Class Actions for Subprime Meltdown: How Likely?

19 Apr Class Actions for Subprime Meltdown: How Likely?

According to a recent article in Reuters, Many Mortgage Suits to Come, But Harder to Win, we can expect a number of class action lawsuits against those responsible for the subprime mortgage losses. Stanford Law School Professor Joseph Grundfest estimated that total investor losses resulting from the drop in stock prices and falling property values could be $5 trillion, dwarfing the investor losses from WorldCom, Adelphia and Enron. But the climate allowing class actions against these now bankruptcy companies has changed.
Recent pro-business Supreme Court decisions make it harder to bring class action lawsuits against companies not directly involved with fraud (Stoneridge Investment v. Scientific-Atlanta) and businesses that are in federally regulated industries (Riegel v. Medtronic). Likewise, it can be difficult for Plaintiffs in such suits to gain the information necessary to defend against early summary judgment motions due to decisions such as Bell Atlantic v. Twombly and Makor v. Tellabs.

The ability to bring national class actions in state courts has also been restricted. A 2005 federal law, the Class Action Fairness Act, gives federal courts jurisdiction to class actions where the amount in controversy exceeds $5 million, and where there is diversity of citizenship, unless at least two-thirds or more of the members of all proposed plaintiff classes and the primary defendants are citizens of the state in which the action was originally filed.

What will the result be? We’ll have to wait and see.

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Brett Weiss, a senior partner at Chung & Press, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his law partner, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute, the Bankruptcy Bar Association of Maryland, and the Civil Justice Network. He has been recognized as a “Super Lawyer” every year since 2007 for Maryland and the District of Columbia, and in 2011 received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, The United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.
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