In a case that has implications for stockholders in Texas and across the nation, American International Group could pursue legal action to the tune of $3.7 billion against Morgan Stanley as a result of purchasing subprime mortgages backed by the financial institution between 2005 and 2007, before the economic downturn. AIG was attempting to work out the legal disagreement without resorting to business litigation, but the allotted time for the agreement expired on Nov. 7. Neither company would comment publicly on the case.
In August 2011, AIG pursued legal action in a $10 billion lawsuit against Bank of America that alleged that the financial institution had committed mortgage fraud. The bank has denied culpability as the lawsuit continues through the court system.
During the first three-quarters of 2013, legal expenses cost Morgan Stanley $549 million, or 44 percent more than the $381 million they spent during the first three-quarters of 2012. However, the company allotted less money for legal expenses during the last quarter of 2013. They stated in the filing that they believe that these costs will continue to rise, but that fluctuations could still occur depending on the global market.
In 2008, AIG was part of a national bailout provided by the taxpayers. Morgan Stanley came to the aid of the federal government during the bailout.
Some business disputes can be resolved through tolling agreements without taking the case to court, as business litigation can be costly and time-consuming. A business litigation attorney may be able to help clients with the negotiation process.
Source: Bloomberg, "Morgan Stanley Says AIG May Sue Over Mortgage-Linked Investments," Michael J. Moore, Nov. 4, 2013
Source: Reuters, "AIG may sue Morgan Stanley over mortgage securities: SEC filing", November 04, 2013