7 ms·

I think the concern with investing in lawsuits should be focused on secondary motives. Lawsuits with lots of investors will have attorneys with secondary motiv

I think the concern with investing in lawsuits should be focused on secondary motives. Lawsuits with lots of investors will have attorneys with secondary motives, such as keeping the case active as long as possible to continue to attract more investors, rather than resolve it. Perpetual cases could bog down courts in never-ending lawsuits and countersuit challenges, a legal version of Mutually Assured Destruction. Do lawsuit claimants have a right to consume unbounded judicial time and public money (to pay for judical staff, the courts)? Legal cases stuck in court for years consume time and energy that could be directed at resolving other legal challenges. Time spent in court is ultimately a tax on the public, regardless of the outcome.

x5n1 11y ago
Not only that, consider all the other parties that wish to do you or your company harm could invest in lawsuits against you brought by parties that have nothing to do with them.
- deleted 11y ago
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eridius 11y ago
Wouldn't such behavior be considered unethical and possibly grounds for disbarment? After all, that's definitely not in the interests of the client.
- Gustomaximus 11y ago
  Delaying vs being thorough would be incredibly tough to prove. To a degree this happens already with large vs small company law suits, where the larger company maintains proceeding in some form til the other small business runs out of cash or gives up.
- BinaryIdiot 11y ago
  You'd think but there are issues like this today and it's difficult to prove depending on the circumstances (at least prove to the point where they can get in trouble with the bar). Anecdotally when my father was going through his divorce his lawyer told him not to take the settlement with his now ex-wife and his lawyer promised she could get him better terms and an expedited divorce and would only need to go to one court appearance. Two additional retainers later and she told my father he had to settle for what was offered at the court house which was a worse settlement and that she event told him she didn't feel comfortable negotiating beyond what was offered because it was "a great deal". I have a hard time believing she had my father's best interests in mind and just kept the case going for a bit longer. I would expect a system like this would exacerbate this type of behavior.
  - spacecowboy_lon 11y ago
    I know of one long running case concerning pensions (British Telecom Section A) that was dragged out for well over a decade - as the longer it went on more pensioners would have died so reducing the cost.
- rwmj 11y ago
  Was anyone involved in SCO v IBM disbarred?
forrestthewoods 11y ago
Sounds like something the free market would solve, no?
- TomGullen 11y ago
  Can't believe people still naively think this would work in the light of all the corruption we observe all the time.
  - mamon 11y ago
    Corruption is, by definition, bribing government officials for personal gain. Therefore corruption can only exist in the areas that are not fully free, but are regulated by a government.
    - TomGullen 11y ago
      So I set up "toms safety certification" in libertopia and a company that sells children's toys that cause children die from choking on small parts bribe me to let them pass and I accept, this is not corruption? Corruption by definition is not bribing government officials. Show me that definition? Corruption by definition is actually fraudulent activity by those in power, where government is one entity that has power. Removing government to remove corruption is quite frankly insane and only makes sense if you change the definition of corruption to mean "government corruption".
      - mamon 11y ago
        The difference is that if private institution that issues "toms safety certification" takes a bribe it is a very shortsighted strategy - such certificates will be very soon considered untrustworthy and general public will start to ignore them, therefore putting certificate institution out of business. Government-powered institutions can take bribes for years, or even decades without ever being punished for that, or being put out of business. And yes, limiting government competencies is the best way to limit corruption.As one of Polish politicians put it: "You don't fight the leeches by catching them by their tails, you fight them by draining the swamp they live in."
kitd 11y ago
But the investors want to make money, and that only comes when a judgement is reached. I can envisage the financial imperative putting a time limit on the investor/lawyer contract.
rayiner 11y ago
Plaintiffs have zero interest in lengthening cases and neither do litigation funders. Litigation funders are paying the attorney's fees and ending the case more quickly reduces how much they have to invest. Reaching a resolution quickly also reduces how long they have to wait to get a recovery.
- msandford 11y ago
  Plaintiffs and litigation funders have no interest in lengthening cases once they feel they have a high likelihood of winning. Until that point, lengthen away! Better to string it out and win than finish it up quick and lose.
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  - rayiner 11y ago
    > Better to string it out and win than finish it up quick and lose. In practice, it's the defense that will string out a case hoping that the plaintiff runs out of money before the case reaches judgment on the merits. Plaintiffs want to win quick, or at least lose quick before they invest too much in the case.
    - msandford 11y ago
      That's a strategy both sides choose to employ actually. Imagine BigCo suing LittleCo notionally for infringing one of its patents, but really it's to drain LittleCo's coffers so that LittleCo is out of business and can't compete with BigCo in market X any longer.
      - petegrif 11y ago
        But in this scenario BigCo isn't the one needing outside financing, is it?
snowwrestler 11y ago
I think the secondary motive to be concerned about is not length of time in court, but the filing of marginal lawsuits because they can attract financing. Lawsuit financing is a speculative investment. We've seen repeatedly that the more money there is to invest speculatively, the more people and companies start pushing the envelope to attract investment. In the last 20 years we've seen big bubbles in Internet services and consumer mortgages. What would be the effect of a bubble in lawsuits? Aside from the financial harm, it might crowd out or delay more worthy court cases.
- petegrif 11y ago
  Outside investors don't invest in 'marginal lawsuits.' One of the absolutely critical considerations for lawyers undertaking contingency cases is that they believe the case isn't marginal. I fail to see why an outsider would embrace more risk than such lawyers.
  - snowwrestler 11y ago
    This is analogous to saying "one of the absolutely critical considerations for banks undertaking mortgage lending is that they believe each loan is likely to be paid back. I fail to see why an outsider would embrace more risk than such banks." But that is precisely what happened leading up to the 2008 financial crisis. And it happened because of outside financing. When banks were risking their own money, they maintained careful underwriting standards. When banks were risking someone else's money--and reaping fees instead--they relaxed their underwriting standards to increase volume. A law firm undertaking a contingency case better be damn sure they are likely to win, because they are risking their own capital. A law firm with outside financing will get paid whether or not they lose.
dbot 11y ago
There should not be any communication between the lawyers and investors, and that rule should be enshrined in the ABA Code of Conduct in the same way that ethical walls are a requirement. If the client wants to manage the relationship with investors, set expectations for success, returns, etc...that's one thing. But the lawyer is an advocate for the client, and that relationship is compromised the moment s/he begins feeling pressure from the investors.
- rayiner 11y ago
  That is what happens in practice, because communication between lawyers and investors are not protected by attorney-client privilege and neither the lawyers nor the funders want to risk compromising the suit by communicating with each other.
hackuser 11y ago
> I think the concern with investing in lawsuits should be focused on secondary motives. Consider a community where many people are invested in one side of a lawsuit. That could put a lot of pressure on the judge and jury to produce the popularly desired outcome.
- petegrif 11y ago
  Judges and juries are frequently under pressure. Popularly desired outcomes aren't unusual.
Mickydtron 11y ago
It seems like the funding coming from outside investors wouldn't really increase the incentive for lawyers to drag things out. If they're paid by the hour, then they already have that incentive, and resist it or not at their own discretion. If they're paid contingently, then their motivation is to get a win as quickly as possible, or drag things out if that will make the payment much larger. Again, they have that motivation regardless of who's paying them. What this would change is make it possibly less likely that the 'client' would run out of money before you can finish the job.

