IBM attorney: Third-party litigation financing out of hand

By John O'Brien | Oct 24, 2012

WASHINGTON (Legal Newsline) - A senior vice president for IBM on Wednesday said London poker magnates should not be funding lawsuits in the United States.

Bob Weber, IBM's senior vice president for legal and regulatory affairs and general counsel, used the example while laying out his issues with third-party litigation financing Wednesday at the 13th Legal Reform Summit at the U.S. Chamber of Commerce.

As part of a panel with Forbes journalist Daniel Fisher, who reported in January 2011 that J. Russell DeLeon had invested $1.6 million with lawyers suing Chevron over alleged pollution to the Ecuadorian jungle, Weber said it was a perfect example of the problems with third-party litigation financing.

"What could be a better argument against this notion than litigation in U.S. courts being funded by a poker magnate in London?" Weber said.

DeLeon founded the online poker firm PartyGaming and will receive as much of six percent of the long-running case's return for the attorneys. The U.S. Supreme Court recently declined a request by Chevron to review and block an $18 billion judgment against it.

Chevron has also sued the attorneys for racketeering.

"There's absolutely no question in my mind, when you have a third-party funder investing, cases that are on their death bed, barely surviving, tend to last longer in the system," Weber said.

Weber also said there are professionalism concerns.

"It injects a stranger into that delicate attorney-client relationship... a stranger whose only interest is making money," he said.

"It puts the funded party's lawyer in an extraordinarily awkward position."

The business has grown in recent years, with Fisher noting "spectacular returns" for companies that engage in it.

In the effort to regulate the industry, those in it have claimed their loans are non-recourse and should not be subjected to regular lending laws. If a plaintiff loses the case, companies like Oasis Legal Finance see no return.

"Our interests are aligned with consumers. When things go well, we get a nice return and the attorney gets a nice fee. Also, we're making sure the consumer is not in worse shape because they are now in debt," Oasis founder Gary Chodes told Legal Newsline in 2007.

This year, an attempt to ban the industry in Oklahoma failed.

"We're very willing to sit down with House members to work on the bill to properly regulate the industry," said Eric Schuller, the director of government and community affairs at Oasis Legal Finance, after it failed.

Also on Wednesday's panel was attorney John Beisner, who authored a white paper on the industry for the U.S. Chamber Institute for Legal Reform, which owns Legal Newsline.

It calls for the Federal Trade Commission to regulate the industry, as well as statutory safeguards against abuses.

There should be a prohibition on ownership by law firms or investors with interest in law firms and a prohibition on contracts between investors and lawyers, the paper argues.

Third-party litigation financing should also be prohibited in class actions, Beisner wrote.

"In the United States, however, we already have two methods to increase court access: contingency fees and the American rule against fee shifting," Beisner wrote.

"A plaintiff wishing to commence a suit can thus do so in the United States without risk."

From Legal Newsline: Reach John O'Brien at jobrienwv@gmail.com.

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