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Should You Be Allowed to Invest in a Lawsuit?

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Re: Should You Be Allowed to Invest in a Lawsuit?

#91

Post by petegrif »

snowwrestler wrote: post #63
Afforess wrote: post #12

I think the concern with investing in lawsuits should be focused on secondary motives. Lawsuits with lots of investors will have attorneys with secondary motives, such as keeping the case active as long as possible to continue to attract more investors, rather than resolve it. Perpetual cases could bog down courts in never-ending lawsuits and countersuit challenges, a legal version of Mutually Assured Destruction. Do…

I think the secondary motive to be concerned about is not length of time in court, but the filing of marginal lawsuits because they can attract financing. Lawsuit financing is a speculative investment. We've seen repeatedly that the more money there is to invest speculatively, the more people and companies start pushing the envelope to attract investment. In the last 20 years we've seen big bubbles in Internet servic…

Outside investors don't invest in 'marginal lawsuits.' One of the absolutely critical considerations for lawyers undertaking contingency cases is that they believe the case isn't marginal. I fail to see why an outsider would embrace more risk than such lawyers.

Re: Should You Be Allowed to Invest in a Lawsuit?

#92

Post by brianlweiner »

hackuser wrote: post #82
mamon wrote: post #72

Earlier quoted context omitted.

The difference is that if private institution that issues "toms safety certification" takes a bribe it is a very shortsighted strategy - such certificates will be very soon considered untrustworthy and general public will start to ignore them, therefore putting certificate institution out of business. Government-powered institutions can take bribes for years, or even decades without ever being punished for that, or b…

> The difference is that if private institution that issues "toms safety certification" takes a bribe it is a very shortsighted strategy ... Government-powered institutions can take bribes for years, or even decades without ever being punished for that, or being put out of business. That's a theory, but the theory does not describe reality. Reality is that human beings defraud each other frequently, and in fact that…

Maybe I'm confused, but reality definitely includes several independent certification organizations. e.g UL, NSF International.

And of course when I buy a house the government doesn't provide an inspector, instead I have to choose from any number of independent home inspectors (some better than others).

Now of course they're often confirming that construction has been done to code (plumbing, electrical, etc), but it's not a far jump to say that these codes could be established and maintained by independent groups like IEEE rather than the specific city and state authorities.

Re: Should You Be Allowed to Invest in a Lawsuit?

#93

Post by teacup50 »

hga wrote: post #54
aorloff wrote: post #6

Good thing we also have the First Amendment. Citizens United v. FEC -- majority opinion essentially said that money is free speech ("Because spending money is essential to disseminating speech..."). And spending that money to fund litigation seems like a very strong kind of speech, whether or not its motivated by greed (profit).

And spending that money to fund litigation seems like a very strong kind of speech Not to me. Compare to Citizens United , which was about government censorship of core political speech, a video pertaining to a current candidate for office (or even a book, per the government's arguments). It's well established that "commercial speech", e.g. advertisements for products, can be subject to severe regulation (e.g. tobacc…

What does it mean in a one-vote/voice-per-citizen democracy when a small number of people with money can buy more "free speech", allowing them to dominate the political dialog and crowd out dissenting voices who have less money?

To me, that seems to create a political field where citizens of great wealth are "more equal" than citizens with less.

Re: Should You Be Allowed to Invest in a Lawsuit?

#94

Post by petegrif »

rayiner wrote: post #56

The arguments against litigation funding are not compelling. In particular, funded lawsuits tend to be much higher quality than contingency ones. Funders are investors. They do due diligence on the merits of the cases because they want to get their money back. And their cost structure doesn't really support funding cases where the hoped-for resolution is a hundred grand in "go away" money. If someone is willing to si…

I think it is extremely unlikely that 'funded lawsuits tend to be much higher quality than contingency ones.' I can imagine them being of slightly higher quality but not much for the simple reason that contingency cases involve attorney's making an investment decision and those attorneys frequently sink millions of dollars into cases and 'want to get their money back.' The only reason one could argue that funded cases may even be of slightly higher quality is that it is harder for the investor to assess the merits of the case than for the lawyers bringing the suit. But even this argument is pretty weak because any such potential investors can hire experts to assess the case.

Re: Should You Be Allowed to Invest in a Lawsuit?

#95

Post by petegrif »

Hermel wrote: post #39
littletimmy wrote: post #37

Earlier quoted context omitted.

Why do you think that's unethical? Doesn't it give lawyers the incentive to fight for their clients? What if a poor client cannot pay upfront and percentage of winnings is what convinces a lawyer to fight in the first place?

Because it gives lawyers a stronger incentive to escalate conflicts, instead of deescalating them, which is not in the interest of society. Lawyering up is a zero-sum game, so the economy is better off if the money in question stays in a productive sector. Take a divorce, for example. Do you prefer lawyers to have an incentive to say "calm down, I'll talk to the other lawyer, and we will find a fair deal" or "give me…

That does not make sense.

