Alternative Litigation Finance in the U.S.: Where Are We and Where Are We Headed with Practice and Policy?
Great event that anyone involved or interested in the legal finance industry should attend.
The RAND Institute for Civil Justice recently launched a research initiative to analyze and explore the convergence of law, finance, and capital markets in the United States, including phenomena such as outside capital invested in law firms, alternative fee structures, and third party litigation funding. The Program endeavors to examine the effects of alternative litigation finance on the efficiency, fairness, and transparency of the American civil justice system through policy analysis, events, and a comprehensive Web presence at the RAND Corporation site.
The 2010 Conference will bring together practitioners, policymakers, judges, and researchers to discuss and debate issues and trends related to alternative litigation finance in the United States. The extensive program will feature presentations, panels, and speakers on practice and policy topics as well as offer continuing legal education.
Why We Need Trial Lawyers
Mark Robinson and Kevin Calcagnie have written a very powerful Op-Ed piece published in the Wall Street Journal. It is a fantastic piece and I think everyone should take the time to read.
Why We Need Trial Lawyers
The alleged need for “tort reform” has become a refrain in American political life. Yet for all the demonizing of trial lawyers, the reality is that product-liability litigation has become an ever more important means of keeping consumers safe. Continue Reading at WSJ.com
What is Post Settlement Funding?
Post settlement funding is when one purchases an assignment of the right to receive an assigned portion of the settlement proceeds in return for providing immediate receipt of settlement funds. When the defendant or defendant’s insurer ultimately sends the settlement funds to the plaintiff’s attorney, the attorney will forward the assigned amount to the provider of the settlement advance when the settlement check has cleared in the attorney’s escrow account.
Benefits of Working with a Finance Company that Specializes in Contingent Litigation
Law firms avail themselves of a secure source of funds that provides not only for future case development costs, but also for the recovery of monies already advanced on behalf of their clients. In the typical credit facility agreement, participating firms will be able to recover up to 100% of the amount of their case development costs in immediately available cash. The typical program produces many benefits for participating firms, including:
- No principal payment until the underlying case is resolved. The firm is not required to make any principal payments until a case is resolved. Traditional banks require periodic repayment of principal balances.
- Payments can be tied to a firm’s cash flow. Most facilities require only interest payments each month, principal payments are only required when the firm receives income.
- No interest expense to the firm on cases that are won or settled successfully. Most states provide a mechanism by which attorneys are permitted to recover the costs of litigation when a case is brought to its conclusion. In addition to the costs of depositions, expert witnesses, demonstrative evidence, and the like, interest expense paid to third parties can generally be treated as a cost of litigation. Each state has its own ethics rules and opinions, with which participating law firms must comply.
- Larger lines of credit are available. Banks are typically reluctant to lend large sums of money to firms engaged in contingent litigation. As a result, bank lines are generally insufficient to cover the majority of a firm’s inventory of case development costs.
- Reduced risk. Traditional banks are often indifferent to the cash flow requirements of a trial lawyer when a line of credit expires. Most providers have designed their programs to insure that attorneys have sufficient time to bring cases to a successful conclusion.
- Eliminate Phantom Tax. Since advances on case expenditures are generally not deductible the capital that is invested in case development can show up as income to the firm resulting in a tax payment on funds that are not realized or available to either the firm or its partners until the underlying cases are successfully resolved which may be years later.
Unforeseen Risks Facing Trial Lawyers Today
The risks to trial lawyers of being sued for malpractice are surprising and patently disturbing. The best way to protect yourself is through education and action. I highly recommend you take the time to review the statistics of the risks facing plaintiffs attorneys on an ongoing basis. Amicus has made this information available on our sister site Settlement Planning Blog.
After reviewing this abbreviated report please contact us for an in-depth review at 877-926-4287.
Click her for the report on The Most Serious Risks….You Don’t See Coming.
They Knew and Failed To…….
The nation’s largest trial lawyer association, AAJ (American Association of Justice) has recently released a a report highlighting situations where they believe companies knowingly risked consumers’ health and or lives.
True Stories of corporations that knew their products were dangerous, sometimes deadly…..Read Complete Report Here.
Using a Specialty Legal Finance Lender
Legal Finance providers typically provide funding for the cost of developing cases and operating your firm.
Legal Finance providers typically provide four to five times more capital than a traditional lending institution. They can do this because they typically only work with plaintiff lawyers and understand the unique value of your portfolio of contingent cases.
