Tag Archives: lawsuit

Litigation Funding: Helping you get your case to trial or disrupting the litigation process?

If you haven’t heard of litigation funders, then stay tuned. I’m sure you will soon. They’re here to make sure your next big case gets the cash it needs to stay alive to victory or settlement.

Or are they just here to see if they can make a buck? Or both?

If you have heard of litigation funding, then I’d like to hear what you think.

What is ‘litigation funding?’

What is a “litigation funder?” These are financiers that provide one of two types of litigation funding to plaintiffs: either by cash advances to individual plaintiffs or funding to plaintiffs’ firms, helping them trade future risk for current cash flow.

In other words, they offer the cash to plaintiffs and plaintiffs’ firms to make it possible for litigation to go forward when it might not otherwise due to the cost of litigation.

The best part is that plaintiffs and plaintiffs’ firms need only pay it back if they win.

The cost? Funders can charge between 36% and 150%, per year, though, according to Kirby Griffis of Hollingsworth LLP, higher rates are not unheard of. They get away with it and avoid usury laws by advancing the cash on a non-recourse basis, requiring repayment only if the plaintiff wins or gets a settlement in their favor.

The Legal and Ethical Gray Area

The main problems–ethically and legally–arise under the legal doctrines of maintenance and champerty. As summarized by Griffis, maintenance is “the giving of assistance to a litigant in pursuing a lawsuit, and champerty is a form of maintenance in which the party giving assistance does so in exchange for an interest in the outcome of the lawsuit.”

Cases, such as Rancman v. Interim Settlement Funding Corp., have found that “a]n intermeddler is not permitted to gorge upon the fruits of litigation.” 789 N.E.2d 217 (Ohio 2003). As a result, the industry has formed a lobby to legitimize litigation funding. The American Legal Finance Association (or the ALFA) approaches legislatures and lobbies them to endorse “voluntary” codes of standards through codification.

ALFA has been successful, even overturning Rancman by statute in Ohio. Maine and Connecticut allow litigation funding by statute, and similar legislation is pending in Kentucky. Texas, Florida, New Jersey, Mississippi, Massachusetts, North Carolina and South Carolina and New Hampshire courts have allowed litigation funding contracts.

So, in some places it’s legal, others it’s not…but what is the effect?

It’s not healthy for our system, Giffis says. Third-party litigation funding disrupts the normal operation of litigation and will increase litigation in the U.S. He cites three reasons for the disruption, as well as an explanation for the potential increase in litigation:

1.  Conflicts of interest: the objectives of the funders and those of the individual plaintiffs are not necessarily aligned.

[I]t is difficult to believe that plaintiffs’ firms that receive a large portion of their funds from a third party will not come under the influence of that third party to at least some extent. Funders may want to hasten settlement to recoup their investment, delay settlement to increase their interest charges, and steer cases toward monetary and away from injunctive relief, among other things.

2.  Displacement of Risk: The opportunity for certain cash (which is only repaid from proceeds of a victory) from funders may create an incentive for plaintiffs’ firms to shift risks to third-party funders, trading future uncertainty for secure cash flow in the present.

3.  Confidentiality conflicts: The involvement of third-party funders “risks the disclosure of confidential information.” Like any investor, funders will want as much information as possible about the case they are financing, and right now the case-law “strongly suggests” that there is no privilege for communications with a third-party funder. What does this mean for defenders against such law suits?

[I]f you are defending a case in which the plaintiffs’ firm has litigation funding, go after the communications with the funder.

Why Increased Litigation? The Bottom Line

These are some of the ways litigation funding distorts the legal system, but why could it result in increased litigation? Simply put, the best way for a litigation firm to protect its investment, much like a smart investor, is by spreading out risk.

For anyone who stands to make money from litigation, as much litigation as possible should happen…

Litigation funding enables plaintiffs’ firms that are reluctant to take on risky litigation to shift the risks of failure to investors, who are able to bear the risk because they can spread it around. Obviously that will cause more litigation to occur.

Is there another side to this? Without a doubt, there are plaintiffs that fail to hold defendants to account in court because of the prohibitive cost of litigation. Should they be prohibited from obtaining third-party funding?

