A series of amicus briefs have recently been filed – some in support of litigation financing, others not, but all have implications for the industry and those consumers in need of the support and coverage it provides.
Amicus briefs are legal documents filed in appellate, or appeals, court cases by someone who is not a party to the case, who may or may not have been solicited by a party, and who is someone able to offer information, expertise, or insight that has a bearing on the issues in the case.
The purpose of the briefs is to advise the court of additional relevant information or arguments that the court might wish to consider before making a ruling.
Proponents and Opponents of Litigation Financing: Here’s What They’re Saying
Proponents of litigation financing, including the Alliance for Responsible Consumer Legal Funding (ARC), which is a trade and advocacy group for the consumer legal funding industry, and Jeremy Kidd, a tenured law and economics scholar at Mercer University’s Walter F. George School of Law, have recently filed amicus briefs in support of litigation financing, specifically in support of Cherokee Funding in a case that has made its way up to the Georgia Supreme Court. ARC has defined the contingent nature of litigation financing in this way:
[In] investment or insurance transactions, for example, money changes hands and the potential for future compensation is created. Individuals or entities receiving investment funds incur an obligation to pay a portion of future profits, if any, to investors.
Similar to when Insurance companies receive insurance premiums and incur an obligation to provide funding if an insured event occurs.
The mere possibility of repayment being contingent creates an element of risk, thereby making transactions like those in litigation financing a form of investment, and therefore eliminating their guidance by financial regulations like the Georgia Payday Lending Act (PLA) and certainly by the Georgia Industrial Loan Act (GILA), for example.
Opponents of litigation financing, which widely include the big businesses and insurance companies themselves who have the most financial gain to be had by limiting the available resources to the plaintiffs they are subject to pay, argue that litigation financing clogs the court system and elongates case proceedings. One of the most frustrating realities for them, I’m sure, is that it gives people, who otherwise wouldn’t have the financial ability to wait, a fighting chance to a fair settlement – which often results in those very companies having to pay those fair settlements.
One of the pillar and most widely-known cases I like to point to when arguing against how frivolous plaintiffs actually are is the Liebeck v. McDonald’s Restaurants case. I’m always amazed by how many people remember the case but also by how inaccurately they remember the facts of it. To this day, I hear people make comments when they read the hot contents warning label on coffee cups and say something to the effect of, “Well, that’s because of that woman who sued McDonald’s because her coffee was too hot. Why do you have to be warned that coffee is hot?”
What people don’t remember is that 79-year-old Stella Liebeck was told she might not survive from the injuries she sustained from her coffee spill. That after skin graft surgeries, and physical therapy appointments she was left in excruciating pain, not to mention medical debt. So, when Liebeck’s family reached out to McDonald’s for help with her medical bills, which at that time had come to roughly $10,000.00, McDonald’s came back to offer $800.00.
For more information about this case, read my article Hot Coffee, and Understanding and Overcoming Tort Reform Claims.
Big businesses and insurance companies have proven time and again they cannot self-regulate. If lawsuits like Liebeck’s didn’t happen, more severe burn cases would. And to defend their financial well-being, these companies have taken to attacking litigation financing as an industry – the involvement, of which, protects people’s Seventh Amendment right, where everyone has their day in court.
We may not always be able to guarantee the fairness of these case proceedings, but litigation financing does help to level the playing field.
Legal Funding: How It’s Categorized and Why It Matters
Because repayment is contingent on the success of the lawsuit, litigation funding is not and should not be covered by GILA, PLA, or other lender rules and regulations. To be a loan, the law requires that repayment be mandatory in order for these rules and regulations to be applicable, and litigation funding is non-recourse. In the instance of Cherokee Funding, if our clients do not recover anything, neither do we. This stipulation, of course, is the cornerstone to our existence and is what makes us different from a variety of other financial arrangements and obligations.
The balance litigation funding provides is necessary in the court system, especially when considering the majority of legal funding consumers are uninsured, underinsured, and otherwise ill-equipped to go up against big businesses and insurance companies with deep pockets. Contrary to opposing arguments, legal funding does not increase litigation by volume or by case duration, nor is there any statistical proof that it causes a back-up in trial courts. By all accounts, litigation funding is an equalizer. The friendly characters representing insurance companies, whether an animated lizard or a middle-aged woman with big hair and a white smock, are being paid for by hard-earned premiums and they’re coming at the expense of everyday people. In my humble opinion, those are the businesses we should be regulating more closely, not the other way around.