With a more custom tailored lending program, your firm is able to utilize this cost effective capital to increase your firm’s ability to maximize the value of each of your cases.
With most legal finance providers, No principal payments are required on the money until final disposition of the case, either through settlement or adjudication. Understanding the cash flow constraints of contingent fee work.
I am sure you understand that the one thing that is most valuable is your time, find a lender with a program that is simple and will be tailored to your individual practice.
Financial Benefits of Borrowing for a Contingent Law Firm
Many firms believe that it is inefficient to borrow funds for case development costs when they can afford to make such advances out of pocket. However, such is not the case. By utilizing leverage through a revolving line of credit, law firms are able to recover up to 100% of the funds that are perpetually invested in case development costs. Even if these funds were invested conservatively in a retirement fund, the principals of the firm would recognize dramatic financial benefits. Amicus guides trial lawyers with the strength of unparalleled financial expertise in the legal arena.
Trial Lawyers Lack Leverage
Trial Attorneys are caught in an endless cycle of interest free loans to their clients. Worse yet they are using after tax dollars to fund these interest free loans.
If you use your past case profits – your own money – to fund your next case, you’re using after-tax dollars. The IRS sees that money as income, successful growing firms can find themselves trapped in an endless cycle of continually tying up your income in the next case, it’s really operating funds that are not tax-deductible. It is time for contingent fee lawyers to get off this treadmill and reduce their tax burden. This can easily be achieved by utilizing leverage as is common in most other industries . Loan costs are generally tax-deductible as a business expense, so you’re using before-tax dollars to fund your case. In addition, funding ones practice with borrowed moneys eliminates the phantom tax as well as allowing you to utilize the additional capital for firm expansion or to funding partner’s retirement accounts.
That translates to more profit for you to run and expand your business, invest elsewhere, or just to enjoy.
Once a firm has begun to free up its cash flow by using borrowed money another tremendous tax savings opportunity is created. A lawyer can now take the excess cash flow and shelter it by structuring a portion of their attorney fees. The tax benefits of a structured attorney fee arrangement can be tremendous. Structured attorney fees offer the advantage of spreading out your tax burden over the life of your payments. Because the money is taxed as it arrives, rather than in one lump sum, spreading it out offers you the chance to move to a lower tax bracket, taxing the income at a lower rate than it would otherwise have been. Structuring your attorney fees can save you taxes today, smooth out your cash flow as well as provide for your retirement.
Finding the maximum tax advantage in your unique situation is research-intensive, and most trial attorneys are busy.
Let the Amicus Capital Services do that work for you, so you can concentrate on the work you really care about: winning trials.
Three Cases that Every Personal Injury Attorney Should Know
Nobody understands risk and liability better than a Personal Injury Attorney. Unfortunately, the nature of the profession makes its practitioners the ideal target. As a result, the settlement planning process can be a mine field of liability.
To illustrate this reality, we’ve collected three of the most noteworthy national precedents that outline the extent of attorney vulnerability and the importance of expert settlement planning.
Lyons v. Medical Malpractice Insurance Association, 730 NYS 2nd 345, (A.D. 2 Dept.2001)
The Judge indicated that MMI (defendant) contended that the plaintiffs could have and should have independently determined the value for themselves! This problem most likely would never have occurred had plaintiff’s counsel retained their own expert with a duty and loyalty to the plaintiff. That is why ACS surveys the entire market and finds the best programs available with the highest quality companies.
Macomber v. Travelers Property and Casualty Corp., 261 Conn 620 (2002)
The plaintiffs agreed to settle their case for cash and periodic payments (a structured settlement annuity). Plaintiffs alleged that Travelers Casualty misrepresented the fundamental nature and terms of the settlements because they did not disclose the true cost or value of the annuity that was to fund the structured settlement. Plaintiffs alleged that Travelers engaged in practices that enabled them to pay less for the annuities than what they represented to the plaintiffs. The Connecticut Supreme Court labeled these practices “rebating and short-changing schemes.”
Josephine Grillo, as guardian and next friend for Christina Grillo, a minor v. Tom L. Pettielle, T.E. Swate and Hardy, Milutin & Johns, in the 96th District Court of Tarrant County; Texas, Cause NO> 96-145090-92
A plaintiff in a personal injury lawsuit settled a decade ago sued her own attorneys and guardian ad litem for legal malpractice because she was not presented with the option of a structured settlement. A simple tool for plaintiff’s counsel is to provide an Acknowledgement Letter that a structure offer was presented and signed by plaintiff that the offer is Accepted or Rejected.