Tag: attorneys fees

Lisa Rickard and Anthony Sebok on the Ethics of Investing in Another’s Lawsuit

Renee KnakeLeave a comment

From the New York Times Room for Debate:

The disclosure that Peter Thiel, co-founder of PayPal, spent about $10 million to help the wrestler Hulk Hogan sue Gawker Media apparently because a Gawker blog outed him as gay years ago revealed for many the lucrative practice of investors paying for litigation in which they are not involved.

While Thiel’s motives were not profit driven, most investors seek a cut of any final judgment or settlement. Should third parties be allowed to invest in lawsuits or does that unduly influence them?

Lisa Rickard, president of the United States Chamber of Commerce Institute for Legal Reform, says no – This is Casino Litigation Where We All Lose

Anthony Sebok, professor of law at Benjamin N. Cardozo Law School, says yes – Third-Party Litigation Finance Promotes Justice and Deters Wrongdoing

 

“Should you be allowed to invest in a lawsuit?” asks the NYT

Renee KnakeLeave a comment

A excerpt from the article appearing in Sunday’s NYT Magazine:

Hedge funds, banks and insurance companies have long been quietly funding the occasional lawsuit, but no major United States investment outfit in the commercial arena specialized in the practice until Juridica was founded in 2007. The industry’s early growth was driven in part by the recession, which made lawyers at big companies eager to hand off risk and also increased the demand among investors for opportunities that could pay off no matter what was happening in the world’s markets. Today the industry seems to have become a permanent part of the financial landscape, with shares of prominent funders trading every day on stock exchanges in London and Sydney.

Anthony Sebok, a professor at Cardozo Law who advises Burford, says he sees the practice as part of a broader trend toward the financialization of the law. ‘‘Why can’t I promise a stranger some piece of the game?’’ he asked me, paraphrasing Bentham’s writings. ‘‘Is there something icky about it, like I’m commodifying my rights? Bentham says these legal rights are our property. Why shouldn’t we be able to sell them?’’ Jonathan Molot, a professor at Georgetown Law who serves as Burford’s chief investment officer, has written that stock offerings by law firms could improve morale, lower rates and help lawyers focus on maximizing long-term profits. Like lawsuits, the firm itself should evolve into an asset. ‘‘It’s a mistake for lawyers to hunker down and say we’re different, we’re excluded, we’re not part of the economy,’’ he said.

But the interests of financiers and plaintiffs are not always so well aligned. Depending on the structure of the deal and the ultimate payout, plaintiffs sometimes walk away with a few crumbs after the funders and lawyers take their share. One such outcome happened in 2007, when Altitude Capital, a funder, invested $8 million in an intellectual-property suit filed by DeepNines, a small network security company, against McAfee, a much larger competitor. The case was settled for $25 million, but after expenses ($2.1 million), lawyers’ fees (roughly $11 million) and Altitude’s cut ($10 million), DeepNines took home $800,000, a little over 3 percent of its settlement. Then, Altitude questioned DeepNines’ math, arguing that the company shouldn’t have deducted its own expenses before calculating contingency fees. It sued its former partner for $5 million more, eventually dropping the suit in 2011.

This kind of falling out is unusual, but it shows the fundamental conflict that can occur.

Full article here.

NCAA proposes deep cuts in O’Bannnon class counsel fee application

George ConkLeave a comment

Plaintiffs counsel Michael Hausfeld
The NCAA has filed its opposition to the plaintiffs lawyers motion for $50 million in counsel fees in O’Bannon v. NCAA. The NCAA argues that plaintiffs should recover only $9 million in counsel fees and proposes steep reductions in cost recovery.
In August 2014 U.S. District Judge Claudia Wilkens ruled that the NCAA violated antitrust law by preventing student-athletes from being compensated for their name, image and likeness rights.
Wilken’s ruling allows schools to pay athletes licensing money into a trust fund starting in 2016. Financial damages were not part of the trial, but Wilken said the plaintiffs “shall recover their costs from the NCAA.”
The NCAA argues that plaintiffs lawyers application is flawed in that it they may not recover fees for work done on the case prior to September 1, 2012 when their theory of the case changed; they may not recover fees for work done solely to advance claims upon which they did not prevail in substantial part, or for claims that were essentially abandoned; nor may they recover for “work that was unnecessary, redundant and inefficient, unsupported by plaintiffs’ billing records, or that did not reflect sound billing judgment”. Finally the NCAA argues that much of plaintiffs’s claims of costs are “unsupported by their submission or the law”.

via OTHERWISE: NCAA proposes deep cuts in O'Bannnon class counsel fee application.