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Executive Counsel: Widening Range of Litigation Targets

Washington, D.C., partner Fritz Chockley authored an article which appeared in the November-December edition of Executive Counsel magazine titled, "Widening Range of Litigation Targets."

According to Chockley, "since 2006 litigation arising out of subprime mortgage lending, financing, and investing has exploded, and there is no end in sight. Current litigation has focused on borrower claims, securities class actions, and public regulatory claims, but as real estate prices cool in once hot markets, parties in other kinds of disputes will seek redress in court. The next wave of claims will include bankruptcy litigation and various creative actions on behalf of investors and borrowers."

Chockley goes on to summarize the history of the subprime mortgage meltdown and provide insight into the various types of suits which have already been brought. As for what's next, Chockley states, "the next wave of litigation likely will rely on creative legal actions and embrace a wider range of targets. Ratings agencies, for example, could face litigation arising from the favorable ratings they gave mortgage-backed securities, ratings which they were subsequently compelled to downgrade."

Chockley also believes there could be claims of "improper valuation along the mortgage lending and securitization chain," which could "plague a host of new defendants on the securitization side as well as the appraisal side, including underwriters, bond insurers, accountants, due diligence firms, investment advisors, fund managers, and others, as the uncertain nature of valuation itself becomes a litigation driver."