While bankers and investors wonder when the credit squeeze triggered by the US subprime mortgage crisis is going to end, for litigation lawyers the work is only just beginning. Navigant Consulting, a US-based firm specialising in risk mitigation analysis for companies, attributes a total of 278 US lawsuits filed in 2007 to the subprime debacle, of which 38 had been dismissed by April 2008, with a further 170 filed in the first quarter of 2008. This suggests a marked acceleration in the number of cases being brought.
Few of these disputes have yet reached court, but much can already be deduced. The scale of legal action may be greater than seen in previous financial scandals, such as the dot-com bubble, because of the size of losses incurred and the sheer number of institutions caught up in the crisis. In addition, a growing number of specialist firms willing to provide third-party funding or adverse cost insurance for large damages claims could begin to level the playing field for smaller investors pursuing investment banks that have significant resources to spend on defence lawyers. Indeed, as the credit crunch prompts a surge in legal disputes, investing in litigation itself may prove a rare growth area in a time of falling asset prices.
