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Investing In Lawsuits Beats the Street

Posted by kdawson on from the some-dare-call-it-champerty dept.

guga31bb sends word on the next wave of investment in a slow market: bankrolling others' lawsuits. The practice sounds on the face of it indistinguishable from champerty. "Juris typically invests $500,000 to $3 million in a case, Mr. Desser said. He would not identify the company's backers, but said that 'on the portfolio as a whole, our returns are well in excess of 20 percent per year.' He added, 'We're certainly beating the market.'"

37 of 203 comments (clear)

  1. Ah yes. by Jurily · · Score: 5, Insightful

    Treating the legal system as a business opportunity is not new, but to base a business model on it?

    You guys should start cutting down on lawyer fees, fast.

    1. Re:Ah yes. by thrillseeker · · Score: 2, Insightful

      Once upon a time, our elected official were people who had built their own businesses - people who knew how hard it sometimes was to make payroll - and people who knwe how hard it occasionally was to be unable to make payroll. We had laws that encouraged growth, which requires someone, somewhere to voluntarily invest something, whether it be his own time or someone else's discretionary nickel. When something worked it was praised, encouraged, duplicated and expanded, and when something didn't, it was simply discarded. Today, our electees are basically all lawyers - and we have an economy in meltdown, archaic business efforts are kept around, and even subsidized because it buys votes, and we have a financial system where one can do better with destruction rather than construction. One wonders at correlation ...

  2. returns are well in excess of 20 percent per year by ionix5891 · · Score: 2, Funny

    well if that doesnt ring any alarm bells!

      maybe we should introduce Bernake to these people :D

  3. Fire Sale by siloko · · Score: 5, Insightful

    Investing in cultural naval gazing more like. When the process of legal shikanery yields better returns than investing in real world products then it is apparent that the our culture has run aground . . .

    1. Re:Fire Sale by Jurily · · Score: 3, Insightful

      When the process of legal shikanery yields better returns than investing in real world products then it is apparent that the our culture has run aground . . .

      No, it's just the logical conclusion of a culture of worshipping money.

    2. Re:Fire Sale by malkavian · · Score: 4, Insightful

      No, it's the logical conclusion of a culture that considers ethics of no consequence.
      You can worship money all you like, and still create a fantastic environment (run your own company? In a company that you enjoy being in? They're not there for the express purpose of making your life fun, they're there to chase money. Ethical companies make a great place to work, the leeches will burn you out and leave you broken). However, all this activity boils down to is parasitic behaviour. When you can make more by discarding ethics, not producing anything and basically sucking the life out of anything that does produce, then the problems start.

  4. So what's the big deal? by Guido+del+Confuso · · Score: 5, Insightful

    According to the article, they only invest in cases that are pretty much a surefire win for the plaintiff. This makes sense, because if they're in it to make money, then cases that are likely to be questionable are a bad investment.

    Seems to me that they're actually doing a public service, by allowing little guys who can't afford to take on big corporations who have clearly done them wrong to proceed with a potentially expensive lawsuit. No longer can the party with deeper pockets simply fight a war of attrition and hope to run the other guy dry. If the plaintiff ends up winning he gets more than he would have gotten had he simply given up, and if somebody else makes a buck off it as well, then so much the better.

    1. Re:So what's the big deal? by Jurily · · Score: 5, Insightful

      Seems to me that they're actually doing a public service, by allowing little guys who can't afford to take on big corporations who have clearly done them wrong to proceed with a potentially expensive lawsuit.

      They're solving a problem that shouldn't exist in the first place: the legal system is a capitalist enterprise, with heavy price fixing by the lawyer community.

      Oh, and a perverted enough legal system that lawyer skill actually matters in a case.

    2. Re:So what's the big deal? by Jurily · · Score: 4, Interesting

      Is your proposed solution simply not to solve the problem?

      My proposed solution:

      1. abolish legally binding precedent. The accepted interpretation of a law should be a consensus among the legal community, not a decision of one moron 150 years ago.
      2. Hire someone competent to rewrite the laws, aiming for clarity and precision.
      3. Law should be treated like software: any and all changes should be incorporated into the text, not distributed as amendments. The current legal system looks like Linux 0.01 with all the patches distributed separately up to 2.6.30, and you can win a case by confusing the judge and your opponent into forgetting a critical patch.
      3. Make the up to date text of every law easily accessible and searchable by anyone.
      4. If you find there is no law for something new, like, say, the internet, say so. Don't torture existing unrelated laws fo fit the new situation.
      5. Arguments should be based on merit, not qualifications and the overuse of jargon.