x5n1 11y ago

Not only that, consider all the other parties that wish to do you or your company harm could invest in lawsuits against you brought by parties that have nothing to do with them.

deleted 11y ago
[deleted]

eridius 11y ago

Wouldn't such behavior be considered unethical and possibly grounds for disbarment? After all, that's definitely not in the interests of the client.

Gustomaximus 11y ago
Delaying vs being thorough would be incredibly tough to prove. To a degree this happens already with large vs small company law suits, where the larger company maintains proceeding in some form til the other small business runs out of cash or gives up.
BinaryIdiot 11y ago
You'd think but there are issues like this today and it's difficult to prove depending on the circumstances (at least prove to the point where they can get in trouble with the bar). Anecdotally when my father was going through his divorce his lawyer told him not to take the settlement with his now ex-wife and his lawyer promised she could get him better terms and an expedited divorce and would only need to go to one court appearance. Two additional retainers later and she told my father he had to settle for what was offered at the court house which was a worse settlement and that she event told him she didn't feel comfortable negotiating beyond what was offered because it was "a great deal". I have a hard time believing she had my father's best interests in mind and just kept the case going for a bit longer. I would expect a system like this would exacerbate this type of behavior.
- spacecowboy_lon 11y ago
  I know of one long running case concerning pensions (British Telecom Section A) that was dragged out for well over a decade - as the longer it went on more pensioners would have died so reducing the cost.
rwmj 11y ago
Was anyone involved in SCO v IBM disbarred?

forrestthewoods 11y ago

Sounds like something the free market would solve, no?

