Today saw yet another big ticket government lawsuit against yet another large financial conglomerate alleging deceptive conduct in selling either mortgages or mortgage-backed securities. What is truly interesting is not the similarities among the October lawsuits, but the differences. The various recent lawsuits against Wall Street firms have been brought by both federal and state officials using an arsenal of different statutes and targeting different pipes in the mortgage market plumbing.  Instead of using federal securities laws, federal and state prosecutors have looked to older statutes like the Civil War era False Claims Act and New York's pre-New Deal Martin Act in bringing the three big October cases.

Here is a rough rundown of these three big headline-grabbing cases from October as well as another cluster of suits brought last September by the Federal Housing Finance Agency (the conservator that took control of Freddie and Fannie): (David Zaring has summarized and analyzed the individual October cases as they have come out):

Each lawsuit involves a fairly discrete set of causes of action. In each case, the government theory is slightly different.

What explains this? Why not bring a similar suit against every bank or throw in the kitchen sink of claims in each case? The federal and state actions have become much more coordinated – as witnessed by the federal mortgage task force involvement in New York state's JP Morgan suit.

It could be that the conduct of different banks, their different business models, and their interactions with different entities in the federal mortgage universe merited different causes of action or legal theories. That explanation doesn’t seem to offer a complete explanation given the breadth of mortgage operations at large financial conglomerates and the likelihood that any deceptive conduct that occurred would be unlikely to be concentrated in only one corner (whether FHA-insured mortgages or sales of mortgages to Freddie/Fannie or representations to MBS investors).

Perhaps the federal/state coordination created a division of labor strategy or a move to share the litigation risk and reward.

Or these lawsuits might involve a diversification strategy. Rather than putting all the litigation eggs in the basket of one statute or legal theory, the prosecutors and government lawyers involved might look to try different causes of action against different firms. If one theory fails, the whole litigation enterprise doesn’t go up in smoke. If one theory appears to be sticking, perhaps it can be copied against other banks (assuming the statute of limitations hasn’t run out and other legal hurdles can be cleared).

A number of targeted suits may allow for quicker and cleaner litigation and make a case easier to present to a judge or jury than a kitchen-sink of multiple claims. One could take the idea of a “theory of the case” seriously and see this approach to litigation as a series of experiments – where individual causes of action are tested.

This more targeted approach is not free from criticism. It doesn’t offer a cathartic Ragnarök. However, that view of litigation is more a construct of Hollywood. More importantly, this diversity of cases opens federal and state officials up to criticisms of the potential unfairness and waste of multiple lawsuits brought by multiple parties.

Another question lingers: why did it take so long for these October lawsuits to be brought?

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