      I'm sure there's more we could do, but these should solve the big problems.

    3. Re:So what's the big deal? by Marcika · · Score: 5, Interesting

      Is your proposed solution simply not to solve the problem?

      My proposed solution:

      1. abolish legally binding precedent. The accepted interpretation of a law should be a consensus among the legal community, not a decision of one moron 150 years ago. 2. Hire someone competent to rewrite the laws, aiming for clarity and precision. 3. Law should be treated like software: any and all changes should be incorporated into the text, not distributed as amendments. The current legal system looks like Linux 0.01 with all the patches distributed separately up to 2.6.30, and you can win a case by confusing the judge and your opponent into forgetting a critical patch. 3. Make the up to date text of every law easily accessible and searchable by anyone. 4. If you find there is no law for something new, like, say, the internet, say so. Don't torture existing unrelated laws fo fit the new situation. 5. Arguments should be based on merit, not qualifications and the overuse of jargon.

      I'm sure there's more we could do, but these should solve the big problems.

      All your points pretty much described a conversion from the Common Law system as it is practiced in the UK and its former colonies (US, India, Pakistan, Oz etc) to the Civil Law system that has been introduced practically everywhere else and has been used since the times of Hammurabi and the Romans.

      However, the problem is that such a conversion cannot happen while there is a large establishment built on it - the judges would have to re-learn, the lawyers would have to re-learn, the legislators would have a gargantuan task of creating a whole corpus of laws without bad loopholes... It would only happen after a revolution. (The German-style civil law was introduced in China, Japan and Korea in the early 20th century, but the power situation were very different from the status quo in the US today...)

    4. Re:So what's the big deal? by swillden · · Score: 2, Informative

      3. Law should be treated like software: any and all changes should be incorporated into the text, not distributed as amendments. The current legal system looks like Linux 0.01 with all the patches distributed separately up to 2.6.30, and you can win a case by confusing the judge and your opponent into forgetting a critical patch. 3. Make the up to date text of every law easily accessible and searchable by anyone. [...] 5. Arguments should be based on merit, not qualifications and the overuse of jargon.

      These three, at least. are already the case in the US, at both federal and state level. Your second 3 is not yet implemented by all counties and municipalities, but they're getting there. As for your first 3, while changes in statutes are passed as "diffs" by the legislature, generally, the patches are applied after they're passed, and the up-to-date version of the law includes a footnote that it was changed and on what date, but the text you read is the "patched-up" version.

      I do think it would be very cool if legislators adopted source code management tools to manage the legal code. I think it would work very well, and would make the whole process much more visible to everyone. Imagine github for the legal code!

      Hmm... Maybe I should download my state laws and publish them via github. Hmm.

      --
      Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
    5. Re:So what's the big deal? by Taylor123456789 · · Score: 2, Informative

      Jurily, you should learn more about our legal system. It is the product of 2000 years of the best legal minds of our civilization.

      1. You cannot abolish precedent. First, they are not made by "morons". Second, most precedent is recent. The courts have a heirarchy. Lower courts must follow upper courts, and the same court must follow its past decisions interpreting the same law before it.
      2. The legislature does hire competent attorneys to write the actual text of the laws, and they do aim for clarity and precision.
      3. All changes to statutes are incorporated into the text. However, not all situations are covered by the text, which is why we have judges to interpret the law to apply to specific situations. Not all specific situations are the same which is why it appears to be a patchwork of precedents. Courts can only interpret the law for the specific fact patterns that come before it.
      3. (sic) The text is easily accessible and searchable by anyone. See Findlaw.com.
      4. This is the purpose of Courts interpreting the law. For instance, does free speech apply to the internet? Under your rule, the answer would be "no", since there was no internet with the Constitution was written.
      5. Agreed.

  5. Unethical, but not illegal by BadAnalogyGuy · · Score: 5, Insightful

    There are many things that people do as professions that are ethically questionable but undoubtedly legal. Not to harp on Maggie Sanger, but the ethics of abortion are intensely debated. However abortion remains legal in the U.S.A. Telemarketing is almost universally reviled, but people still make a living at it.

    You would expect that ethics would take a big role in how the legal system is formulated, and for the most part you'd be right. But due to the creativity of human beings, the fruitful edges of legality and ethics can be sought out and exploited.

    1. Re:Unethical, but not illegal by Jurily · · Score: 5, Interesting

      You would expect that ethics would take a big role in how the legal system is formulated, and for the most part you'd be right.

