United States: Subprime Suits - The Slow Pace Of Litigation

United States: Subprime Suits - The Slow Pace Of Litigation - 2/23/2009

Home

Index of Filings

News and Press Releases

Filings

Decisions

Settlements

Litigation Activity Indices

Top Ten List

Annual/Quarterly Updates

Clearinghouse Research

Articles & Papers

Search

Related Sites

About Us

Local Rules

Sponsors

Register

_______________
Copyright © 2001
Stanford Law School

2009 News and Press Releases

SEARCH

News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

HEADLINE NEWS:

United States: Subprime Suits - The Slow Pace Of Litigation
Frederick W. Chockley III and Rebecca Barnes - Baker & Hostetler

Mondaq. February 23, 2009
_________________________________________________________________________

EXCERPT: Wise foreign investors navigating the subprime crisis might take note of previous lessons learned. The Asian Crisis precipitated a backlash against globalization and foreign investment. Certainly, the same reaction can be seen in debates over U.S. government bailout aid to foreign entities and nervousness over large stakes in American banks now held by sovereign wealth funds. Although the U.S. welcomed outside capital at the height of the crisis, a white knight in the throes of a desperate situation may be perceived as a villain once markets stabilize. Recent scrutiny of the lack of transparency of sovereign wealth funds has also fostered protectionist sentiments in the United States. What does this mean for litigation? Foreign investors looking to recover their losses on securitized investments may face considerable challenges and uncertainties in the U.S. legal system. While subprime litigation largely mirrors the crisis driving it, it differs in one important way: its pace. Major events in the crisis such as sales and bankruptcies may take place over the course of weeks or even days, but the legal trail that follows will surely drag on for years. Surveys of in-house counsel published by the American Bar Association predict large increases in litigation involving subprime mortgages and investments. Only now are many of the suits filed in response to earlier subprime events beginning to reach the courts for resolution. Additionally, a relatively thin body of precedent exists regarding many securitized lending issues to be litigated, due in part to recent events restricting the ability to recover in securities lawsuits. The Private Securities Litigation Reform Act (PLRSA), enacted in 1995, changed pleading standards to restrict securities class action lawsuits, and in January 2008, the U.S. Supreme Court disallowed lawsuits against secondary violators like credit rating agencies and mortgage consultants for fraud. Foreign nationals have regarded the U.S. as a preferred venue for litigation because foreign courts were generally seen as more hostile to plaintiffs. As foreign subprime litigants try to follow Americans into court, they may change this view. U.S. courts are currently split on allowing foreign nationals to serve as class action representatives or even to participate at all.

Back to News page | Back to Archived News 2009 page | Back to Top

