Federal Deposit Insurance Corporation (FDIC) litigation activity associated with failed financial institutions increased significantly in 2013, according to Characteristics of FDIC Lawsuits against Directors and Officers of Failed Financial Institutions—February 2014, a new report by Cornerstone Research. The FDIC filed 40 director and officer (D&O) lawsuits in 2013, compared with 26 in 2012, a 54 percent increase.
The surge in FDIC D&O lawsuits stems from the high number of financial institution failures in 2009 and 2010. Of the 140 financial institutions that failed in 2009, the directors and officers of 64 (or 46 percent) either have been the subject of an FDIC lawsuit or settled claims with the FDIC prior to the filing of a lawsuit. Of the 157 institutions that failed in 2010, 53 (or 34 percent) have either been the subject of a lawsuit or have settled with the FDIC.