      I don't care about ethics. The problem is, the whole system is geared towards requiring lawyers to function. Unclear laws, obscure precedents, etc. Not to mention the special powers the lawyers' associations have, like automatic trust of a member judge.

      In order to change this, laws should be written at least as unambiguous as RFC's, for starters.

    2. Re:Unethical, but not illegal by BadAnalogyGuy · · Score: 3, Interesting

      The whole point is that this is illegal in most everywhere in the world.

      So is the death penalty, but I don't see how something illegal elsewhere makes an iota of difference here.

    3. Re:Unethical, but not illegal by Guido+del+Confuso · · Score: 4, Insightful

      You can't make laws as clear as technical documents. That's a quixotic notion held by those who fail to appreciate that other people see things vastly different from how they do. The difference between an RFC and a law is that you can reasonably expect people to follow the RFC because it is in their own best interest to do so. A law, on the other hand, will always have an exception, a border case, or some other mitigating circumstance that will require interpretation. That is the job of the courts and lawyers.

    4. Re:Unethical, but not illegal by lordandmaker · · Score: 4, Funny

      It's funny, I've never heard it this way round before.

    5. Re:Unethical, but not illegal by QuantumG · · Score: 4, Informative

      Umm.. by "here" do you mean New Jersey? Cause that's the only place in the US that doesn't consider champertous contracts illegal (Bigelow v. Old Dominion Copper Mining & Smelting Co.)

      --
      How we know is more important than what we know.
    6. Re:Unethical, but not illegal by dword · · Score: 2, Insightful

      You can't make laws as clear as technical documents. That's a quixotic notion held by those who fail to appreciate that other people see things vastly different from how they do.

      But isn't that the whole reason for which we have laws?

    7. Re:Unethical, but not illegal by Jurily · · Score: 4, Interesting

      You can't make laws as clear as technical documents.

      Of course you can. Rule #1: Follow the intent, not the letter, And then make the intent as clear as humanly possible.

      The difference between an RFC and a law is that you can reasonably expect people to follow the RFC because it is in their own best interest to do so.

      Laws are not optional. They're protected by force and imposed on everyone in the area. And they have penalties, too.

    8. Re:Unethical, but not illegal by Jurily · · Score: 2, Insightful

      So is the death penalty

      Most everywhere?

    9. Re:Unethical, but not illegal by AlXtreme · · Score: 4, Insightful

      Of course you can. Rule #1: Follow the intent, not the letter, And then make the intent as clear as humanly possible.

      I don't know if making laws that vague would solve anything, instead it would probably make things much more worse. All those lawyers would have a field day in arguing that the intent of a law is something different to what the rest of us think, or use the intent of one law to negate a completely different law.

      Things aren't perfect as they are, but the legal system isn't this complex merely due to the lawyers. All these laws have to be as clear as possible, in intent and letter, which is the task the legislative branch has when coming up with a law.

      The problem is that each year many laws are added to the system (because the legislative branch has to keep up the act) but there is very little incentive to actually remove laws to simplify the system. The more laws there are in the system, the harder it will be for a layman to understand even a portion of these laws and the more ammunition lawyers have in the courtroom.

      Or to continue the analogy, what if you had 100 non-deprecated RFC's that define a simple protocol like SMTP? You would get a whole branch of IT workers through whom you would have to dictate your emails, because the whole system is so complex.

      --
      This sig is intentionally left blank
    10. Re:Unethical, but not illegal by Chrisq · · Score: 2, Insightful

      This is however, very borderline. It is, if not illegal, very close, depending on the exact wording of the contracts, and the exact nature of the particular cases (and also depending on the jurisdiction).

      You mean like Microsoft paying an "undisclosed sum" /to fund litigation/ .. cough .. for Unix licenses.

    11. Re:Unethical, but not illegal by jimicus · · Score: 4, Interesting

      Of course you can. Rule #1: Follow the intent, not the letter, And then make the intent as clear as humanly possible.

      What a good idea.

      Which is exactly why any half-decent judge interprets according to the spirit of the law.

      Where a problem occurs is when the spirit isn't clear but the letter is - and the most obvious interpretation of the letter is pretty bad.

      Myself, I think laws should have something akin to the preamble section in the GPL - a short paragraph which explains in clear English exactly what the law hopes (and doesn't hope) to achieve - in order to aid understanding the spirit.

    12. Re:Unethical, but not illegal by Anonymous Coward · · Score: 3, Interesting

      RFC has some precise definitions that allow such exceptions.

