Thursday, November 18, 2010

Making a Buck on Misery

Banks, hedge funds, and other investors are now putting up money for lawsuits (medical malpractice, class action, etc) in the hopes of cashing in on big awards. From the NY Times

The loans are propelling large and prominent cases. Lenders including Counsel Financial, a Buffalo company financed by Citigroup, provided $35 million for the lawsuits brought by ground zero workers that were settled tentatively in June for $712.5 million. The lenders earned about $11 million.

And of course:

The rise of lending to plaintiffs and their lawyers is a result of the high cost of litigation. Pursuing a civil action in federal court costs an average of $15,000, the Federal Judicial Center reported last year. Cases involving scientific evidence, like medical malpractice claims, often cost more than $100,000. Some people cannot afford to pursue claims; others are overwhelmed by corporate defendants with deeper pockets.

This doesn't always work out well for the plaintiff:

Such financing also drains money from plaintiffs. Interest rates on lawsuit loans generally exceed 15 percent a year, and most states allow lawyers that borrow to bill clients for the interest payments. The cost can exceed the benefits of winning. A woman injured in a 1995 car accident outside Philadelphia borrowed money for a suit, as did her lawyer. By the time she won $169,125 in 2003, the lenders were owed $221,000.

This whole story is disturbing, but this paragraph gave me the shivers:

“If you want to use the civil justice system, you have to have money,” said Alan Zimmerman, who founded one of the first litigation finance companies in 1994, in San Francisco, now called the LawFinance Group. “If there’s less money, you’d have less litigation. But then you’d also have less justice.”

Increasingly, there are two justice systems. There is one for the folks who have money, like the Colorado wealth manager Laura wrote about last week. Then there's the other system, where people who don't have money have no choice but to live with injustice.

cross-posted at MainSt/


Thom Simmons said...

Absolutely thoroughly disgusting.

under what warped theory is this even PERMITTED?

DissedBelief said...

I have always understood this to be the case. A very long time ago when I worked in a law office, one of the attorny's had been the recipient of seven parking tickets and one speeding ticket. She went to the courthouse one day with them all, and the clerk there told her, "oh [her name] just give them to me, we'll take care of them". And they did. The attorney was never required to pay or appear on any of them. Things like this occurred regularly. And then there were my experiences when I filed for divorced. It is disgraceful that when individuals make a mistake such as getting married under the best of intentions and things go awry, that others can profit from this. Purposeful stalling, attorney indiscretion and all other manner of unprofessional behaviors led me to file a grievance with the bar association. This was a joke. Any organization that polices itself, does not. It was naturally dismissed and I was out more than $20,000 for three years of divorce litigation, this in a marriage with no property, no children and an armed stalking husband. It should have been clean cut and quick. Which great philosopher said "shoot all the lawyers"? And justice for all only applies to those who have bottomless pockets. For the rest of us, well, we just have to stay out of "trouble".