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Posts Tagged ‘subprime class action’

No time for extended entry this evening, but here’s a link to a tidbit from Andrew Longstreth of the American Lawyer (via Law.com) discussing a possible trend in the federal courts ruling on motions to dismiss subprime-related securities class actions for failure by the plaintiffs to meet the scienter requirements under Tellabs.

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As we welcome in the first full business week of 2009, two news sources have recent stories discussing trends in securities class action litigation from 2008. 

First, the Wall Street Journal Blog reports that 2008 saw an increase in securities class action filings.   However, the article also notes that suits actually dipped in the second half of the year, despite the drastic worsening of the credit crisis.  A possible explanation offered for this trend is the impact of market volatility and the more general market decline following the credit crisis in obscuring or watering down the effects of individual acts of alleged securities fraud.  The article also touches on the prospect of a decline in securities class actions as the pool of potential defendants in the financial-services sector is exhausted.

Meanwhile, this article from The Australian published this report on a surge in class action filings Down Under during the past year.  The article includes an intersting discussion about the role of litigation funders in class action litigation Down Under and predicts a possible showdown  over licensing requirements between the country’s only licensed litigation funder and potential overseas competitors.

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In the wake of the Wall Street meltdown, recent press on subprime mortgage class action litigation has focused on securities class actions and cases involving subprime investments.  Less has been written about trends in class actions seeking redress for alleged predatory lending practices.

However, that doesn’t mean that there aren’t any cases involving predatory lending practices.  In fact, as discussed in this editorial by Andy Meek of the Memphis Daily News, local governments in the Memphis area may be considering a resolution authorizing legal action against mortgage companies for certain lending practices that some say caused individuals poor and minority communities to accept bad loans.  A similar action is reportedly already pending in Baltimore.

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Magnified by the most recent credit crisis, subprime mortgage litigation continues to be a hot topic among those following developments in class actions.  Peter Page of the National Law Journal authored an interesting article, published today, discussing the most recent wave of lawsuits stemming from the ugly recent turn in the subprime mortgage crisis.  The article focuses on recent securities fraud class action filings involving claims of failure to disclose subprime investments by mortgage companies, banks, and others.

Securities fraud cases are only a part of the wave of class action litigation that has been spawned by the subprime mortgage fiasco.  Subprime-related issues have formed the basis for a wide range of class actions brought on behalf of a wide range of plaintiffs and based on a wide variety of causes of action, with varying success.  The many types of subprime-related class actions include:

  • Consumer protection actions involving claims for predatory lending;
  • Class actions claiming racial discrimination in mortgage lending;
  • Class actions by subprime loan borrowers under the Truth in Lending Act (TILA);
  • Securities fraud class actions claiming failure to disclose facts about subprime investments;
  • ERISA Class Actions alleging improper subprime investments on behalf of the participants of a pension or retirement plan; and
  • Shareholder derivative lawsuits alleging nondisclosure of and mismanagement involving subprime investments.

The most recent CADS Report, the newsletter of the ABA’s class action and derivative suits committee, has a nice collection of articles on developments many of these areas.  The Newsletter is available only to ABA CADS members (I won’t comment in detail here on the perhaps fitting choice of acronyms), but non-members can get a preview here, along with information on how to join.

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The Seventh Circuit Court of Appeals’s highly anticipated Truth In Lending Act (TILA) class action decision in Andrews v. Chevy Chase Bank, No. 07-1327 (7th Cir., Sept. 24, 2008) was finally issued Wednesday.  The court reversed the district court’s class certification decision and joined the First and Fifth Circuit Courts of Appeals in holding that the TILA’s rescision remedy (at the risk of oversimplification, the right to back out of the deal), is not suitable for class-wide treatment.  The case involves claims by a Wisconsin couple that their mortgage lender violated TILA, 15 U.S.C. § 1635, by misrepresenting facts in selling them an adjustable rate mortgage (ARM) of the type that is the center of the current subprime lending crisis.  The opinion, authored by Judge Diane S. Sykes, is available for download on the court’s website.

As usual, Class Action Defense Blog has already posted a thorough summary of the decision, so rather than repeating the nuances of the decision here, I’ll direct you to that post.

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