      The device MUST implement X.
      The device MUST either implement X or fall back gracefully to Y
      The device MAY implement X. Presence of implementation of X is recognizable by Y.
      The content of field X is undefined and subject for proprietary extensions. If the content is not recognized, the device should ignore it..

      Law is a set of inclusive specs: whatever isn't forbidden, is allowed. Thus, if a case is not covered by law, it's no-case.

      And border cases are precisely the reason of various injustices. They are a subject of personal interpretation of the judge, so guy X gets away with something harder and guy Y goes to prison for something lighter strictly because they were in the "border" area and their respective judges had some "gut feelings" about whether it is a crime or not. Borders should be defined strictly. If they are not, the law is faulty and needs to be fixed.

      Besides, at least _some_ practices should be introduced, definitely.
      - unified diffs to changes in laws. (Paragraph 1: "the word 'will' in paragraph 25 line 5 chapter XXIX tome III is to be replaced with the word 'won't'. Goddamnit, the lawmakers should be fired for publishing stuff like this as actual law.)
      - one centralized, public, quickly accessible fully cross-referenced searchable source for _all_ laws. Including relevant precedents. With all the back revisions etc, repository style.
      - url-like address for any law entry. Finding a referenced line can take half a hour in current style.
      - strict list of priorities of laws. A quick and efficient process of resolving internal conflicts in law, without requiring plaintiffs presence. It cannot be that a government organization internal regulations overrides the Constitution.and you must obey unless you sue - you should just notify a proper body about the conflict and they should overturn the regulation within 7 days without your interaction.
      - a strict list of keywords of invocation/revocation of privileges. It cannot be that the policeman asks two questions and your answer "yes" to one may be interpreted as waiving your constitutional right about which the second one is.
      - FUD is evil. The law enforcement organs should be totally illegal to give false legal advice. Their job is to prevent violation of laws, and by telling the citizens falsehoods about their laws they operate strictly against their purpose. Any offers to the arrested should be considered valid legal contract offers, with equal consequences of failure to uphold it (you can sue a cop for failing to "help you out" in exchange for testimony and require all the punitive damages equal to your jail time)

    13. Re:Unethical, but not illegal by NonSequor · · Score: 4, Interesting

      Have you heard the expression "your right to swing your fist ends where my face begins"? Well I imagine if that were put into law the process would go something like this:

      Legislator 1:I want to ban people hitting other people's faces with their fists.

      Legislator 2: What about a light tap with a closed fist as a sort of, "Go get 'em champ!" endearing sort of thing? Do you really think that should be illegal?

      Legislator 1: Sure, I buy it. We could put an exemption for that.

      Legislator 3: I'm more worried about people hitting other people in the face with things other than fists.

      Legislator 1: Like what?

      Legislator 3: Well this guy slammed a door on my brother's face and broke his nose.

      Legislator 2: Ouch...

      Legislator 1: Sure that should be illegal too.

      Legislator 2: Wait, what if it wasn't on purpose? What if, like, you were holding a door open for someone and then slipped and slammed the door in their face?

      Legislator 1: Well that wouldn't count.

      Legislator 3: You would still be responsible for being clumsy.

      Legislator 1: Yeah, I guess that makes sense. You should have to at least pay for medical bills or something, but it's not like we're going to lock people up in jail over that.

      Legislator 2: What if it's a windy day and the wind blows the door closed and it breaks someone's nose and the guy thinks that it was you slamming the door?

      Legislator 1: Well if it was really the wind and not you, then you aren't responsible.

      Legislator 3: Wait, how do you prove it was the wind?

      Legislator 1: Well... ...And so on and so forth.

      The moral of this story is that we don't just throw out old laws because we don't want to go through the trouble of hashing out all of the minutia in them over again. The law is never going to be not complex, because the essential logic that it needs to express is complex.

      So long as the concerns that motivated the original law are still essentially valid (which, of course, is not always true), then it's generally better to amend the existing law and build off the work that has already been done, rather than attempt to rewrite them completely.

      The law has the difficult task of objectively resolving disputes with subjective elements. When you think about it, that's a problem roughly equivalent to Hard AI. Over many centuries, law has developed heuristics for dealing with this problem. If you take the time to learn about them, you'll find that although they don't produce justice with algorithmic certainty, they do tend to produce reasonable results more often than not.

      --
      My only political goal is to see to it that no political party achieves its goals.
    14. Re:Unethical, but not illegal by swilver · · Score: 2, Interesting

      All of these examples however differ in just one thing. Intent. Did you intentionally break someone's nose or was it an accident?

      The law therefore could simply state: intentionally breaking someone's nose is illegal.

