NU Online News Service, Jan. 28, 2:42 p.m. EST
Recent statistics show declines in securities lawsuits relating to the subprime mortgage crisis in 2010, but directors and officers liability insurers should prepare to see more of those cases in 2011, a plaintiffs' attorney warned last week.
"I think we have not seen the end of RMBS litigation," said Gerald Silk, a partner for Bernstein Litowitz in New York, referring to cases brought by investors alleging they were misled when they purchased securities backed by residential mortgages.
Mr. Silk, who was participating on a webinar hosted by New York-based Advisen last Friday, was responding to a question posed by Advisen Principal and Moderator Jim Blinn. Mr. Blinn asked, "Where will you be trying to make money during the coming year?"
After identifying a few continuing trends, such as derivative lawsuits and suits tied to merger and acquisition activity, Mr. Silk replied, "We have had a lot of clients contacting us, both private and public institutions, very concerned about decisions in the RMBS arena." He referred specifically to a decision by U.S. District Judge Harold Baer of the Southern District of New York, dismissing some claims by investors. "People want to know what they need to be protected, whether through class actions or otherwise," Mr. Silk said.
"I think you're going to see more RMBS litigation now as we're coming up on statutes of limitations, depending on the claims and the state. More and more and more RMBS litigation will unfold, and Allstate is a good example of that," Mr. Silk predicted, referring to a late December 2010 suit filed by the Northbrook, Ill.-based insurer against Countrywide Financial Corp., seeking damages related to its purchases of more than $700 million in mortgage-backed securities from the company, now owned by Bank of America.
Days after making the observation, several wire services reported on Tuesday that Mr. Silk's firm is representing a group of institutional investors—including insurers such as TIAA-CREF Life Insurance Co., New York Life Insurance Co. and Dexia Holdings—in a separate case against Countrywide and Bank of America.
Today, Reuters is also reporting three new lawsuits from the states of Michigan, Oregon and Fresno County in California that were filed on Wednesday.
Before the filings, both a report published by Advisen and an annual report by Stanford Law School and Cornerstone Research revealed that securities class action filing levels dropped last year, attributing the declines mainly to lower levels of cases tied to the subprime mortgage and credit crisis.
For more numerical details of those reports and other forwarding-looking views of this year's securities litigation trends, see the Feb. 7 print edition of National Underwriter magazine.
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