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Yesterday, I posted a blog about an incident that occurred in Ohio where a man was killed when struck by a bus. The post caused me to ponder an issue that comes up in my office, now and again. It is an important issue and one, I thought, that was worth sharing with those of you who have utilized or plan to utilize lawsuit finance services. Simply stated: What are the ethical ramifications of entering into a legal funding contract with a respresentative or derivative client?

By representative or derivative, I am referring to a case where the injured person is mentally incapacitated, a minor, or someone killed in an accident and whose rights are being pursued by an estate representative. In these instances, both the lawsuit funding company and the attorney must be very careful.

In a wrongful death action, like the Ohio case from yesterday’s post, the handling attorney must correctly advise the litigation funding company representative who the heirs are and what the likely distribution is. Will the entire recovery go to a particular person or be split among several? If split among several, what is the projected case value and what are the likely percentage splits? The legal funding company can provide case funding only against that share of the potential proceeds belonging to the individual seeking funding; it cannot fund one heir on the larger case value. If an inexperienced or uneducated lawsuit finance company attempts to do that, the attorney should speak up, point out the mistake, and prevent it, because the case will be very difficult to settle or resolve with a lopsided legal cash advance standing in the way. The legal finance company may be able to provide funding, individually, to several heirs, but only against each heir’s potential share, as each value is projected by the handling attorney.

As to the minor or incapacitated plaintiff, legal funding should, probably, not be provided, at all. If a lawsuit finance company is willing to do such a transaction for a minor or incapacitated person, again, the attorney should usually step in and stop it. A lawsuit funding company (or any vendor) cannot contract with someone who lacks the capacity to contract. On the other hand, if a lawsuit cash advance is absolutely necessary for the incapacitated plaintiff’s sustenance or medical treatment, the attorney could take a proposed legal finance contract to the handling judge (probate or circuit) and get a transaction approved by the judge on a "best interests of the client" basis, with the personal representative signing the agreement in a representative capacity. Such a transaction should only be completed by judicial order and only when absolutely necessary.

Alternatively, if the representative person is responsible for medical care or is receiving a portion of the proceeds for the recovery of money he/she has provided for medical care, household help, nursing services, etc., it is possible to provide lawsuit financial services to the representative against his/her share of the recovery. Here again, though, the attorney must deal with the litigation funding company representative in a fair and ethical manner. The attorney who directs funds to one plaintiff or another to avoid the legal finance company’s lien could face a lawsuit or a bar complaint for ethical violations.

If you ever have a client who is seeking legal funding services under any of these scenarios, I advise proceeding with caution. Call me at Lawsuit Financial, toll free, at 1-877-377-SUIT (7848), even if you are proceeding with a competitor. I am happy to provide practical advice and assistance to InjuryBoard members, their clients and litigation funding companies on appropriate methods to utilize so that clients may receive the legal financial help they need in an ethical and sensible manner.

One Comment

  1. Gravatar for Mike Bryant

    Interesting advice as to the cases where it hurts or shouldn't be done. Thanks for the information.

Comments are closed.