States Need to Regulate Litigation Financing Industry: Professor

January 11, 2012

  • January 11, 2012 at 11:16 am
    George says:
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    This is just a horrible, horrible idea. Particularly extending the attorney-client privilege to the financier. Financier gets information from the attorney that leads them to believe the litigation will be lost, all of a sudden there’s no money. Every financed lawsuit after that, the attorney is wise to this and doesn’t reveal weak portions of their case to the financier because of possible loss of funding.

    I can’t think of a better way to increase the amount of fraud in our court system than this.

  • January 11, 2012 at 1:27 pm
    Anejo says:
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    If a case is so good as to attract investors wouldn’t the attorneys for the plantiff work on a contingency basis and just take a higher cut for themselves?
    Second question: Wouldn’t the cases need to be really big in order to attract investors? The little guy doesn’t gain greater access to the courts unless he/she is part of a class action suit. I don’t see investors involved in a dog bite suit.

    • January 11, 2012 at 1:45 pm
      Broker says:
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      Good comment except the now dog bite claims will become bigger and the legal community will no doubt find a way to create their famous legal mills for the smaller claims working now on the law of numbers. This in turn will cause everyones liability premiums to sky rocket and will now become that much harder to be in business. If this isn’t a classic example of why we need tort reform now.

      • January 11, 2012 at 2:02 pm
        Anejo says:
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        Right or wrong our world was a lot more simple pre-1977 when attorneys got the right to advertise.

  • January 11, 2012 at 1:27 pm
    David Babbitt says:
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    If the Nation would add in Frivolous Lawsuite language in all State courts to protect instances being brought forward and already the 1000s of claims each year brought forward that are inappropriate, I would make that trade off to allow this.

    • January 11, 2012 at 4:10 pm
      The Other Point of View says:
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      Every state and federal court already have laws protecting against frivolous suits. That doesn’t mean frivolous suits are not filed, but attorneys can be sanctioned for filing them. It happens often enough.

      • October 17, 2014 at 3:00 pm
        Darren McKinney says:
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        Actually, “Other Point,” it doesn’t “happen often enough.” If it did, there’d be far fewer meritless and frivolous lawsuits clogging our court dockets (at great taxpayer expense) and delaying righteous claimants’ days in court. For more than two-thousand years, third party involvement in lawsuits has rightly been opposed by the Greeks and Romans, Blackstone himself and, more recently, an Illinois lawyer named Abraham Lincoln. And the last thing our nation’s anemic recovery needs right now, just as China’s growth is slowing and Europe teeters on the edge of a triple-dip recession, is more lawsuits. Prof. Steinitz is yet another Ivory Tower anti-capitalist, with no clue about how the real world works, foolishly advocating for still further expansion of civil liability.

        -Darren McKinney, American Tort Reform Association, Washington, D.C.

  • January 11, 2012 at 1:58 pm
    The Other Point of View says:
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    I don’t have an opinion on whether this is a good or bad idea, but I think it’s funny how the same folks who think this is a bad idea and call for more government regulation to stop it are the same folks who complain that we need less governmental regulation and that the free market should be allowed to work its magic without interference.

  • January 11, 2012 at 2:11 pm
    Adam says:
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    There are structures already in place to help the “little guy”, including contingency fee arrangements, class action suits, viatical agreements, legal aid charities, etc.

    This “good idea” is rife with practical and theoretical problems. Specifically, the suggestion that the attorney-client privilege be opened up to third party financiers is absurd. Not only is there an inherent conflict of interest between a victim and an individual who wants to profit off it, but it would be an absolute nightmare for the attorney taking the case. Who, exactly, is the client? To whom can I share relevant information? Doesn’t a plaintiff now have an incentive to exagerate the value of his claim? What recourse does the financier have? Does the attorney owe a duty to alert the financier that the client’s claim is frivolous? If the defendant makes an offer that the client rejects, can the financier trump the decision? If the plaintiff loses and is liable for the defendant’s attorneys fees, who is responsible? If the client has no money, can he sue the financier for not settling when he had a chance? Or for not settling for more money? Is a jury entitled to know that the plaintiff will only recover a percentage of any verdict? Will this result in them awarding more than the case is otherwise worth?

    The machinations are endless.

  • January 11, 2012 at 2:15 pm
    TxLady says:
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    If a case has merit, an enterprising attorney will take it on a contingency basis, no need for any sort of outside financing arrangement to get a lawyer to the disadvantaged. It seems to be a way to keep lawyers from having to take on the risk of the wins or losses by having someone else pay for the attorney and take that risk. Am I understanding this correctly? Then the only one I see with a guaranteed win and associated profit, is the lawyer. If the plaintiff wins, does the lawyer and the financier now get a cut of the award, leaving even less for the victim? We need to steer clear of this one.

  • April 13, 2012 at 5:42 pm
    Lulaine @ RD Legal Funding says:
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    In terms of capitalism litigation financing is helpful in the sense of helping investors achieve a return on their investment that they are not getting currently on the market. Since the crash of 2008, they have been searching for a way to make the returns the market was offering and with interest rates low, litigation financing offers that. For the common person, it can be a helpful tool so big corporations aren’t going to bully the plaintiffs into a deal that is not good for them. Regulation may help if done the right way but a lot of people are seeing the benefits of the industry and it has taken on global proportions.



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