...

In America, barometer of shareholder litigiousness, the number of federal class action lawsuits increased in 2007 after two years of decline, report accountants and advisers PriceWaterhouseCoopers (PwC) in their latest Securities Litigation Study (April 2008). One hundred and sixty-three cases were filed, compared to 109 in 2006, an increase of nearly 50%, and the bulk of filing (63%) was in the second half of the year as the sub-prime fallout widened and the resulting credit crunch bit. Sub-prime-related cases accounted for 23% of the total, but 29% of those files in H2.

Sub-prime and the credit crunch are just two negatives lurking in a pile which includes rapidly deteriorating economic fundamentals that signal falling asset prices and lower returns. When the going gets tough, litigation, insurance claims, and the cost of such cover, tend to rise together.

In the December/January 2008 edition, EVCJ reported on rising litigation by minority shareholders seeking to go beyond portfolio companies to get to the deeper pockets of PE houses behind them. The trend is marked in the USA, but not unknown in Europe,

In one recent case, minority shareholders in an unidentified Spanish enterprise that went bust without the correct insurances in place tried to claim against the liability insurance of the board representative from the private equity owners.

The firm was ultimately admonished. "But this was a potentially catastrophic claim," stresses Mike Lobb, at Howden Insurance...

NOTE: All illustrations and photos have been removed from this article.



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