576 new suits filed in US courts in 2008
The credit crisis produced a jaw-dropping 576 new litigation matters filed in US federal courts in 2008, according to a new report.
The Navigant Consulting report, found that the number of subprime-related cases filed in federal courts was twice the number filed in 2007.
Since January 1, 2007, a total of 866 cases have been filed in federal courts – and the litigation wave has shown few signs of abating, claimed Navigant. Almost 70% of those cases remained active at the end of 2008.
“Whether you’re talking about the economic collapse or the related litigation, the year 2008 was by any measure historic,” said Jeff Nielsen, head of Navigant’s Financial Services group and lead author of the report. “The credit crisis continues to find new ways to inflict damage, and each time a new wellspring of litigation seems to emerge.”
The number of subprime-related filings on a quarterly basis peaked at 179 in the first quarter of 2008; however, new cases continued to be filed at a rate of more than 100 per quarter throughout the year. They even trended up slightly following the Lehman bankruptcy filing in September 2008, according to the research.
Securities cases drove much of the litigation in 2008 (38%), followed by borrower class actions (24%), and contract disputes (17%). Other categories tracked by Navigant included employment and bankruptcy litigation.
The report also found an expansion in the scope of litigation tied to the financial crisis. For example, the 2008 figures included more than 50 cases tied to auction-rate securities, a category that did not exist in 2007.
Geographically, New York and California account for approximately half of all cases filed in 2008.
“One thing you can bank on,” added Nielsen, “is that however long it takes for credit market conditions to improve, it will take considerably longer to work through the related litigation.”