Alternative Litigation Financing Sparks Malpractice Claim
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A modern-day offshoot of the contingency fee arrangement is “alternative litigation financing.” Also known as third-party litigation financing, A.L.F. is the practice of making cash advances, usually to a litigant, to be repaid from the proceeds from the litigation. There is plenty of room for debate the pros and cons of this developing trend. Supporters may argue that this practice allows an injured plaintiff to take an “advance” on an anticipated recovery to address financial hardship before reaching a settlement or verdict. This is particularly useful for injured plaintiffs who cannot return to work. But attorneys associated with litigation financing may be susceptible to claims when something goes awry.
The U.S. District Court for the Northern District of Illinois recently considered this inquiry in Client Funding Solutions Corp v. Crim, Case No. 10-cv-482. In this case, a former client sued her attorney for referring her to a loan servicing company after she asked her attorney for a personal loan. The plaintiff sustained injuries arising from a commuter train accident. During the litigation, the plaintiff underwent various procedures and was unable to afford her medical and personal expenses. Instead of providing a personal loan, the attorney referred her to a litigation finance company that issued her a $108,500 loan in exchange for a 45-60% interest rate to be paid following her recovery. Although the plaintiff did recover in the litigation, she was forced to pay the litigation finance company about four times the amount of the original loan pursuant to her contract.
Read original articleTags: financing, personal loan
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