(h/t to Kirby Giffis of Hollingsworth LLP whose comments were published in “The Metropolitan Corporate Counsel,” vol. 19, no. 7, July 2011)

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Big Brother: not just the government, anymore.

As sure “as the day follows night,” Apple has been sued for its iPhone location tracking.

Whether the suit survives a summary judgment motion is another question.

Continue reading

Meet the Tiger Elders, with lawyers on speed-dial

Age pyramid for China showing smaller age coho...
Image via Wikipedia

Meet the Tiger Elders, with lawyers on speed-dial.

Citing the New York Times, the blog Overlawyered notes that a law has been proposed in China that would require adult children to visit their elderly parents… or face a law suit.

China is facing an aging population that will increase pension and health care costs, Baby Boomers are having on the United States, and decrease the competitive advantage afforded the country due to large quantities of cheap labor as its population leaves the labor force. Due to the one child policy, the squeeze will be much greater in China.

Perhaps requiring adult children visit and pay attention to their parents is a way to provide for the mental well-being of the elderly? And help diminish the costs on state to care for them?

Memorable Depositions

The ABA Journal has asked readers what are some of the memorable depositions they’ve been in over the years.  I had a good laugh at a few of them.

“Andythelawyer” remembered a depo where the client shared more than his attorneys thought appropriate:

A couple of decades ago I was representing one of many directors of a failed savings and loan in a massive consolidated shareholder securities class action.  The deposition witness was the S&L’s former president—a little old guy with a Czech accent worth about $750 million (which was real money back then).  The deposition was taken in a downtown Los Angeles law firm’s conference with 40 people—mostly lawyers, including 4 representing the witness.

After an hour one question (I don’t recall what) prompted defense counsel to clamp their hands over the witness’s mouth and drag him down into a huddle.  After two minutes of murmuring his little bald head popped up, chirping: “On the advice of counsel, I don’t remember.”

Pandemonium ensued for the next 15 minutes.

“Jon Hyman” had me groaning:

The case began as a sexual harassment EEOC charge alleging that a corporate executive displayed pornographic images on his computer to a female subordinate. Everyone at the company denied the photos existed. In fact, the executive had a plausible explanation—the charging party was a disgruntled, terminated employee who may have accidentally received an email forward of a dirty joke, and was exaggerating that one isolated incident to extort money through a bogus claim. I responded accordingly in the company’s position statement to the EEOC, which found no probable cause.

Flash forward six months. The lawyer for the ex-employee (now a plaintiff) is deposing the same executive. Her lawyer marks the position statement as Exhibit 1, and the executive re-affirms his story. Her lawyer then marks as Exhibit 2 the discovery responses in which the company denied that any pornographic photos existed, and the executive again re-affirms his story. When her lawyer marks a manila envelope as Exhibit 3, I started to feel a pit in my stomach. When the executive opens the envelope and reveals a half-dozen pornographic photos, the pit moves up into my throat. When I realized that the photos are of the same executive cavorting with two women—whom he identified on the record as “escorts”—I just about threw up.

“Jane” remembers a court reporter distracted by a witness:

I was taking a deposition in a suburb of Cincinnatti.  The court reporter had travelled two hours to get there.  During the deposition, I noticed that she wasn’t typing enough, based on my experience with court reporters.  I asked for a readback, and she said, “You know, I didn’t get that either.”  I asked for a readback from fifteen minutes earlier, from something I had in my notes, and her recording was insufficiently accurate.  I brought her outside the room and asked if there was a problem.  She said that the witness was, “Just SO GOOD LOOKING that she couldn’t concentrate.”  I called the court reporting service, who said that it would be two hours before another reporter could be sent.  I had a deposition pending in Chicago, so couldn’t wait for that.  What we did was turn the reporter around to face the opposite direction, so she couldn’t see the witness in front of her.  Viola.  Accurate reporting.  You can’t make this stuff up.

