New York Times So Reports in November 14, 2010 Article–$1 Billion May Be At Issue.
In a November 14, 2010 article by Binyamin Appelbaum in The New York Times, he reports on the fact that large banks, hedge funds, and private investors are bankrolling plaintiffs’ lawsuits at record rates, all in the hope of sharing in potential winnings.
Two examples of successful funding were cited: (1) Counsel Financial, a Buffalo company financed by Citigroup, provided $35 million for lawsuits brought by Ground Zero works tentatively settled in June of this year for $712.5 million, with the lenders earning about $11 million from their funding; and (2) Ardec Funding, a New York lender backed by a hedge fund, lent $45,000 in June to a Manhattan lawyer representing parents of a baby brain-damaged at birth, with Ardec collecting an annual rate of 24% or $900 per month until a $510,000 jury verdict is paid off.
Total investments in lawsuits at any given time now exceed $1 billion, according to the article, with New York public records showing that more than 250 law firms borrowed on pending cases. Interest rates on lawsuit loans are high, generally exceeding 15% a year.
The article cites the pros and cons to such funding, without even discussing arcane champerty restrictions. However, it does note that pursuit of a federal court civil action costs an average of $15,000, according to a 2009 Federal Judicial Center report. This figure goes up mightily in scientific evidence-driven cases, frequently costing more than $100,000. This outside funding is one way for plaintiffs to overcome the financial edge of corporate defendants with deeper pockets, the article observes.