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
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