In a new report, Navigant Consulting Inc., a global consulting firm providing dispute, investigative, operational, risk management and financial advisory solutions, found that beyond the billions in writedowns, the credit crisis produced 576 new litigation matters filed in U.S. federal courts in 2008.
According to the Navigant report, titled ‘2008: Seeking Relief,’ the 576 subprime-related cases filed in federal courts in 2008 were twice the number filed in 2007 and by themselves exceed the 559 savings-and-loan cases handled by the Resolution Trust Corp. over its entire six-year existence.
Since Jan. 1, 2007, a total of 866 cases have been filed in federal courts, and the litigation wave has shown few signs of abating, as almost 70% of those cases remained active at year-end 2008.
"Whether you're talking about the economic collapse or the related litigation, the year 2008 was, by any measure, historic," says Jeff Nielsen, a managing director at Navigant Consulting 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 and even trended up slightly following the Lehman bankruptcy filing in September 2008. 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.
SOURCE: Navigant Consulting