Hacker News Reader

Comment by dannyphantom | Hacker News Reader

> "...Individuals allegedly put in hundreds of millions of dollars for what were described as high-reward, low-risk contracts to fund loans tied to personal-injury lawsuits through two companies..."

Makes you wonder if this type of transaction is practised by billboard personal injury law firms ("ambulance chasers") across the country. With how common personal injury commercials play on the radio and television it seems there is no shortage of attorneys willing to take a personal injury claim where insurance is quick to pay out.

View on HN

This is not, generally, the law firms but legal investment companies (often founded and or run by ex-attorneys). There’s two, under reported, investment strategies in law. The first is funding class action lawsuits for a cut of the return - occasionally this can be paying out the actual class before a judgement and betting on getting a higher return when the case settles or is adjudicated. The second is this one, which is paying out to people who have already won a case and need cash fast before the normal payout date. It’s essentially payday lending for smaller settlements.

The billboard guys are just, usually, getting paid their normal cut of a lawsuit.

Litigation financing - funding the lawsuit in exchange for a percentage of recovery - is not limited to class actions. I knew someone that was in a firm that did this. Everything I ever heard about it from him made it sound like it was run in a very similar manner to venture capital firms. I never once heard the word "loan" or any indication that the risk of losing every penny invested on a specific lawsuit was anything other than "high".

Now, these firms aren't very likely to even take a meeting from the type of law firm that advertises on billboards or TV.

Firms that handle lemon law cases in my state operate this way, too -- no fee for the client assuming the case is actually worth a damn because the law includes a provision that the automaker pays the legal fees if they win a buyback/replacement/remedy.

ex-attorneys !!

Reply on news.ycombinator.com