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litigation finance

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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Ethics roundup

by Walter Olson on February 4, 2013

  • His own bad deal to make: client can’t sue lawyer for malpractice after lawsuit lending swallows up proceeds of $150K settlement [BNA]
  • U.K. legal representation: “John Flood looks at the cab rank rule” [Legal Ethics Forum, more]
  • Drumming up business: “Junk fax class action may proceed despite attorney misconduct” [Reuters]
  • “Personal Injury Lawyers Sue Other Personal Injury Lawyers Over Solicitation” [Turkewitz, more]
  • Manipulating time records to qualify for bonus proves costly for Wisconsin attorney [Volokh]
  • Lawyer profile: “Defender of the Notorious, and Now Himself” [NY Times]
  • Local prosecutors connive at debt-collection abuses thanks to 2006 legal provision [LA Weekly]

February 22 roundup

by Walter Olson on February 22, 2012

  • Florida courts allow probe of finances of MDs who treat many injury plaintiffs [Dolman Law Group; Crable v. State Farm]
  • Booster clubs: “Does Title IX Reach Voluntary Donations?” [Joshua Thompson, PLF, earlier here, here]
  • Freedom to Discriminate in Choice of Roommates: 9th Circuit case of Fair Housing Council v. Roommate.com [Eugene Volokh; related from David Bernstein h/t commenter wfjag]
  • PI firm employee “disliked sending clients to [chiropractors] because insurers were more reluctant to settle those claims” [ABA Journal]
  • “Bill introduced to de-criminalize the Lacey Act” [Paul Enzinna, PoL; earlier on Gibson Guitar and wood imports here, here] More: Reason.tv on the raids [Balko]
  • “Australia: A Cautionary Tale of Litigation Financing?” [WSJ Law Blog]
  • Constitutional law book review: Jay Wexler, “The Odd Clauses” [Greenfield, Lowering the Bar]

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January 23 roundup

by Walter Olson on January 23, 2012

  • Copyright violations on PIPA sponsors’ websites? [VICE] “A SOPA Analogy” [David Henderson]
  • DEA agent who mistakenly shot self loses appeal [BLT, earlier]
  • “And people say libertarians lack empathy”: AP adopts pre-emptively disapproving tone toward advances in pain control [Coyote; related, Alkon on Primatene Mist]
  • Cordray, NLRB recess picks allow President to reward key Democratic interest groups [Copland, Examiner] Litigation Lobby gunning for ban on consumer finance arbitration as Cordray priority [CL&P] Mike Rappaport on the recess appointment clause [LLL, earlier here, etc.]
  • Keystone’s just the half of it: US environmental funders push shutdown of Canada energy production [Vivian Krause, Financial Post]
  • Hot potato, or just hot business sector? “Credit Suisse Parts with Litigation Finance Group” [WSJ Law Blog]
  • Speaking of shoplifters in elected office [Harrisburg Patriot-News on Perry County, Pa. case h/t commenter A.A.; earlier on California case]

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December 30 roundup

by Walter Olson on December 30, 2011

October 13 roundup

by Walter Olson on October 13, 2011

  • Behind the antitrust assault on Google [Jerry Brito, Josh Wright, more]
  • Rapid rise of lawsuit lenders [WSJ] And a Searle Civil Justice Institute conference on third party financing of litigation;
  • More law firms muscle into class action against e-book publishers [PaidContent] Fifth Circuit questions cy pres [Trask] And a new edition of the Federalist Society’s Class Action Watch is out;
  • When the house painters announce they’re not leaving: “Britain plans to tighten anti-squatter laws” [NYT]
  • “Courts Call Out Copyright Trolls’ Coercive Business Model, Threaten Sanctions” [EFF] “Righthaven’s Copyright Trolling is a Bankrupt Idea” [Cit Media Law] More: Vegas Inc.
  • “Twombly is the Logical Extension of the Mathews v. Eldridge Test to Discovery” [Andrew Blair-Stanek via Volokh, Frank] “Four more reasons to love TwIqbal” [Beck] “O’Scannlain says 9th Circ has adopted ‘Iqbal lite’ pleading standard, ‘Same insufficient complaints, fewer dismissals!'” [@ScottKGraham on dissent in Starr v. County of Los Angeles, PDF]
  • Florida farms sell raw milk as (wink) “pet food” [Sun-Sentinel]

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July 22 roundup

by Walter Olson on July 22, 2011

  • Illinois prisoner sues for land to start his own country [AP]
  • “Have you got a piece of this lawsuit?” Important Roger Parloff piece on litigation finance [Fortune, now out from paywall] “Hedge Funds Finance Medical Malpractice Claims” [Jeff Segal, Michael Sacopulos and Wayne Oliver, Forbes via White Coat]
  • Criminalizing bad parenting: more scrutiny of “Caylee’s Law” proposals [Steve Chapman, L.A. Times and Boston Globe editorials, New Scientist]
  • Deal with ADA complainant averts closure of popular Popponesset Marketplace in Mashpee, Mass. [Cape Cod News]
  • Because it’s not as if NYC needs electricity or anything: Bloomberg gives $50 million to Sierra Club campaign to stop coal burning by utilities [WaPo] “Environmental justice” arguments deployed against pipeline that would bring Alberta tar sands oil to U.S. [John Kendrick, WLF]
  • Unimpaired have permanent right to sue: Fla. high court throws out asbestos-reform law [PBP]
  • Red tape demanded by quality-of-life progressivism suffices to strangle poorer urban economies [Walter Russell Mead]

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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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January 21 roundup

by Walter Olson on January 21, 2011

January 5 roundup

by Walter Olson on January 5, 2011

  • Notables including Alan Morrison, Richard Epstein, Kathleen Sullivan sign amicus brief urging court review of multistate tobacco settlement [Daniel Fisher/Forbes, Christine Hall/CEI, Todd Zywicki]
  • “Congress rediscovers the Constitution” [Roger Pilon, WSJ]
  • Chief Justice John Roberts Jr. profiled [Roger Parloff, Fortune]
  • When outside investors stake divorce litigants: yes, there are legal ethics angles [Christine Hurt]
  • Mexico, long noted for strict gun control laws, has only one legal gun store [WaPo]
  • Judge throws out “parasitic” lawsuit piggybacking on Wisconsin drug-pricing settlement [Madison.com]
  • Erin Brockovich sequel: Talking back to the Environmental Working Group on dangers of chromium-6 in drinking water [Oliver, Logomasini/CEI]
  • “Little white lies” to protect the bar’s image [five years ago on Overlawyered]

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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