January 4, 2008

Per a report by the National Law Journal's Tresa Baldas (Nov. 12, no free link) a first-of-its-kind law will go into effect this month in Maine "mandating that legal-funding companies register with the state, disclose all fees and costs up front in a written contract, and outline what is owed over time as the case develops." The business of lending money to lawsuit plaintiffs on the security of their expected winnings has been growing rapidly, more than doubling in the past three years, according to the American Legal Finance Association (yes, there's a trade group). The practice has critics on both sides of the aisle: Baldas quotes Long Island plaintiff's lawyer William Sayegh as saying that he is

"100% opposed" to legal funding, and that he tries to talk clients out of using such services.

Sayegh believes legal-funding companies overcharge clients, pressure them into making earlier settlements so they can get their money faster and ask for information covered by attorney-client privilege. "Trusting an unknown third party? I have very serious concerns with that," Sayegh said. "They're definitely interfering with our work".

Meanwhile, defense lawyer Dwight Davis of King & Spalding in Atlanta recalls a case in which the legal-funding company, he said, "invested heavily in the case and 'could not allow [plaintiffs] to settle for a reasonable amount."