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champerty

On Thursday I was a panelist at the Federalist Society National Lawyers’ Conference discussing the rapid rise of litigation funding — specifically, well-capitalized firms that advance money to plaintiffs in commercial high-stakes litigation, often in exchange for a share in the proceeds. (A separate wing of the litigation finance business, which was not the panel’s primary focus, advances smallish sums to individual injury plaintiffs at high interest rates in a sort of analogue of payday lending.)

My opening remarks speculate about the future emergence of divorce trolls — excuse me, “marital rights assertion entities” — set up to buy out an ex-spouse’s stake in ongoing matrimonial strife and play it for maximum extraction value. While no one has yet rolled out that kind of business model, note that outside financiers have indeed begun to fund divorce litigation.

More seriously, I went on to argue that the rise of patent trolls and mass tort operations prefigures problems we are likely to see emerge from litigation finance, from the encouragement given to low-value claims to a settlement process skewed by the interests of the funders rather than the original disputants, and suggest that the age-old rules against champerty, maintenance and barratry might owe something to an appreciation of such dangers. A link to the video is here.

More: Check out Roger Pilon’s post on what else Cato people were up to at the Mayflower last week.

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A no-win, no-fee outfit in Liverpool “is offering customers an iPad 2 if they make a personal injury claim.” [Daily Mail]

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Copyright troll tripped up:

A federal judge in Las Vegas today issued a potentially devastating ruling against copyright enforcer Righthaven LLC, finding it doesn’t have standing to sue over Las Vegas Review-Journal stories, that it has misled the court and threatening to impose sanctions against Righthaven. … [U.S. District Court Judge Roger] Hunt’s ruling today came in a 2010 Righthaven lawsuit against the Democratic Underground, operator of a big political website.

One of DU’s message board posters had reprinted without permission, but with link and credit, four paragraphs’ worth of an article under copyright to the Las Vegas Review-Journal, which is one of a number of newspapers with working agreements with RightHaven. And this part’s interesting:

In their counterclaim [which Judge Hunt allowed to proceed], attorneys for the Electronic Frontier Foundation (EFF), a digital free speech group based in San Francisco, hit Righthaven and Stephens Media with allegations of barratry (the alleged improper incitement of litigation); and champerty (an allegedly improper relationship between one funding and one pursuing a lawsuit)….

Some fans of entrepreneurial lawyering in the academy and elsewhere have sought to portray rules against barratry and champerty as wrongheaded survivals of a much older approach to the role of the legal profession. But it looks as if EFF — no one’s idea of a Blackstone-reading antiquarian club — just put those rules to powerful use. [Las Vegas Sun]

P.S. Bloggers who settled wonder: can we get our money back?

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February 15 roundup

by Walter Olson on February 15, 2011

  • Artist Jeff Koons drops his lawsuit against maker of resin balloon dogs [Legal Blog Watch, BoingBoing, earlier]
  • The car pile-up happened fast, the come-ons from lawyers and chiropractors were almost as speedy [Adler/Volokh]
  • Andrew Thomas update: former Maricopa County Attorney intends to sue former bar president and ethics investigators [ABA Journal, Coyote]
  • Litigation finance: “Poker Magnate, London Firm Bankroll Chevron Plaintiffs” [Dan Fisher, Forbes] Case for champerty pleaded before ethics commission [Podgers, ABA Journal] The experience in Australia [Karlsgodt]
  • Judge: Kansas City stadium mascot hot dog toss suit can go to trial [OnPoint News, earlier]
  • How National Enquirer matched wits with John Edwards to expose scandal [David Perel, HuffPo] More: Justice Department building a case? [AW]
  • “The Whooping Cough’s Unnecessary Return” [Paul Howard/Jim Copland, City Journal] Theodore Dalrymple reviews new Paul Offit vaccine book [same]
  • Many trial lawyers yank funding from Ralph Nader operations in pique over his role in depriving Al Gore of White House victory [ten years ago on Overlawyered]

