Blog: Today in Legal Reform
Bipartisan Call For NY AG’s Office to End Case
Former New York governors Mario Cuomo and George Pataki coauthored an op-ed in the Wall Street Journal, calling on the state’s attorney general office to drop its case against former AIG chairman Hank Greenberg. The litigation is being pursued under the Martin Act, which gives the New York Attorney General “extraordinary powers to investigate and litigate financial fraud.”
The governors point out that “the attorney general's office has decided to deplete its resources and consume more of the court's time by raising claims for injunctive relief against Mr. Greenberg that were long ago abandoned and that, in any event, are without merit and serve no conceivable purpose.”
The authors, one a Democrat and one a Republican, continue:
“We both recognize that the Martin Act can be an effective tool for regulating New York businesses, but it must be used with caution and care. Misuse of the act, as in this case, sends the wrong message to the business community, putting New York at risk of losing jobs and damaging its economy.”
Lawsuit Funder Sues Plaintiffs’ Firm
“This is not pretty,” writes Alison Frankel in ThomsonReuters.
She’s referring to a dispute between a plaintiffs’ law firm and a lender that provided it a loan in order to litigate an antitrust class action. Now that the class action case has settled, the lender has filed a suit seeking $28 million as repayment for the loan.
Writes Frankel:
The breach-of-contract suit claims that under a 2004 lending agreement, [plaintiffs’ lawyer] Alioto owes [funder] LFG $28 million of the $49 million he has been awarded as co-lead counsel to a class of indirect purchasers of liquid crystal display screens. LFG asserts that it holds a lien on all of the Alioto firm's fees and receivables via an $18.3 million credit facility extended by the lender. Alioto, meanwhile, told me Monday that he has repaid $11 million to LFG, which includes "most if not all" of his $7 million to $9 million in principal, plus interest. According to Alioto, the lender is improperly attempting to cash in on his fees from the LCD case.
Third-party funding of litigation raises a host of ethical issues, including the introduction of an outsider with an entirely financial stake into the attorney-client relationship. This case shows what happens when the relationship between the lawyers and lenders goes bad. Not pretty at all.
Louisiana Considering Measure to Regulate Lawsuit Lenders
The Louisiana State Senate Commerce Committee yesterday advanced a measure that would protect consumers from the growing lawsuit lending industry.
Melissa Landry, executive director of Louisiana Lawsuit Abuse Watch, writes in The Pelican Post:
Louisiana lawmakers are considering a proposal to appropriately regulate the lawsuit lending industry. Senate Bill 166 by Sen. Dan Claitor from Baton Rogue will bring these companies in line with other lenders and better protect Louisiana consumers and our courts from lawsuit loan sharks.
Earlier this week, FoxBusiness.com featured ILR’s position on the burgeoning lawsuit lending industry. You can read that story here.
FACT Act Picks Up Steam
As Harold Kim blogged about last month, Congress is currently considering a vital piece of legislation — the Furthering Asbestos Claim Transparency (FACT) Act (H.R. 942) — that would address problems with federally-created asbestos bankruptcy trusts.
These entities, with assets estimated in excess of $36 billion, were established by companies forced into bankruptcy by asbestos litigation. Their goal is to compensate asbestos victims fairly and promptly.
As Harold posted about last month, however, the trusts’ “opaque operations” open the door to abuse:
A recent article in the Wall Street Journal revealed that an employee of a California law firm filed a claim with a trust in the name of someone who didn’t even exist. Five weeks later, he received a $26,000 check from the trust. The same firm also filed trust claims on behalf of clients who were nurses. They allegedly were exposed to asbestos while chipping paint from boilers – not exactly a typical duty for nurses.
Thankfully, others are picking up on the need to enact this important legislation.
This morning, the Houston Examiner features a piece on the FACT Act:
Businesses and employees have already suffered through decades of harsh court battles, bankruptcies, companies closing their doors and people losing their jobs. Many of these have been right here in Houston and Southeast Texas. Congress has an opportunity to fix the problems with this system.
For more information on the FACT Act, we urge you to check out these additional links:
- As Asbestos Claims Rise, So Do Worries About Fraud (Wall Street Journal)
- It's a FACT: The Bill That Will Help Restore Integrity to the Justice System (FreeEnterprise.com)
- Facts on the FACT Act (InstituteforLegalReform.com)
FoxBusiness.com: ‘Cash-now Promise of Lawsuit Loans Under Fire’
Over the weekend, ILR's Justin Hakes was quoted in a FoxBusiness.com expose about the growing lawsuit lending industry.
Hakes sums up well the need to protect American consumers from this burgeoning practice:
"The lawsuit lenders charge sky-high interest rates on these loans, often more than 100% annually ... Even when the consumer 'wins' or settles the case, he or she often recovers no money, because the entire amount of the award or settlement goes to pay the plaintiff's attorneys or to repay the lawsuit lender."
For a great background on lawsuit lending, please click here to watch a brief video with former Georgia Attorney General Thurburt Baker discussing “Why Lawsuit Lending is a Problem.”
You can find an archive of additional articles and backgrounders on the issue of Lawsuit Lending by clicking here.
US Litigation Culture Spreading to Australia
“Australia has clearly made its choice and you are racing down the path, leading globally (after the US) in class action litigation and funding,” says ILR president Lisa Rickard in an interview with The Australian. Rickard warns that the recent commercialization of law in Australia could lead to the kinds of litigation abuse seen in the United States, and recommends leaders “take a step back and examine” the effect the changes on the legal system.
Courts & Congress Can Uncover Asbestos Sham
A Wall Street Journal editorial highlights super plaintiffs’ lawyer and Baltimore Orioles owner Peter Angelos’ use of his team doctor to screen asbestos clients and his latest attempt to consolidate 13,000 asbestos claims. The editorial also highlights the FACT Act as a remedy to help shine a light on the opaque asbestos trusts to prevent “double dipping” of both trust claims and lawsuits against solvent defendants. An analysis of the Angelos cases found 1,500 claimants have already filed with a bankruptcy trust and 70% of the remainders were diagnosed by a group of five doctors, raising concerns of “bogus suits manufactured with the help of friendly doctors.”
Is Litigation Becoming Simply a Profit Center?
Melissa Francis and trial lawyer Mark Lanier discuss the dangers of lawsuit funding in this video from Fox Business. Litigation funding, which is a relatively new concept in the United States, is more established overseas, but it’s still unclear what happens when things go wrong and disputes break out, according to Bloomberg.
Plaintiffs Ordered to Pay Legal Fees for Frivolous Suit
A number of animal-rights groups that filed a “frivolous, unreasonable, and groundless” lawsuit against Feld Entertainment must pay the defendant’s legal fees, the National Law Journal reports. The amount the plaintiffs will have to pay will be determined at a later date, but the company says it spent at least $20 million defending itself over the past decade.
Judge Cracks Down on Abusive ADA Litigation
A federal judge has ordered two New York lawyers to stop filing ADA suits after ruling that their “tactics lacked expertise, possibly violated the rules of professional conduct and were ‘disingenuous at best.’ According to the New York Times, the lawyers have filed dozens of lawsuits over disability access and collected thousands of dollars in legal fees, but the judge found that they were essentially “cutting and pasting old defendants in place of new defendants.” New York isn’t the only jurisdiction where frivolous ADA suits flourish – restaurants, coffee shops, and community centers are among the businesses in California that have been hit with abusive litigation.
