Credit default swap litigation: so hot right now?

Since at least last March—when Citigroup and the late Wachovia were sued by a hedge fund over derivatives contracts—BigLaw has been  anticipating the next wave of subprime related litigation in the form of credit default swap lawsuits.  (Recall Professor Greenberger’s helpful definition of a credit swap: “ Really insurance but not regulated like insurance; really a futures contracts but not regulated like a futures contract.”)

Yesterday, as reported in  The, the chairs of Paul Hastings’ derivatives and newly-formed  credit crisis groups predicted that “the banking industry's implosion means that banks with a piece of the $43 trillion market in these unregulated instruments are likely to sue to recoup their losses. And who are they going to sue? Other banks.”  (By the way, note the $23 trillion difference with the $66 trillion figure cited  here.  But hey what’s the big deal: it’s only a discrepancy equivalent to seven times the annual GDP of China.)

Due to those pesky client conflicts, this impending spate of bank-on-bank litigation will not necessarily translate into a windfall of work for Wall Street litigators. As we noted here back in June, One firm gathers what another firm .  And just as Quinn Emmanuel stepped up in London when the  Magic Circle, one has to think that the firm will be similarly opportunistic here, despite a  rough start with this sort of lawsuit.

                                                  -posted by brian