Plaintiffs' attorneys have long funded client's cases in situations where the aggrieved didn't have the resources to pay the often hefty fees, but in which, it was perceived, an favorable outcome - and payout - appeared likely.
The latest iteration on this sort of initiative has brought crowd-funding to the fore. After all, why should the big guys have all the fun?
The concern, as the following article explains, is that funding individual cases was usually done by experienced, knowledgeable investors who often knew (or know) the litigants and something about the issues at hand. The question is whether the pressure to deliver returns to a broader category of investors will create pressure to generate more lawsuits in order to keep the funding mechanism functioning. And the obvious targets for such suits would be the 'deep pockets,' the corporations and high net worth individuals who provide tempting targets because of their ability to pay and potential inclination to settle on terms favorable to the litigants.
There is nothing illegal in that, but it may cause a rethinking of the rules - or even a decline in returns as too much money chases too few 'good' cases. But then that's why they call it a market. JL
Paul Barrett reports in Business Week:
Litigation finance inevitably encourages more lawsuits, with deep-pocketed corporations as the targets. And turning litigation into a vehicle for third-party speculation raises questions about conflicts between clients’ interests and those of outside funders looking to maximize returns.