Here is an interesting article from Forbes reporting on investing in lawsuits. The article spotlights some hedge fund managers and large investors that invest in commercial lawsuits. I was aware of personal injury lawsuit loan companies that provided loans to Plaintiffs using the potential lawsuit funds as collateral, but I had not encountered companies and individuals investing in the actual lawsuit. I suppose that the difference between the two is negligible, but while I have a very negative view of personal injury lawsuit loan companies, I am more ambivalent to the practice of investing in commercial lawsuits.
My main complaint with personal injury lawsuit loan companies is that they charge usurious interest rates on their loans. I have heard of interest rates on these loans that were 100% and even higher. Much like payday loans, they had a tendency to take advantage of desperate people in desperate situations. The HBO program Last Week Tonight with John Oliver did an informative report on that industry, you can watch that here. Lawsuit loan companies also make it nearly impossible to settle cases; the astronomical interest rates that they charge make it so no settlement puts enough money in the client’s pocket to pay off the loan and interest. This forces cases to trial that should or could have settled. Case strategy should be based on law, facts and client choices. Case strategy should not have to be based on a third party loan company.
However, this article is reporting on investment into commercial cases, such as patent, copyright, corporate dispute and contract cases. The parties involved in these lawsuit investment cases are on more equal bargaining positions. Further, many of these business disputes are extremely expensive and do not have any other source of litigation funding. Any reputable Plaintiff’s attorney will not require any upfront money and will front the expenses throughout the litigation. There is no need for these personal injury lawsuit loans if a lawyer is doing her/his job.
So if you don’t want to invest in Apple or Toshiba, maybe you can invest in Apple v. Toshiba.