Lawyers who are taking contingency cases have no incentive to 'escalate conflicts.' Their only interest is to make their case and reach a settlement.

Ironically, it is in cases where lawyers are paid hourly that they have an interest to 'escalate conflicts' to draw cases out and keep drawing fees.

Re: Should You Be Allowed to Invest in a Lawsuit?

#96

Post by domdip »

jaredhansen wrote: post #88
branchless wrote: post #59

Earlier quoted context omitted.

a taboo against usury - pity it didn't last...

What? Most states have usury laws right now [1], as do plenty of places outside the US. [1] http://www.alqlist.com/interestratesummary.html

And most of them have loopholes big enough to drive a truck through. (See payday loans, title loans, hard money loans, merchant cash advance, etc., etc.)

Re: Should You Be Allowed to Invest in a Lawsuit?

#98

Post by dragonwriter »

petegrif wrote: post #95
Hermel wrote: post #39

Earlier quoted context omitted.

Because it gives lawyers a stronger incentive to escalate conflicts, instead of deescalating them, which is not in the interest of society. Lawyering up is a zero-sum game, so the economy is better off if the money in question stays in a productive sector. Take a divorce, for example. Do you prefer lawyers to have an incentive to say "calm down, I'll talk to the other lawyer, and we will find a fair deal" or "give me…

That does not make sense. Lawyers who are taking contingency cases have no incentive to 'escalate conflicts.' Their only interest is to make their case and reach a settlement. Ironically, it is in cases where lawyers are paid hourly that they have an interest to 'escalate conflicts' to draw cases out and keep drawing fees.

Escalating conflict may be a way of increasing the perceived uncertainty, cost, and risk to the other party, and thus increasing the likelihood and size of a settlement to make the case go away, so there may be an incentive to escalate conflict with contingency. Its probably less than with hourly fees, and more than with flat-rate fees (which ISTR are occasionally offered by some for some things like simple divorces.)

Re: Should You Be Allowed to Invest in a Lawsuit?

#99

Post by Mickydtron »

This seems like a broken patch to a broken system. To use the main example from the article, Cat would crush Miller if Miller didn't have access to this method of financing their lawsuit, and Miller's lawsuit looks at least plausible, so them being crushed out of hand is a bad outcome. So, it does somewhat fix the problem of smaller litigants being able to go up against larger defendants without just being automatically crushed out of hand.

However, it does seem that there are some obvious failure states for this new system. If venture litigation becomes the norm, then only litigants who are either extremely large themselves or can attract financing will even have a chance of victory. So, the financiers become the de facto arbiters of the judicial system.

To me, the real problem is that the civil justice system is so expensive as to be out of reach for many/most people, or at least putting a limit on how big a size difference the two parties can have. All told, this isn't that different than someone taking out a mortgage to fund a lawsuit, and that is fairly obviously allowed. The fact that someone might need to take a mortgage or seek outside funding in order to seek justice is the problem, not the mortgage or financing itself.

Re: Should You Be Allowed to Invest in a Lawsuit?

#100

Post by hga »

teacup50 wrote: post #93
hga wrote: post #54

Earlier quoted context omitted.

And spending that money to fund litigation seems like a very strong kind of speech Not to me. Compare to Citizens United , which was about government censorship of core political speech, a video pertaining to a current candidate for office (or even a book, per the government's arguments). It's well established that "commercial speech", e.g. advertisements for products, can be subject to severe regulation (e.g. tobacc…

What does it mean in a one-vote/voice-per-citizen democracy when a small number of people with money can buy more "free speech", allowing them to dominate the political dialog and crowd out dissenting voices who have less money? To me, that seems to create a political field where citizens of great wealth are "more equal" than citizens with less.

My preferred general approach is that the answer to speech you don't like is more speech. Very specifically, large numbers of people can in turn collectively buy their own "free speech" through various forms of non-profits. Right now, compare the 5 million members of the NRA vs. Michael Bloomberg, who is the only person currently putting serious money into gun control.

In a way, that supports your case, in the Colorado, Washington and Oregon wins he's achieved (through non-profits fronts he's established, after Mayors Against Illegal Guns became so notorious for the number of criminal mayors in it). But not generally, nationally the needle hasn't moved aside from Obama and Hillary! publicly calling for the confiscation of the nation's handguns and semi-auto long guns (!).

But our response is not to try to muzzle him, let alone support a law like McCain-Feingold which muzzled the NRA and therefore its 5 million members working in collective action prior to it being spiked by Citizens United.

I'll also note that money only gets you a hearing, I simply don't believe that big money can "dominate the political dialog and crowd out dissenting voices who have less money" without concurrent capture of gatekeepers (like the Federal government in the case of McCain-Feingold...). The examples are legion, the latest being ¡Jeb! Bush's total failure to gain any traction outside of big money sources.

(I recently came across an analysis that to win the Presidency, you've got to do well at both getting "big" and "small" money. Hmmm, like Obama did. By that metric, watch Cruz, and of course Trump is a wildcard, not needing either and currently not playing that game at all.)

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