Litigation Funding

[Beeg_Dawg]

https://www.cbsnews.com/news/litigation-funding-60-minutes-2022-12-18/

OK, here is a new one for me.  Litigation funding.  Basically, special investment firms seek out high dollar lawsuits and purchase a (large) piece of the award if there is one.  Lawsuits are scanned by lawyers.  If they spot one that has a good chance of a large settlement, they offer carry the plaintiffs cost of litigation for a big payout.

Pretty much an unregulated racket IMO.  Just another data point for how screwed up our judicial system has become.

 

 

[Legend]

The funding thing isn’t bothersome to me as it remains aligned with the same incentives that exist when the law firm does the funding itself.  There was already big money there.

Now, if you are saying those particular incentives are shit and we need tort reform, then I agree.  But the foxes have been guarding that henhouse forever.  Most politicians are lawyers and are unlikely to hurt their guild.

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Sic transit gloria mundi (so shut up and get back to work)

[Mick]

The funding thing isn’t bothersome to me as it remains aligned with the same incentives that exist when the law firm does the funding itself. There was already big money there. Now, if you are saying those particular incentives are shit and we need tort reform, then I agree. But the foxes have been guarding that henhouse forever. Most politicians are lawyers and are unlikely to hurt their guild.

The legal profession, as a guild, takes myriad steps to reduce competition. In spite of the fact that there are 1 million+ lawyers practicing their craft, they’ve set up the rules for their profession to maximize income for lawyers, period, at the expense of their clients. Clients have made inroads here and there; e.g., through use of Alternative Legal Service Providers (ALSPs) and AI, but the anti-competitive barriers are still in effect, particularly for B2B purchasers of legal services. Part of the issue is that anti-solicitation rules remain in effect, so clients are underinformed. Part of the issue is that the internal buyers are lawyers themselves. That’s not to say that they don’t seek competition among the law firms from whom they purchase, but they aren’t particularly aggressive about it. If you want to see reduced legal fees, you’d see the use of reverse auctions (bidding out of legal matters/projects) on the rise. In fact, the only time I’ve ever seen a standing ovation at an industry conference that wasn’t related to a retiring lawyer was from a roomful of people after the 2009 financial shocks. There was a client panel of five very senior GCs, and the first question from the audience was whether the GCs intended to expand use of reverse auctions. The seniormost GC (IIRC) was from 3M, and he looked up and down the panel before he reluctantly said “No.” The entire place leapt to their feet and cheered.

As for litigation funding, that started in Australia 27 years ago from insolvency litigation when the courts there, and later in the UK and America recognized that legal claims were assets and permitted insolvency practitioners to enter into contracts to finance litigation. The Australian High Court held that third party litigation funding served a legitimate purpose and were not an abuse of process or contrary to public policy. So the niche has been around for more than a quarter century. We have about 300 litigators, but our use of litigation funding is extremely limited.

The History of Litigation Funding | Sentry Funding

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