When Supervillains Collide: Hedge Funds and Contingency-Fee Lawyers
I could be coming to this way, way late -- I don't keep up on new areas of investing and finance; I'm too busy keeping up with new areas of spending and bankruptcy -- but this seems like an indication that something's wrong with the tort system.
Burford Finance company -- which seems like a richly-financed, well-staffed, up-and-up publicly-traded investment fund -- has an unusual focus. From their website:
HOW WE HELP
- Burford is the world’s largest provider of investment capital and risk solutions for litigation.
- Burford provides capital to businesses and law firms engaged in litigation.
- Burford has immediately available capital and responds in real time.
In other words, they fund litigation. The very thing -- the only thing, frankly -- that keeps the exploding number of lawsuits from exploding higher and louder is money. And Burford has solved that problem.
Hooray!
To be fair, here's how they describe it:
Burford’s capital can be used to pay some or all of the costs of litigation, to finance insurance arrangements or to monetize a claim to provide immediate capital for other business purposes.
Businesses make use of Burford’s capital to alleviate liquidity or budget constraints, to assist with the accounting treatment of litigation matters, or simply for prudent financial management.
We permit meritorious cases to proceed with high quality lawyers when that might otherwise have not been economically possible.
I'm not trying to go all Newt-Gingrich-vs-Bain-Capital here. It's a legitimate business, solving what seems to be a legitimate business need. But there's something inefficient, isn't there, about a legal system so over-the-top, so out-of-control, that it's become a financial sector unto itself? Like oil and gas and semiconductors and insurance and....lawsuits?
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Comments:
May '10
Re: When Supervillains Collide: Hedge Funds and Contingency-Fee Lawyers
We could solve that problem in two words: Loser pays.
Aug '10
Re: When Supervillains Collide: Hedge Funds and Contingency-Fee Lawyers
When you think about John Kearns of the famous windshield wiper suit and the shares he sold in the hoped-for settlement to fund the litigation, there is some sense in this.
Then again, if you have ever found yourself in a case, where your opponent is gigantic and has endless funds, finding a contingency fee firm is a blessing.
EJ is right as far the reduction in frivolous suits would go away and the endless duels would lessen, but lawyers going away ?
The plaintiff attorneys are still the biggest contributors to you-know-who.
If you scratch this Burford deal, i bet you find lawyers. Right now firms are closing down around the country, they are ready to start auctioning off their services.
Edited on February 7, 2012 at 9:52pmMar '11
Re: When Supervillains Collide: Hedge Funds and Contingency-Fee Lawyers
Not if the lawsuit causes them to go bankrupt. Also just because you win does not mean you get the cash quickly.
A big problem with the legal profession is how revenue are collected. With so much compention out their why should they be commision based or time and material with huge profit margins per hour billed.
Then again contracts are so complicating and the scope being prosecuted is often complex it takes a lot of man hours to cover all your bases. A real problem is juries do not have the years of experience and expertise to make decisions on many civil law cases. Many judges don't have the experience either. That is why I think congress and states need to create exponentially more special courts who have jurisdiction over very specific industries/cases. The fact is we have specialization of trade in every profession but very little (Family/Tax/Bankruptcy) in courts besides lawyers and expert witnesses.
Edited on February 7, 2012 at 10:28pmJul '11
Re: When Supervillains Collide: Hedge Funds and Contingency-Fee Lawyers
flownover:
The plaintiff attorneys are still the biggest contributors to you-know-who.
Don't say Voldemort. Oops.
Here is an outstanding discussion.
TED Blog | Four ways to fix a broken legal system: Philip K. Howard ...
Dec '11
Re: When Supervillains Collide: Hedge Funds and Contingency-Fee Lawyers
I dont like the idea of loser pays, because you could have the most righteous claim in the world and still lose. All loser pays is raise the risk to freeze the little guy out of the system.
May '10
Re: When Supervillains Collide: Hedge Funds and Contingency-Fee Lawyers
I've heard of this, but haven't paid too much attention yet. I'd caution against hanging terms like "legitimate" on these ... transactions. I expect some state bars may have something to say about venture funding for lawsuits. Besides, if all the deep-pocketed liberals start investing in litigation, how on Earth will Kleiner Perkins manage to raise new funds???
Edited on February 8, 2012 at 1:23amSep '11
Re: When Supervillains Collide: Hedge Funds and Contingency-Fee Lawyers
I understand the business model.
My brother-in-law is a plaintiff's attorney. A couple of years ago a tractor-trailer driver arrived home, early in the evening--and backed his truck into a side road adjacent to his house. He backed from the state highway into the side road. The trailer did not have working lights.
A woman came driving along the state highway--and only barely missed being decapitated when her car went under the trailer. The trucker's insurance company refused to pay.
Among other issues was whether the sun was down at the time of the accident, and whether the setting sun could possibly have made the truck hard to see. Knowing the date and time, you can determine the azimuth and angle of elevation of the sun; knowing the location, you can model the terrain and roadway in 3D. Using modeling software from Autodesk you can create a realistic (and true) picture of who could see what at the precise time of the accident.
For about a hundred grand in hardware, software, and consulting time.
They settled--they didn't have the bucks to litigate, and the insurance company knew it.
Edited on February 8, 2012 at 4:20amRe: When Supervillains Collide: Hedge Funds and Contingency-Fee Lawyers
John Murdoch has it right. The insurance companies, mostly overlooked in the tort reform debate, are most responsible for the problems in the tort system.
Frivolous lawsuits? Few are filed. Frivolous defenses? That's why we have long dockets.