Tuesday, April 15, 2008

Class-Action Cases Rise, Fueled by Subprime Troubles

The subprime mess is turning out to be a boon for class-action lawyers. Litigation stemming from the housing crisis is driving an increase in class-action filings, according to a study to be released Friday by the NERA Economic Consulting company. Through Dec. 15, filings were up 58 percent from 2006, according to the study. A total of 198 class actions were filed this year through Dec. 15, and 38 of them were securities class actions related to subprime mortgages. No shareholder class actions related to subprime loans were filed in 2006, according to the report.

“There is no question,” said Gerald H. Silk, of Bernstein Litowitz Berger & Grossmann, that the subprime market has led to an increase in litigation. His New York firm has class actions pending against the subprime lenders Fremont General, Accredited Home Lenders and American Home Mortgage Investment.

Stuart M. Grant of Grant & Eisenhofer, a firm in Wilmington, Del., said, “All you are seeing now is the low-hanging fruit.” His firm has a shareholders’ derivative lawsuit pending against Countrywide Financial, the mortgage giant.

Class-action filings, excluding subprime cases and those stemming from the backdating of stock options, have increased almost 40 percent from 2006. Average settlements have also jumped, to $33.2 million from $22.7 million.