Financial Crisis Litigation Wave Forming Its Crest

Financial Crisis Litigation Wave Forming Its Crest - 3/17/2009

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Financial Crisis Litigation Wave Forming Its Crest
Evan Weinberger

Securities Law 360. March 17, 2009
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EXCERPT: Massive financial calamity is often accompanied by great, crashing waves of litigation. Although the raw numbers of lawsuits filed following the generalized meltdown of the financial markets are up at historic levels, those expecting an even bigger wave shouldn't put away their surfboards yet. According to a report last week by Navigant Consulting, 576 subprime-related cases were filed in 2008, twice the number filed in 2007 and more than the 559 cases handled by the Resolution Trust Corp. during its six-year existence following the savings and loan crisis in the 1980s. Securities litigation made up 38 percent of all cases filed in 2008, the report said. “I would have thought we would have seen a bit more,” said William Sullivan, the chair of the securities litigation practice at Paul Hastings Janofsky & Walker LLP. “But there's a lot out there.” And there is bound to be a lot more, as investigations into the cause of the market meltdown bring about new causation theories. For every case that is either settled or closed following a verdict, two new cases will be filed in 2009, the Navigant report said. Alexander D. Bono, a partner at Duane Morris LLP, called the lag in shareholder suits merely a hiatus. “I use the word hiatus because I think there may be a tsunami down the road,” he said. “Many of the typical representative plaintiffs right now are on the sidelines, trying to figure out what they want to do.” Added Patrick Daniels, a partner with Coughlin Stoia Gellar Rudman & Robbins LLP, “We've got a six-year statute of limitations [on subprime cases]. We've got some time here.” Theories abound as to why there has been a lag so far.

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