On July 15, 2013, the FDIC provided the latest update on the web page on which the agency is tracking the litigation it has filed and that has been authorized against the directors and offices of failed banks. According to the latest update, the FDIC has now filed a total of 69 lawsuits against failed bank directors and officers, including a total of 25 so far during 2013. By way of contrast, the FDIC filed 26 lawsuits against failed bank directors and officers during all of 2012.
Though the agency has now filed 69 lawsuits, it has not filed any since mid-June -- roughly a month-long period where there have been no new failed bank lawsuit filings. During the current bank failure litigation wave, there have been other periods where the pace of new filings dropped off (refer for example here). Given the ebb and flow of filing activity, it would unwarranted to try to read anything into the fact that there have been any filings in about a month – particularly given that there was an intervening federal holiday during that period.
The latest update also reflects an increase in the number of lawsuits against failed bank directors and officers that the agency has authorized. As of the prior update (dated June 7, 2013) the agency had authorized lawsuits involving 114 failed banks and involving 921 former directors and officers. Now with the latest update, the agency has now authorized lawsuits in connection with 120 failed banks, and involving 962 individuals. In other words, since the last update the agency, the agency has authorized lawsuits in connection with only six additional banks, but the lawsuits authorized in connection with those six banks apparently involve 41 individuals.
The number of authorized lawsuits is inclusive of the 69 lawsuits the agency has filed so far, involving 530 former directors and officers. In other words, in addition to the 530 individuals who have been named as defendants in failed bank lawsuits, the FDIC has authorized lawsuits involving another 432 former directors in connection with the 51 authorized but as yet unfiled lawsuits.
Just as there have been no lawsuits in about one month, there have been no new bank failures during that period either. Actually, it has been more than a month since the last bank failure on June 7, 2013. There have been a total of 484 bank failures since January 1, 2007. With the recently increased number of authorized lawsuits, the agency has now authorized lawsuits in about 24 percent of bank closures during the current bank failure wave. This implied rate of litigation activity is roughly equivalent to the litigation rate during the S&L crisis, when banking regulators filed lawsuit against the former directors and officers of failed bank in connection with about 24% of failed institutions.
To be sure, the agency has at this point only authorized lawsuits in connection with about 24% of banks that failed during the current bank failure wave; what percentage of those authorizations result in actual lawsuits remains to be seen. On the other hand the number of lawsuits authorized also seems likely to increase in the months ahead.
The 69 lawsuits that have been filed so far have been filed in 19 different states and Puerto Rico. The state with the largest number of lawsuits against former directors and officers of failed banks is Georgia, which now has had 16 lawsuits filed against former directors and officers of banks that were located in the state prior to their closure. This is hardly surprising since Georgia has experienced the highest number of bank failures. But with about 23% of all failed bank lawsuits involving failed Georgia banks, but with the state representing only about 17% of bank failures, the lawsuits are falling disproportionately against Georgia’s banks. Of course, that could simply be a matter of timing; many of the closed Georgia banks were among the first banks to fail, so it arguably is unsurprising that the earliest lawsuits would be concentrated against failed Georgia banks.
After Georgia, the states with the largest numbers of failed bank lawsuits are California (9); Illinois (9); Florida (7); Washington (5); and Nevada (4). This roster of states corresponds roughly with the list of states that have experienced the highest numbers of bank failures.