STEPHEN MOORE: Third Party Litigation Funding Scams Hurt All Of Us
Trial lawyers have been the bane of U.S. employers and families for many decades, sucking blood out of the economy like a herd of mosquitos. The ambulance chasers profit off of others’ misery, oftentimes in class action…
Trial lawyers have been the bane of U.S. employers and families for many decades, sucking blood out of the economy like a herd of mosquitos.
The ambulance chasers profit off of others’ misery, oftentimes in class action suits making tens of millions of dollars for themselves and thousands of dollars for the injured parties. What a deal.
Excessive litigation is estimated to shrink the U.S. productive economy by up to $500 billion a year. Tort costs have exploded in recent years at an annual return of 7.1%, more than twice the inflation rate.
Yes, victims deserve to be compensated for corporate bad behavior, as a matter of justice and deterrence. but just because you have an injured party doesn’t mean you have a company villain. If everyone who breaks a leg skiing could sue the manufacturer of the skis, there would be no skiing.
Back in the 1990s the Republicans put a muzzle on the most rapacious lawyers with the most outrageous harassment lawsuits. Lawsuit reform was part of the Republicans’ “Contract with America” from 1994. It didn’t help that 80% or more of the trial lawyers’ political contributions went into the coffers of the Democratic Party.
But now trial lawyers have courted the GOP and conservative leaders with a spate of lawsuits against big tech and big media. These are two groups that conservatives have traditionally felt are hostile to free markets and conservative values.
A big problem is the new scam called “Third-Party Litigation Funding,” which allows law firms to find investors to fund lawsuits in exchange for getting a share of the judgment if there is a guilty verdict.
So unknown investors secretly bankroll lawsuits for profit. What’s really nefarious is that the investors, not the injured party, often walk away with the bulk of the jackpot awards.
These lawsuit investment funds are growing rapidly and captured more than $2 billion in new financing agreements for 2024. The total assets of these funds have grown to $16.1 billion.