“D.C. Toedt” remembers an attorney getting caught by surprise…by his own witness:

I represented a corporate defendant in a patent infringement lawsuit.  I was starting the deposition of a non-party witness whose testimony would be important to the plaintiff’s proof of his date of invention. I started through the usual opening questions.  Have you ever testified at a trial?  No.  Have you ever testified at a deposition?  No.  Have you ever been convicted of a crime? No.  [At this point, there was something about the witness’s demeanor ….]  Have you ever been accused of a crime?  Yes.  What crime?  Attempted murder.  When?  My trial starts next Wednesday.  Whereupon the plaintiff’s lawyer asked for a brief recess—he was caught by surprise, even though it was his own witness.

From “C,” several memorable depos:

  • Depo of plaintiff in sex harassment case where claim was that harasser co-worker had erection at boring company meeting in conference room where he was the presenter!  Plaintiff’s attorney put pencil in his pants and moved to various angles asking plaintiff to confirm the degree and angle of alleged erection on record.
  • Plaintiff answered my question with asking if I was “the devil.”
  • Plaintiff’s attorney fell asleep.  I asked Plaintiff on the record how they felt about the fact that their attorney was asleep.  “Not very good.”

“Attorney X” depoed a woman who was on the mystical side of things:

My most memorable was the woman – next-door neighbor witness to a dispute over a house fire –  who had to arrange her stones and herbs around her to create a circle of spiritual safety before beginning to testify.

“BZ” had a client who took him very literally:

I once instructed a client, a dump truck driver, to only answer the questions he was asked. The questions and answers went like this:

Q. Could you tell me your name?
A. Yes.
Q.  Will you tell me your name?
A.  Yes?
Q.  When will you tell me your name?
A.  When you ask?
Q.  Could you please tell me your name?
A.  Yes.

This went on for twenty minutes until the lawyer finally asked :  “What is your name” only to then ask:
Q.  Could you tell me your address?
A. Yes.

I did not laugh but it was hard.

And, from “MartyMar” comes my favorite:

After advising my client, a 90-year old woman in a probate case, to always read any document in its entirety opposing counsel places before her before answering the question “Have you ever seen this document before”?”, my client followed my advise to the “T”.

During her deposition, opposing counsel handed my client a 23 page trust agreement and asked her if she has ever seen the agreement before.  My client politely takes out her bifocals and begins to read each and every word on each and every page.  After about an hour and a half, my client completely read the agreement and asks opposing to repeat his question.

Q. Have you ever seen this document before?

A. No.

(Opposing counsel’s client): This is some bullshit (referring to the hour and a half it took her to read the trust agreement..just to get a “No” response).

It’s true: you can sue for anything…

Image by striatic via Flickr

Winning the lawsuit is another story.

The latest in our nation’s history of obnoxious and frivolous law suits is that of the Mormon suing his own church for injuries incurred while performing proxy baptisms in an LDS Temple.  He claims he was hurt because the people he was baptizing were too heavy.

The civil suit filed Wednesday in Salt Lake City‘s 3rd District Court claims Daniel Dastrup suffered severe back injuries, including a herniated disk, after performing about 200 baptisms at the LDS temple in Raleigh, N.C., on Aug. 25, 2007.

The lawsuit contends the church was negligent in failing to warn Dastrup that the repetitive nature of the proxy baptisms — bending, lifting and twisting — could result in physical injury.

“The church owed the plaintiffs a duty to exercise reasonable care to avoid injury to the plaintffs from the services they performed to the church,” the lawsuit states.

And when he complained, the person supervising the baptisms said he couldn’t stop. I am not making this up.

The lawsuit alleges Dastrup, then 25, complained about his injuries but a LDS temple officiator ordered him to continue and refused to let another worker relieve him.

If the officiator had told him to jump off a cliff, would he have done that, too?  Do you do everything you are told to do, Mr. Dastrup?  Is it so hard to say “no?”

And, yet again, Dastrup proves that: yes, you can sue for about anything, regardless of your own personal responsibility to say “no, I’m done.  My back hurts.”

UPDATE: Maybe this is why the Catholic and Eastern Orthodox churches perform infant baptism–it’s far easier on your back.