      Trying to extend the text of the law to provide a fail-safe method on how to prove intent is futile. It's not possible to establish intent without cooperation from the suspect. The most we can hope for is a good guess. I mean, I could take a swing at someone intending to stop just short of breaking their nose to give them a scare. If I stumble or the target makes a sudden move, you could have dozens of witnesses seeing me break someone's nose seemingly without cause, while it was never actually my intent.

    15. Re:Unethical, but not illegal by sjames · · Score: 2, Interesting

      True, but nobody is legally compelled to listen to a sales pitch or to be involved in an abortion.

      Should anyone try in a similar way to not participate in the civil court system, the judge will practically rip the shirt from their back and give it to the plaintiff.

      Lack of ethics in sales is harmful to society, but lack of ethics in the legal practice can actually unravel the fabric of society. IMHO, the courts and legislature are being quite careless about that currently.

    16. Re:Unethical, but not illegal by NonSequor · · Score: 3, Insightful

      That's what I meant when I said the law has to objectively resolve disputes with subjective components. Intent is subject to interpretation, and the law specifies mechanisms for testing for intent.

      What is and isn't illegal is simply the first question. The second question is, how should mitigating factors be considered in answering the first question? The third question is, how is a violation punished? The fourth question is, to what extent should mitigating factors be considered in determining the intensity of punishment used?

      A system that doesn't attempt to consider all elements of the case is tyranny.

      So how do you weigh all of the pertinent considerations against each other? Is one of them always most important? Or maybe one of them should only be important when it crosses a certain threshold.

      The whole point is that the legal system is an attempt by humans to establish methods for making good guesses which take into account as many relevant factors as is possible. Since they're at best good guesses (and sometimes bad guesses) bad results do sometimes occur. However, it's better than the binary alternatives of either not punishing any crimes or punishing all suspects.

      --
      My only political goal is to see to it that no political party achieves its goals.
    17. Re:Unethical, but not illegal by zotz · · Score: 2, Insightful

      First you need to decide whether equity or predictability is more important in your law.

      all the best,

      drew

      --
      FreeMusicPush If you want to see more Free Music made, listen to Free
    18. Re:Unethical, but not illegal by mokus000 · · Score: 2, Insightful

      . In a technical document, however, you want to get the result that the manufacturer intended, so you don't try to find loopholes in the technical document.

      Unless you're Microsoft... *ducks*

      --
      Additive identity, multiplicative cancellation, distributive multiplication over addition: pick any two (unless 1 = 0)
    19. Re:Unethical, but not illegal by stranger_to_himself · · Score: 2, Insightful

      The whole point is that the legal system is an attempt by humans to establish methods for making good guesses which take into account as many relevant factors as is possible. Since they're at best good guesses (and sometimes bad guesses) bad results do sometimes occur. However, it's better than the binary alternatives of either not punishing any crimes or punishing all suspects.

      Further you can only really address most of these problems as they occur, hence the need to rely on precedent a lot of the time.

  6. Patents on software... by pieterh · · Score: 4, Informative

    It relates because the business of software patents is very close to this. Patent litigation in the software sector is much higher than in any other sector and much of that litigation is speculative and funded by exactly the kind of VC TFA is talking about.

    --
    My blog
  7. Fmylife.com of the times by Anonymous Coward · · Score: 2, Funny

    http://en.wikipedia.org/wiki/Swynfen_will_case

    Got promised 1.3mil to win a case, the first case I've run. Had sex with the hot beneficiary. Won the case. Didn't get paid. She married someone else and sued me for misconduct. My life sucks.

  8. The Sophomore Class by westlake · · Score: 2, Interesting

    The trial attorney's primary asset is his experience in court - his ability to win cases.

    But that makes it difficult to hit a bank for a loan.

    So he - like generations of skilled craftsmen and professionals before him - seeks financing outside the normal banking system.

    There is the side issue of collection from the client who isn't paying his bill. Corporate litigation at the highest level tends to more rather more work and expense than the collision at Third and Main.

    Gah. Does the phrase "independent contractor" ring a bell with anyone here? Or are you all still living in the Dorm?

  9. Of course I meant SCO by Chrisq · · Score: 4, Insightful

    I should have said:
    You mean like Microsoft paying SCO an "undisclosed sum" /to fund litigation/ .. cough .. for Unix licenses.

  10. American Dreams by moeinvt · · Score: 2, Insightful

    Old American Dream: Rugged self reliance, hard work and innovation lead to success and propserity.

    New American Dream: Have the government take care of you while you attempt to win a lawsuit or the lottery.