In the five years since the first of the subprime credit crisis lawsuits began appearing there have been roughly 230 subprime and credit crisis lawsuits filed, according to a great summary by Kevin LaCroix at D&O Diary blog.
Four suits were filed in 2011 but the peak year was 2008 with 102 filed. That’s when the whole mess hit the fan. LaCroix’s list can be found here.
While they continue to churn through the courts, LaCroix has tracked 40 settlements representing $4.4 billion total and one trial that resulted in a plaintiffs’ verdict. That makes the average settlement about $110 million so far, but as LaCroix notes, the largest deals pull the average up. That includes the largest in the wave of deals, a $627 million Wachovia Preferred Securities deal. Others include a $624 million Countrywide settlement, $475 million for Merrill Lynch and $415 million in a Lehman Brothers deal.
The trial was in Florida in a suit against BankAtlantic Bancorp. In that case, Southern Dist. of Florida Judge Ursula Ungaro set aside the jury verdict and plaintiffs now have the decision on appeal to the 11th Circuit Court of Appeals.
He also found that the dismissal rate is running ahead of traditional norms. LaCroix cites 76 cases in which dismissal motions have been granted, out of 144 cases that have reached the motion to dismiss stage. He counted grants whether they were with, or without, prejudice, meaning plaintiffs could renew claims granted “without prejudice.”
That amounts to a dismissal rate of 52%, higher than the routine rate in all securities class actions of about 40%, he says.
Two dismissals have been reversed on appeal, Nomura Asset Acceptance Corp. and Blackstone Corporate. Other cases are pending.
Another interesting observation has been the cost to the pair of banks that took over two subprime lenders to their own detriment – Bank of America and Wells Fargo.
Bank of America bought Countrywide Financial and took over Merrill Lynch. So far the tab for settlements of the lawsuits has been $624 million for Countrywide, $475 million for Merrill Lynch, and another $150 million for a Merrill bond case and $315 million for a Merrill mortgage-backed securities deal. That’s a $1.56 billion price tag so far.
For Wells Fargo, the cost of Wachovia securities settlement was $627 million, another $75 million to Wachovia equity investors and $125 million to Wells’ mortgaged-backed securities investors. That brings Wells to a $827 million settlement price tag,.