Skadden's Beisner Urges Ban on Third-Party Litigation Financing in Chamber of Commerce Report
By Alison Frankel
October 28, 2009
Post a Comment
Class action maven John Beisner of Skadden, Arps, Slate, Meagher & Flom is trying to think a couple moves ahead of the plaintiffs bar. Like us, Beisner has taken note of the rise of third-party litigation financing funds in the last couple of years. (Our most recent posts covered public offerings in London by Burford Capital and Juridica Capital; Richard Lloyd wrote in the June issue of The American Lawyer about the state of play in third-party financing.) And naturally he began to worry about how plaintiffs lawyers could take advantage of this new source of capital in class actions and mass torts."Plaintiffs lawyers are already driving the bus on class actions," Beisner told the Litigation Daily. "To add investors to the process turns those cases not into litigation, but into a business proposition." Once plaintiffs lawyers can offload risk to investors, Beisner said, there's little to keep them from filing meritless claims. And an onslaught of such claims, he added, can force defendants into settling even dubious cases.
Beisner and his team at Skadden have delineated their fears in a 16-page report published by the U.S. Chamber of Commerce's Institute for Legal Reform, which, like Beisner, spends a lot of time trying to outsmart the plaintiffs bar. The paper's conclusion: Third-party litigation financing should be banned in the U.S., at least in the context of class action or mass litigation.
Beisner concedes that third-party financing is still rare in the U.S., and that the big British investor funds talk about financing company-against-company litigation, not plaintiffs' tort claims. He told us he's not yet aware of any class actions financed by nonlawyer investors. But, he added, "we need to sound the alarm bells. Is this something the legal system should permit?"