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Righthaven update

by Walter Olson on December 11, 2010

Having defeated a Righthaven suit filed against the political site Democratic Underground, lawyers from the Electronic Frontier Foundation now would like the court to award attorneys’ fees. [Kravets, Wired "Threat Level"] Among the claims advanced by EFF in that case were that Righthaven had engaged in barratry and champerty, concepts familiar to many Overlawyered readers if in desuetude in some sectors of the legal world these days. It had also pointed out that some of the newspapers facilitating the suits themselves, or websites they operate, appear to engage in or encourage practices that might be considered wrongful under Righthaven’s theories, such as “cutting and pasting” potentially copyrighted text.

Separately, Groklaw has analyzed what happened in one sample case. Of the furor aroused by the lawsuits, “I think the benefits are worth the negative publicity,” said one executive with the Las Vegas Review-Journal’s owner at a September panel.

The entrepreneurial copyright litigation firm has also now signed up the Denver Post as a new affiliate, and has made a splash by suing the owner of the Drudge Report over its use of a photo allegedly swiped from the Colorado newspaper, an offense (if proven) presumably not as readily defended under “fair use” doctrine as some others over which it has sued.

Let’s you and him fight

by Walter Olson on December 7, 2010

Hedge-fund-backed lenders bankroll divorcing spouses. [New York Times, Marginal Revolution]

Yes, it’s an informative piece, and yes, it does explore some of the drawbacks and abuses, particularly for clients whose lawsuits are being financed by banks, hedge funds or other investors. But the Times (with its reporting partner, the Center for Public Integrity) also buys in to what David Oliver correctly identifies as a big, central fallacy when it claims that the influx of money into plaintiff’s cases “is helping to ensure that cases are decided by merit rather than resources.” So when an outside investor makes it possible for, say, a patent troll to launch mass royalty demands on behalf of marginal patents, or a mass tort firm to roll out scientifically dubious toxic-injury claims, or an Indian tribe to assert 200-year-old land claims against nearby farmers for casino-seeking leverage, it means that cases are now suddenly being resolved on a basis that more closely tracks the merits? Check your premises, please. More: Dan Fisher/Forbes and Ted Frank/PoL, and earlier on Counsel Financial.

P.S. Good round table at New York Times “Room for Debate”, check out in particular the Paul Rubin and Richard Epstein contributions; Kenneth Anderson/Volokh (“insurable interest”).

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Get ready for the rise of firms whose business plan is to bankroll lawsuits. [NYLJ]

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New at Point of Law

by Walter Olson on January 12, 2010

Things you’re missing if you’re not reading my other site:

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New at Point of Law

by Walter Olson on November 30, 2009

Stories you may be missing if you’re not following our sister site:

May 24 roundup

by Walter Olson on May 24, 2009

  • Souter’s middle-of-the-road views on litigation didn’t fit conventional patterns [Copland, PoL]
  • Champerty and maintenance watch: new fund invests in commercial litigation for a share of the payouts [Fortune mag via Zywicki]
  • Report: distributor of “Religulous” film “has served a written settlement proposal” to preacher depicted onscreen [OnPoint News, earlier]
  • U.K.: “Homeowner Suit May Stop Village Cricket” [Telegraph via Never Yet Melted]
  • Overlawyered sparks a discussion across usual lines on EMTALA, the federal law on emergency medicine [Kennerly]
  • Federal Circuit: think twice before proceeding with frivolous appeals [David Bennett, Law.com]
  • Father-son duo who have served as key expert witnesses in litigation alleging autism-vaccine link push risky and questionable therapy for the condition [Chicago Tribune and second article and PDF graphic via Orac; Kathleen Seidel]. Waste and harm that go on in the name of treating autism should give pause to many sides in health care debate [Tyler Cowen]
  • One “deadbeat dad’s” story [Amy Alkon]. Forthcoming Lifetime reality show sounds like it will showcase harassment of fathers in child support arrears [Fathers and Families via Instapundit]

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“Hedge funds and institutional investors are financing the latest wave of IP lawsuits. … Says Daniel McCurdy, a patent consultant in Warren, N.J., ‘They are the arms merchants in the new patent wars.'” (Nathan Vardi, Forbes, May 7). For more on champerty, a former offense at common law which consisted of financing the prosecution of a lawsuit in exchange for a share of the proceeds, follow this link.

