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Markets in everything, lawsuit edition
...some wealthy investors are starting to dabble in lawsuit investment, bankrolling some or all of the heavy upfront costs in return for a share of the damages in the event of a win...
Here is the full story, thanks to John De Palma for the pointer.
Posted by Tyler Cowen on December 24, 2007 at 10:24 AM in Law | Permalink
Comments
This is nothing new -- it's called champerty and is generally illegal in most U.S. jurisdictions, at least until recently.
Posted by: KipEsquire at Dec 24, 2007 11:16:44 AM
Those investors should watch, Civil Action. You can't predict what the jury will
return as a verdict.
Posted by: Mike Fladlien at Dec 24, 2007 12:46:15 PM
It is not champerty to fund a lawsuit. Champerty normally requires instigation as well. In any event, contingency arrangements mark the end of champerty. In any event buying interests in the outcome of litigation, like buying judgments, is not really a problem under US law.
Posted by: J. Bogart at Dec 24, 2007 12:46:37 PM
It is why Weiss and Lerach are going to do time.
Posted by: michael webster at Dec 24, 2007 1:03:51 PM
This could be a very good thing if it helps to deter predatory behavior against financially weak individuals.
Posted by: nordsieck at Dec 24, 2007 3:39:26 PM
Enormously valuable in cases where a party may be stronger on the merits but lacks the resources to complete the case. Sounds like a good investment.
Posted by: sidereal at Dec 26, 2007 5:08:00 PM
This could be a very good thing if it helps to deter predatory behavior against financially weak individuals.
Enormously valuable in cases where a party may be stronger on the merits but lacks the resources to complete the case. Sounds like a good investment.
Just to be clear, the contingency-fee mechanism and class-action mechanism in the States already speak to these concerns. If someone has a strong, valuable claim, s/he will have no trouble finding a good lawyer willing to fund his/her case in exchange for a share of the damages. Similarly, if a large number of people have been injured in a small way (at the individual level), there will be no shortage of lawyers willing to sue on behalf of a class, in exchange for a share of the judgment.
That being said, I can't really deny that having a free market in lawsuits (as opposed to a market in which lawyers are the only buyers) would probably be more efficient economically.
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It is not champerty to fund a lawsuit. Champerty normally requires instigation as well. In any event, contingency arrangements mark the end of champerty. In any event buying interests in the outcome of litigation
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