NEW YORK — Insurance lawyer David Grais has been poring over equations in finance books to get up to speed on his new specialty: lawsuits stemming from the sub-prime mortgage debacle.
With his traditional insurance practice slowing down, the 55-year-old partner at a small New York firm began segueing into sub-prime in June, after a friend predicted at lunch that it would become the next legal blockbuster.
"This whole area is a new dawn" for lawyers, Grais said.
First came the sub-prime mortgage boom. Next was the bust. Now, as surely as day follows night, come the lawsuits.
All large-scale financial scandals spawn mountains of litigation, but the sub-prime fiasco stands out because of the complexity of the system that funneled more than $1 trillion from investors around the world through Wall Street and mortgage lenders to borrowers with dicey credit.
As losses mount on those loans, the scene of the blame game is shifting to the courts.
Sub-prime borrowers are suing loan brokers and lenders, accusing them of deceptive practices. Wall Street firms that bought now-delinquent sub-prime loans are trying to force lenders to buy them back.
Investment-bank shareholders are going after those firms' managers, saying they took excessive risks by loading up on bonds backed by sub-prime mortgages. And investors are suing money managers whose sub-prime-laden funds have suffered hefty losses.
"Somebody described it to me as, 'Everybody's standing in a circle shooting at each other,' " said Kevin LaCroix, a lawyer who writes a blog on sub-prime litigation.
In all, the 278 civil sub-prime-related cases filed in federal courts last year already amounted to half of the 559 actions brought during the entire savings-and-loan crisis from 1989 to 1995, according to research firm Navigant Consulting Inc.
"The pace of filings has just accelerated dramatically," said Navigant Managing Director Jeff Nielsen.
The data don't include the unknown number of suits filed in state courts -- or the probes by federal and state regulators and prosecutors, who are bearing down on many of the key players in the mortgage industry, looking for evidence of wrongdoing.
The sub-prime meltdown is likely to overtake the S&L crisis as the civil litigation record-holder this year, Nielsen said.
"We're at the stage now of throwing a lot against the wall and seeing what sticks," said Therese Pritchard, a securities law partner at Bryan Cave in Washington.
