending practices and investments in securities backed by subprime mortgages. Among the largest third-quarter write-downs was $9.8 billion by Citigroup Inc. and $7.9 billion by Merrill Lynch. Share prices for both companies' stock have fallen recently, and the losses have cost both companies' chief executive officers their jobs. Reinsurance brokerage Guy Carpenter & Co. L.L.C. estimated in a report earlier this month that total losses to directors and officers liability insurers from the subprime crisis could top $3 billion. The losses already announced by financial institutions are large enough to make the risky opt-out securities lawsuits worth pursuing for certain investors, said plaintiffs attorney Patrick J. Coughlin of Coughlin Stoia Geller Rudman & Robbins L.L.P in San Diego. The resolve of those investors to strike out alone should not be doubted, Mr. Coughlin told attendees at a session during the Professional Liability Underwriting Society's 20th annual international conference, held Nov. 7-9 in Washington. The number of opt-out lawsuits in securities fraud cases to date has been small, but they are becoming more attractive to shareholders facing huge losses, because recoveries typically are greater when those investors pursue individual suits, said Mr. Coughlin as well as defense and insurer attorneys. |
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