Washington, D.C., partner Fritz Chockley and Rebecca Barnes co-authored an article for the Fall 2008 edition of The International Economy magazine titled, "Subprime Suits: The Slow Pace of Litigation."
According to the authors, in the wake of the U.S. subprime mortgage crisis, more than six hundred securities-related lawsuits were filed through the second quarter of 2008, reflecting the magnitude of the crisis. "In the civil cases filed to date, plaintiffs have employed various theories of liability, generally focusing on claims of fraud and inadequate disclosure and oversight. The litigation reflects the size of the subprime mortgage meltdown, but only hints at the global nature of the crisis."
Chockley and Barnes note that foreign investors have also been impacted by the crisis, and that "wise foreign investors navigating the subprime crisis might take note of previous lessons learned . . . although the United States welcomed outside capital at the height of the crisis, a white knight in the throes of a desperate situation may be perceived as a villain once markets stabilize."
Addressing the question of how this situation may affect litigation, Chockley and Barnes state that "foreign investors looking to recover their losses on securitized investments may face considerable challenges and uncertainties in the U.S. legal system" including a "legal trail that . . . will surely surely drag on for years."
The authors conclude: "Foreign nationals have regarded the United States as a preferred venue for litigation because foreign courts were generally seen as more hostile to plaintiffs. As foreign subprime litigants try to follow Americans into court, they may change this view. U.S. courts are currently split on allowing foreign nationals to serve as class action representatives or event to participate at all . . . Depending on how responsive foreign plaintiffs find U.S. courts, foreign courts may soon join the subprime mortgage meltdown fray as well."