Subprime and Credit-Crisis Related Securities Cases: The Latest Status

Subprime and Credit-Crisis Related Securities Cases: The Latest Status

The first subprime-related securities class action lawsuit was filed in February 2007, and so the subprime and credit crisis-related litigation wave will soon enter its fifth year. With the anniversary date just ahead, it seems like an appropriate time to step back for an updated interim status update. I have set out below a numerical overview of the case filings and case resolutions so far, followed by some observations about how the cases are developing.

New Case Filings

Though the depths of the financial crisis is now mercifully receding further into the past, credit crisis-related cases still continued to arrive during 2010, albeit in significantly diminished numbers.

As I noted in my overview of the 2010 securities class action lawsuit filings (here), the credit crisis cases were a significant part of all filings during the years 2008 (when there were 102 credit crisis-related lawsuit filings) and 2009 (62).

By contrast during 2010, there were only 23 new credit crisis-related securities lawsuits, representing about 13% percent of the total. Of these 23 new credit crisis cases, only nine of these cases were filed in the year's second half, and only one was filed after August 2010. The subprime and credit crisis litigation wave, it seems, is winding down.

One factor complicating efforts to continue to track the filings is that over time it has become increasingly difficult to maintain definitional clarity about what exactly constitutes a subprime or credit crisis-related case. For that reason, published reports of the number of subprime and credit crisis securities suits vary. But the various reports generally agree that there are about 230 securities class action lawsuits have been filed since the beginning of the subprime litigation wave. For statistical simplicity, I have used the number 230 for analytical purposes in this post.

Dismissal Motion Rulings

Since the very first of these cases moved through the preliminary motions, I have tried to track the dismissal motions rulings. My running tally can be accessed here. As the number of rulings have accumulated it has become increasingly challenging to meaningfully sort out the rulings, but some generalizations are possible.

Not counting the handful of cases that have been voluntarily dismissed and not refiled, there have been dismissal motion rulings in a total of 106 of the cases, or about 46% of all of the subprime and credit crisis-related securities class action lawsuits lawsuits. (The counting gets a little complicated because some cases have had multiple rulings, and others have had only partial rulings).

For purposes of determining how the dismissal motions have been running, I have counted as dismissals all cases in which dismissal motions have been granted, regardless of whether the dismissal was with or without prejudice, but not counting as dismissals those cases where the dismissal motion was initially granted without prejudice and then subsequent dismissal motions were denied on rehearing. I count a case in which any part of the plaintiff's claims survive as a dismissal motion denial, even though the motion may have been granted in substantial part.

Using these principles to categorize the various dismissal motion rulings, it appears that dismissal motion rulings have been granted in 53 cases, or half of all dismissal motion rulings so far. Of these 53 dismissals, 39 were granted with prejudice and 14 were granted without prejudice. In addition to these 53 dismissals, there were an additional seven cases in which dismissal motions were initially granted without prejudice but in which renewed motions to dismiss were subsequently denied.

Dismissal motions have been denied, in whole or in part, in 53 of the cases.

Based on the dismissal motions that have been heard so far, the dismissal rate on these cases is running at 50% compared to historical dismissal rates of securities class action lawsuits of about 40%.

Read the article in its entirety at the D&O Diary, a blog by Kevin LaCroix.