Litigation Loans, Funding Personal Injury Cases, and Selling Settlements

The ethics rules in nearly every state where Doug Landau practices law generally state that a lawyer can advance the costs of: expert witnesses, litigation expenses, medical records, reports, illustrations, exhibits, subpoenas, deposition transcripts, videographers, etc. Loaning money to the client for living expenses is generally not allowed. A lawyer is not supposed to “mortgage his or her interest in the case.”  Often contingent upon the outcome, there is a whole industry of litigation loan companies that lend money for lawsuits.

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Litigation funders focus on non-recourse financing. Because repayment is not guaranteed, they are allowed to charge high-interest rates. However, this means that if the case loses, the litigation funders end up with nothing. Unlike a loan, this system usually doesn’t require the client to give back the money lent if the case is lost.

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Doug Landau was retained by a New Jersey Law Firm, and in a major drug product liability case, where the litigation loan balloon payment was greater than the remaining millions of dollars that were held in a local Virginia lawyer’s trust account. The lawyer had paid the funds to the Circuit Court of Fairfax County Clerk’s Account. Because the size of the settlement, and the fees claimed by involved law firms exceeded the many millions of dollars held by the clerk’s office, that lawyer lost his license and went out of business. Of the fees that they had earned, law firms from all over the country ended up taking between $0.40-0.50 on the dollar. There has been recent litigation about these high-interest loans, as well as the industry that buys structured settlements.

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Litigation loans are not condoned by the Virginia Workers Compensation Commission. The Comp Commission approves settlements with annuities but does not want their periodic payments sold to a post-settlement company for pennies on the dollar. That would defeat the purpose of these protective financial arrangements that are approved by this governmental agency as being “in the best interest of the injured worker.” Doug Landau has been asked by the Virginia Workers Compensation Commission to be their “bully pulpit” for continuing legal education programs, speaking out against injured workers selling their structured settlements.

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A few Abrams Landau clients have gotten litigation loans against their cases. The team here generally does not promote these economic programs, unless absolutely necessary. Abrams Landau has been able to self-finance nearly all its litigation, although it does have a case presently with a significant investment of this type.

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It is important to make sure that your counsel shops around for the best fit, and that you understand that a major part of any ultimate settlement, verdict, or judgment may be payable to a litigation lending company. If you, or someone you know, has sustained a permanent injury and/or have been disabled from worm for a long time, and there are questions about the laws that apply and how to pay for litigation costs, please contact us at 703–796–9055, or email frontdesk@landaulawshop.com.