A lawsuit as an investment?

In recent years, investors have started buying shares in other people’s litigation proceedings. Are they warping the legal system in the process?

Source: Should You Be Allowed to Invest in a Lawsuit? – The New York Times

An interesting idea I wrote about earlier, but critically, I’m now surprised to see. I’ve come to have a different perspective.

I don’t understand why this should “warp[] the legal system.” It’s how the “legal system” works now when it comes to paying the costs of a lawsuit:

  • Lawyers who specialize in certain kinds of cases–personal injury ones come to mind immediately and I can’t off-hand think of others–do, in a sense, “invest” in the lawsuit.
    • When a client comes to a lawyer with a case that has what the lawyer would call “good damages”, i.e., you’re badly hurt and your potential defendant has what’s called “deep pockets,” i.e., good insurance, or your potential defendant is a municipality, the lawyer knows pretty much from the beginning what that case is worth. That is, how much it could settle for, how long it could take to settle, and how much it’ll cost the lawyer to take on that case. Because cases like this are taken on contingency. That is, the lawyer pays all the costs and gets his fee only when the case is finished.
  • If a lawyer doesn’t take your case on a contingency basis because after evaluating your case he is not confident it will succeed, you have limited choices:
    • You can take the lawyer’s evaluation as an expert prediction and give up the idea of suing.
    • You can pay for the lawsuit yourself.
    • You can search for a law firm who will handle your case for nothing, that is pro bono.
    • Or you can file the case by yourself, pro se, meaning you will act as your own lawyer.

Two of those options are lousy. One will take a lot of effort and you may not succeed. One option is OK, but only if you can afford it. (And if you can and do afford it, you are yourself an investor in your case.)

The only cases I’ve read about up to now that do involve outside investment as a way of financing lawsuits concern wealthy people.

Why shouldn’t middle class or low income people have that same advantage? And since a putative investor in a lawsuit of course reviews the end monetary potential of the case, as would any investor in any investment, how does this differ from the review of a personal injury lawyer who takes cases on contingency only when he’s sure the lawsuit will succeed and he’ll make money?

One way or the other, you won’t get a lawyer to take your case unless he (or another sort of investor) is almost positive he’ll make money out of it.

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