LitigationFinanceMan  

Date / Time: 12/23/2007 9:34 PM UTC

The Wild West of Finance

LITIGATION FINANCE FIRMS
The legal financing industry evolved out of the need for underfunded plaintiffs and their attorneys to fight cases against well staffed and heavily funded defendants.  Today the industry has evolved to hundreds of companies performing 24/7 plaintiff funding and attorney loans.  The road to these firms present day success has been hard fought.  Primarily the issue of legal funding was challenged in Ohio by a lady claiming usury and unenforceability of her contract because of third party participation.  Although Rancman won in Ohio based on ancient legal principals, the rest of the U.S. courts have held up almost all other challenges.  The most common challanges to this business is that;
1) Plaintiff funding for a portion of a potential reward is a 'loan' and thus usury because the interest rates are compounded monthly violating most state usury laws.  The current average charged is about 3% with other fees.
-Only the state of Ohio has agreed to this principal and some smaller courts but most courts today agree with the industry contention that plaintiff funding is an 'investment' because if the plaintiff loses the company receives no money in return, and their is no guarantee.
2)Maintanence has been contended in some cases based on an ancient ethics rule where lawyers cannot advance clients expenses during litigation.
-This principal has not been excepted since the evololution of the contingency fee-whereby a civil litigator charges a fee of the outcome and is paid only if the case wins.
3)Champtery or selling an interest in the outcome of a case.  Most states no longer recognize this law and some have outlawed it.

Some important cases on these issues are;
Kraft v. Mason
Rancman v. Interim Settlment Funding
Victoria Fausone v. U.S. Claims Incorporated
Anglo Dutch Petroleum International, Inc. v. Smith

*For a complete list visit the ABA site dedicated to all the states rulings and opinions regarding Litigation Financing-
http://www.abanet.org/media/youraba/200608/article01.html

Contact:
Mikey Sherriff
mikey@legalfinanceamerica.com

• Tags:
• legal funding
• lawsuit loans
• litigation funding
• attorney financing
• attorney loans