TomGullen 11y ago
Can't believe people still naively think this would work in the light of all the corruption we observe all the time.
- mamon 11y ago
  Corruption is, by definition, bribing government officials for personal gain. Therefore corruption can only exist in the areas that are not fully free, but are regulated by a government.
  - TomGullen 11y ago
    So I set up "toms safety certification" in libertopia and a company that sells children's toys that cause children die from choking on small parts bribe me to let them pass and I accept, this is not corruption? Corruption by definition is not bribing government officials. Show me that definition? Corruption by definition is actually fraudulent activity by those in power, where government is one entity that has power. Removing government to remove corruption is quite frankly insane and only makes sense if you change the definition of corruption to mean "government corruption".
    - mamon 11y ago
      The difference is that if private institution that issues "toms safety certification" takes a bribe it is a very shortsighted strategy - such certificates will be very soon considered untrustworthy and general public will start to ignore them, therefore putting certificate institution out of business. Government-powered institutions can take bribes for years, or even decades without ever being punished for that, or being put out of business. And yes, limiting government competencies is the best way to limit corruption.As one of Polish politicians put it: "You don't fight the leeches by catching them by their tails, you fight them by draining the swamp they live in."

kitd 11y ago

But the investors want to make money, and that only comes when a judgement is reached. I can envisage the financial imperative putting a time limit on the investor/lawyer contract.

rayiner 11y ago

Plaintiffs have zero interest in lengthening cases and neither do litigation funders. Litigation funders are paying the attorney's fees and ending the case more quickly reduces how much they have to invest. Reaching a resolution quickly also reduces how long they have to wait to get a recovery.

msandford 11y ago
Plaintiffs and litigation funders have no interest in lengthening cases once they feel they have a high likelihood of winning. Until that point, lengthen away! Better to string it out and win than finish it up quick and lose.
- deleted 11y ago
  [deleted]
- deleted 11y ago
  [deleted]
- rayiner 11y ago
  > Better to string it out and win than finish it up quick and lose. In practice, it's the defense that will string out a case hoping that the plaintiff runs out of money before the case reaches judgment on the merits. Plaintiffs want to win quick, or at least lose quick before they invest too much in the case.
  - msandford 11y ago
    That's a strategy both sides choose to employ actually. Imagine BigCo suing LittleCo notionally for infringing one of its patents, but really it's to drain LittleCo's coffers so that LittleCo is out of business and can't compete with BigCo in market X any longer.
    - petegrif 11y ago
      But in this scenario BigCo isn't the one needing outside financing, is it?

snowwrestler 11y ago

I think the secondary motive to be concerned about is not length of time in court, but the filing of marginal lawsuits because they can attract financing. Lawsuit financing is a speculative investment. We've seen repeatedly that the more money there is to invest speculatively, the more people and companies start pushing the envelope to attract investment. In the last 20 years we've seen big bubbles in Internet services and consumer mortgages. What would be the effect of a bubble in lawsuits? Aside from the financial harm, it might crowd out or delay more worthy court cases.

petegrif 11y ago
Outside investors don't invest in 'marginal lawsuits.' One of the absolutely critical considerations for lawyers undertaking contingency cases is that they believe the case isn't marginal. I fail to see why an outsider would embrace more risk than such lawyers.
- snowwrestler 11y ago
  This is analogous to saying "one of the absolutely critical considerations for banks undertaking mortgage lending is that they believe each loan is likely to be paid back. I fail to see why an outsider would embrace more risk than such banks." But that is precisely what happened leading up to the 2008 financial crisis. And it happened because of outside financing. When banks were risking their own money, they maintained careful underwriting standards. When banks were risking someone else's money--and reaping fees instead--they relaxed their underwriting standards to increase volume. A law firm undertaking a contingency case better be damn sure they are likely to win, because they are risking their own capital. A law firm with outside financing will get paid whether or not they lose.

dbot 11y ago

There should not be any communication between the lawyers and investors, and that rule should be enshrined in the ABA Code of Conduct in the same way that ethical walls are a requirement. If the client wants to manage the relationship with investors, set expectations for success, returns, etc...that's one thing. But the lawyer is an advocate for the client, and that relationship is compromised the moment s/he begins feeling pressure from the investors.

rayiner 11y ago
That is what happens in practice, because communication between lawyers and investors are not protected by attorney-client privilege and neither the lawyers nor the funders want to risk compromising the suit by communicating with each other.

hackuser 11y ago

> I think the concern with investing in lawsuits should be focused on secondary motives. Consider a community where many people are invested in one side of a lawsuit. That could put a lot of pressure on the judge and jury to produce the popularly desired outcome.

petegrif 11y ago
Judges and juries are frequently under pressure. Popularly desired outcomes aren't unusual.

Mickydtron 11y ago

It seems like the funding coming from outside investors wouldn't really increase the incentive for lawyers to drag things out. If they're paid by the hour, then they already have that incentive, and resist it or not at their own discretion. If they're paid contingently, then their motivation is to get a win as quickly as possible, or drag things out if that will make the payment much larger. Again, they have that motivation regardless of who's paying them. What this would change is make it possibly less likely that the 'client' would run out of money before you can finish the job.