September 23, 2008

Kevin LaCroix at D&O Diary has been tracking some of the burgeoning litigation to arise from the subprime catastrophe (Word-format document here), and finds that along with lawsuits against some predictable targets (Merrill Lynch, AIG), the "dark new phase" of the crisis "already has produced its own distinctive round of lawsuits", in which "companies lacking any direct exposure to subprime nevertheless experience losses because of exposure to other companies suffering credit crisis-related reversals." (Example: Constellation Energy). LaCroix believes "the ensuing litigation wave could threaten to become a generalized inundation deluging a substantial number of participants in the larger economy."