January 26 roundup

by Walter Olson on January 26, 2007

  • DOJ subpoenas of online-gambling firms spark UK outrage (Times Online)

  • “Don’ts” for lawyers: don’t supplement your criminal-defense practice by running escort service on the side [NY Law Journal]

  • Maternity-clothing retailer tripped up on pregnancy discrimination claim [Lenard]

  • Filling out a Quicken-software will for an elderly client deemed “unauthorized practice of law” in South Carolina [McCullagh, Giacalone]

  • Champerty ‘n’ maintenance update: New York courts allow suspended lawyer Ross Cellino [Jul. 15, 2005] to resume practice [Business First of Buffalo]

  • Worried about long-dormant restitution or repatriation claims that might arise to put a cloud on your art holdings? Buy art-title insurance [Forbes pay archive]

  • Snatching whole milk from schoolkids not such a great idea, maybe [Musil]

  • Yes, let’s stop slamming lawyers for representing unpopular clients — and let’s start being consistent about it [Ted "no relation" Olson, Katyal via Adler]

  • Pfizer sued on theory its frisky Viagra ads encourage spread of sexually transmitted diseases [AP/WaPo](complaint courtesy Slate)

  • After his experiment in splitting up his blogs, Steve Bainbridge has reunited them again [ProfessorBainbridge.com]

  • Remove Child Before Folding author Bob Dorigo Jones interviewed about wacky warnings (see Jan. 6, Jan. 12, etc.) [Illinois Review].

  • Note: one item originally posted here [on air-show crash] removed as duplicative of one of Ted’s earlier.

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The Barnes Firm, formerly Cellino & Barnes, is a powerhouse in the personal-injury business in upstate New York, where it is a ubiquitous advertiser. According to the Buffalo News, it’s built one of the largest caseloads of Vioxx lawsuits in the nation by hawking its star attorney, Brian A. Goldstein, who in television ads

described how he was uniquely qualified to represent Vioxx users. Not only was he a personal injury lawyer, he told viewers, he was a former physician and board-certified surgeon….

The lawsuits accuse the drug’s maker, Merck & Co., with failing to tell patients the whole truth about Vioxx.

Goldstein, though, appears guilty of the same charge about his medical background. Georgia’s Composite State Board of Medical Examiners revoked Goldstein’s license to practice medicine on Jan. 10, 1991.

Goldstein was found guilty of providing Georgia licensing authorities with misleading and incomplete information about his education, according to records obtained by The Buffalo News. The licensing board found that Goldstein:

• Attended college and medical school at the same time in the Dominican Republic.

• Graduated from medical school less than three years after he graduated from high school.

• Received credit for courses he had not taken, had not completed or failed.

• Said he attended Tulane University when he had not, falsified his earlier training and submitted a false letter of recommendation for a residency at the Manhattan Psychiatric Center.

The hearing officer in Georgia not only recommended revocation but also said the decision should be published “as a public reprimand for [Goldstein] for his conduct.”

But none of that information was mentioned in the Vioxx ads, or in Goldstein’s biography on The Barnes Firm Web site.

The Buffalo News investigation includes various defenses of his conduct offered by Goldstein, including the following:

He also said Georgia authorities failed to consider the fact he had received an undergraduate degree from Empire State College.

The News confirmed that degree from the college, which grants degrees based on life experience as well as academic studies. But the degree was granted in 1988, three years after Georgia filed charges against him.

The newspaper asks medical ethicist Arthur Caplan about Goldstein’s “selective use of parts of his medical background to recruit legal clients”. Caplan’s response: “I think it’s sleazy”. (Michael Beebe, “Did Barnes Firm lawyer tell the whole truth?”, Buffalo News, Jan. 22). Carolyn Elefant comments at My Shingle (Jan. 22), and the incident also stirs memories for blogger Gina at Together Again (Jan. 23). The law firm of Cellino & Barnes has figured in these pages before: see Jul. 15, 2005.

