"Whether you’re talking about the economic collapse or the related litigation, the year 2008 was by any measure historic," said Jeff Nielsen, a Managing Director who leads Navigant Consulting’s Financial Services Disputes & Investigations group and is 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 percent), followed by borrower class actions (24 percent), and contract disputes (17 percent). 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.
For 2009, Nielsen noted that more than two new cases continue to be filed for every one that is disposed, meaning that the backlog continues to grow. The Navigant report also presents an analysis of savings-and-loan era litigation and concludes that certain types of government-driven litigation, which are yet to be filed, could run on for years. "One thing you can bank on," said Nielsen, "is that however long it takes for credit market conditions to improve, it will take considerably longer to work through the related litigation."
