Consumer Law

Investing in Litigation

By Brian Wolfman

It's well known that class actions and other aggregated litigation require many lawyers, paralegals, and experts to make them go. And so, the well-heeled, repeat-player lawyers finance the litigation for everyone else. As a result, their paydays may be larger when the case settles or goes to a plaintiffs' judgment. But what may not be well known is that the banks and hedge funds are getting into the act as well, financing a range of litigation, including relatively small-stakes individual cases. As today's New York Times explains:

Large banks, hedge funds and private investors hungry for new and lucrative opportunities are bankrolling other people?s lawsuits, pumping hundreds of millions of dollars into medical malpractice claims, divorce battles and class actions against corporations ? all in the hope of sharing in the potential winnings.

And, like the contingent-fee system, the involvement of big-time investors may provide injured people access to the courts and improve the quality of justice:

A review by The New York Times and the Center for Public Integrity shows that the inflow of money is giving more people a day in court and arming them with well-paid experts and elaborate evidence. It is helping to ensure that cases are decided by merit rather than resources, echoing and expanding a shift a century ago when lawyers started fronting money for clients? lawsuits.

The Times article suggests some abuses as well. Read the whole article here.

Full post as published by CL&P Blog on November 15, 2010 (boomark / email).