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Yes, it’s Ed Fagan again. This time the much-publicized reparations impresario “has been hit with sanctions that will run into the hundreds of thousands of dollars for his handling of a lawsuit seeking recovery from an Austrian bank of the value of artwork looted by the Nazis. Employing unusually harsh language, Southern District of New York Judge Shirley Wohl Kram assessed attorney fees against [Fagan], and also fined him $5,000, finding he had committed champerty and misled her.” (Daniel Wise, New York Law Journal, Aug. 23). For Fagan’s earlier misadventures, see Jun. 4 and many links from there.

The law firm of Cellino & Barnes bills itself as the largest personal injury firm in western New York, and the “faces of [name partners Ross M.] Cellino and [Stephen E.] Barnes grace a reported 150 billboards across upstate New York. The attorneys’ names and likenesses frame their phone number and the one-word question ‘Injured?'” However, the firm has now gotten itself into hot water: an appellate panel has suspended Cellino and censured Barnes for, among other infractions, “advancing financial assistance to clients that was unrelated to the expenses of litigation”.

The unanimous five-judge panel found that Cellino and Barnes advanced financial assistance to clients beyond the expenses of litigation and, when they subsequently became aware that such actions violated the disciplinary rules, “arranged for the establishment of, funded and controlled [a] company owned by respondent Cellino’s cousin and that they did so in order to continue loaning money to clients.”

At common law, champerty (supplying clients with money in exchange for a share in the action) and maintenance (supplying them with money in order to keep their lawsuits going) were both offenses, but the prohibitions have tended to fall into disuse or to be repealed outright in recent times. On champerty, see Jun. 19, 2005, Jun. 27, 2004, Oct. 25, 2003, and this excerpt from The Litigation Explosion. (Mark Fass, “Bad Lawyer, No Billboard”, New York Law Journal, Jun. 14; Michael Ziegler, “Cellino & Barnes leaders punished”, Rochester Democrat & Chronicle, Jun. 11; Rick Pfeiffer, “Lawyers Cellino and Barnes found guilty of violating conduct code”, Tonawanda News, Jun. 11). More on the Barnes law firm: Jan. 31, 2006.

On the day the Shinnecock Indian tribe filed the first of an expected series of lawsuits laying claim to wide swaths of the Hamptons (see Jun. 13), the tribe disclosed that its courtroom offensive was being underwritten by wealthy Detroit casino investors Marian Ilitch, who with her husband Michael founded Little Caesars Pizza and since then has gone on to purchase baseball’s Detroit Tigers as well as the city’s Red Wings hockey team, and real estate developer Michael Malik. “Gateway Funding Associates, a company backed by [Ilitch and Malik], signed an agreement with the tribe more than a year ago to pay for the lawsuit and other ‘economic development’ initiatives in exchange for a part of any future proceeds, said Tom Shields, a spokesman for Gateway.” Champerty has been defined as the practice of aiding in a lawsuit in return for a share in the benefits being sued over; it was illegal at common law but “the prohibitions have been greatly relaxed in modern times” and in some cases abolished. (Katie Thomas, “Shinnecocks launch legal claim to Hamptons land”, Newsday, Jun. 16; “Lawsuit backers invest in casinos” (sidebar), Jun. 16; James Langton, “Native American tribe lays claim to the Hamptons”, Sunday Telegraph (U.K.), Jun. 19).

Champerty in the suites: “Lehman Brothers’ hopes of underwriting some juicy tort litigation crashed badly, leaving behind the toxic residue of avarice and gullibility.” Forbes examines one California town’s “man-made legal disaster”, a saga previously covered in our posts of Jan. 12, Jan. 17 and May 8 (Scott Woolley, “Municipal bombs”, Forbes, Jun. 21).