Lawsuit Funding: Evening a Drastically Uneven Litigation Playing Field

The New York Times, in an article written by Binyamin Applebaum, discusses the practice of outside investments in litigation, otherwise known as lawsuit funding. The article deals with the issue in a somewhat balanced fashion, but seems to lean a bit toward what I will call the "profit motive" of both lawsuit funding companies and trial lawyers, rather than discussing the more important function of lawsuit funding: Evening up the drastically uneven litigation playing field. This ‘principle’ article was followed by a series of "Op Ed’s", under the heading "Room for Debate", written by several legal scholars, some in favor of the practice, others opposed. It is very interesting reading.

As I indicated, if I have any criticism of the article, it may be that is focuses a bit much on the industry’s "profit motive". Certainly, Lawsuit Financial, my company, like any for-profit business, is in business to make money. I don’t hide from that. I can’t speak for others in my industry, big or small (my company is one of the smaller companies in the industry), but my company was founded for reasons that have nothing to do with profit. I founded the company to help offset a growing strategy in the litigation defense community to demonetize trial lawyers and their clients, to delay legal proceedings for as long as possible, to deny claims until plaintiffs are desperate for a resolution. The State Farm (and other insurance participants) cases following Hurricane Katrina are great examples of this strategy. Money is the great equalizer in litigation; corporate defendants and insurance companies, historically, have it; plaintiffs and plaintiff’s attorneys do not.

The vast majority of defendants in litigation are either large, billion dollar, corporate Goliaths or they are represented by large, billion dollar, corporate Goliath insurance companies. These corporations have all the time and money they need to defend serious litigation brought by those who have been seriously harmed by these corporate interests or their insureds. And, these huge corporations use their money and power as leverage in litigation. Not only do they deny claims, but they vigorously defend them (at great expense), hide and cover-up evidence of wrongdoing (also at great expense), and otherwise delay proceedings until desperation causes plaintiffs to give up or settle for peanuts. Often, this cost of defense is greater than the amount of money that they could have resolved the case for, but part of this strategy is to wear down the trial bar into re-thinking the type and quality of cases it pursues. If these corporate types make litigation difficult to pursue, perhaps lawyers will think twice about taking on a case.

Until very recently, the plaintiff had only a contingency fee lawyer, and the limits of the lawyer’s pocketbook, to stand up to these Goliaths. Now, at long last, they have private investors willing to assist in financing their pursuit of justice against these wrongdoers. Is this is a bad thing?

Critics of lawsuit funding companies seem to offer the same criticisms that they have offered to demonetize trial lawyers. The argument goes that lawsuits and lawyers drive up the cost of goods and destroy industries by filing and winning multi-million dollar suits against them.

To the first point, multi-million dollar results are the exception, not the rule; they are few and far between and they are usually reduced, somewhere down the appellate line. Further, these verdicts are usually rendered to right an outrageous wrong and compensate a catastrophically injured plaintiff. Despite the rhetoric, they are not rendered "frivolously". so, why do you hear the words "frivolous" and "litigation" uttered in the same sentence, as often as you do? Again, it is part of a global corporate strategy to brainwash the American people into thinking that all litigation is "frivolous", that it drives up what they pay for products and services. However, the net result of accepting this notion is that we are all less safe, because defectively dangerous products and services go unchecked and those profiting from them go unpunished. In other words, by buying into the nonsense that plaintiff lawyers routinely file frivolous litigation, we are shooting ourselves in the foot (probably with a defectively, dangerous gun). I submit that this is an attack on our safety and, in the long run, the cost to the public will be considerably higher than any lawsuit payout.

To the second point, that lawsuits are destroying industries, I opine that destroying an industry that manufactures products that harm or kill people, pollutes the environment, drives up the cost of health care, etc., all in the pursuit of corporate profit, at public expense, is a good thing. The public should celebrate every large verdict they see against the Enron’s, BP’s, RJ Reynolds, and other poison-spewers around the world. They should, absolutely, celebrate every recall effort that is designed to make products safer. And corporations don’t often voluntarily issue a recall; they are usually forced to do so by the government or by….that’s right…the threat of a lawsuit. Because a lawsuit is the best safety tool available to prevent further harm to members of the public. They falsely argue that it is lawsuits that are costing jobs. But aren’t these the same corporations that are shipping our jobs overseas? After all, there is less safety oversight in foreign countries; these despicable companies can make unsafe, inferior, products, using cheap, foreign workers, in an unchecked environment.

This false campaign of lies and half-truths, financed by the very same corporate interests and profits used to deny, defend and delay litigation, while shipping our jobs overseas, seems to be working. And, the public seems to be buying into the biggest lie of all. What’s the ‘big lie’, you ask? That corporations interests who do all this bad stuff (and they do) are the ‘good guys’ and the lawyers who bring them to justice on behalf of members of the public are the ‘bad guys’.

The only thing these corporate types are ‘good’ at is using their money and power to help them win the public relations war. ‘Tort reform’ (as government mandated limitation placed on our litigation rights is often referred to) is a strategic initiative, designed by corporate interests (particularly the U.S. Chamber of Commerce), to marginalize the political interests of trial lawyers and justice advocacy groups, by eliminating the political base. We must resist and respond to these efforts; we must be proactive in advocating a message of protection and safety instead of constantly reacting, in anger, to the unwarranted and unrelenting criticism. America: Where is your common sense? Shouldn’t "We, the People" be a little smarter than this? Why are we buying this? Why do we constantly act… and vote…against our own best interests? Shouldn’t we want to keep the government out of our courtrooms?

It bears repeating: The threat of a lawsuit is the biggest, best, and most important safety tool an American citizen has available to combat wrong-doing. Simply stated, lawsuits protect us from harm. But, slowly and methodically, wrong-doers and corporate interests are selling the public on legal concepts and policies that are solidly against the public interest. They do so by financing political campaigns and politicians who will now owe them favors; they do so by demonetizing the only place where corporate power should not count, the legal system. Money and power can change the outcome of a lawsuit; as such, it should be equally available to both sides of the dispute, shouldn’t it? The public should demand it! And that is where lawsuit funding is a most valuable tool. It helps to level an unjust playing field. It puts its money where its mouth is. It says that we are all equal under the law.

When corporate interests have succeeded in taking away all of our individual legal rights, when we can no longer defend ourselves against these corporate types, maybe people will finally wake up and smell the coffee. But, of course, by then, it may be too late to do anything about it. Then again, maybe if you, your precious child or another family member is the innocent person who has been seriously hurt by one of these special interest safety violators, you will retain an attorney. Perhaps you will explore the possibility of litigation, and, perhaps….