So, it is March 20, 2020. We don’t know much about much in terms of what comes next. Stress and anxiety are most folks constant companions at the moment I’m certain. (And I bet a lot of you weren’t expecting the need to tech competence under the ethics rules to come at you quite this fast.) Whether or not there will be things to read here probably matters almost not at all to most people. Nevertheless, for better or worse, as long as I’ve got access to the internet I will plan to continue to post contents on the same weird and unsettling sort of “schedule.” Today’s another one of those days.
Today’s post is an opportunity to talk a bit about the dark side of litigation funding. Now, do not get me wrong, I’m generally “pro” when it comes to the topic of litigation funding. In fact, I had the opportunity to be a lawyer for one of the early litigation funding companies that operated in a niche, high-end space. Even then, one of the consistent issues for a company doing things the right way was the stigma of litigation funders as being companies that would take financial advantage of people in need.
Today’s story isn’t exactly about taking advantage of the kind of person in financial need you might think of, but it certainly is a story that sheds some light on unsavory aspects of an industry that speculates on the outcome of litigation.
Today’s story though also is something of a revisiting of the travails of a prominent California law firm that I’ve written about a few times in the past. Those posts had focused on a very contentious set of litigation matters between the firm and one of its former partners that effectively boiled down to a “he said, it said” sort of situation where the “he” was saying that the “it” was engaged in financial fraud and fired him when he raised questions about it and the “it” said that “he” was a sexual harasser. (If you aren’t familiar with that post, you can catch up here.)
It’s been a very bad couple of weeks for just about everyone in the United States. It’s been an even worse couple of weeks for John Pierce, the founder of the Pierce Bainbridge law firm. It has been such a bad couple of weeks that it is hard for an objective viewer not to think that the previously-referenced “he” seems to have a leg-up in proving his side of events against the “it” in the “he said, it said” landscape.
Before elaborating on the litigation funding issue, just a short recap of the recent chronology of events for the founder of this particular law firm.
- March 10, 2020 – news comes out that Pierce has been placed on leave over financing questions.
- March 11, 2020 – Pierce, along with his law firm, gets sued by West Coast Business Capital over alleged default on a contract where Pierce allegedly unilaterally signed over a percentage of his firm’s future receivables in exchange for an immediate injection of cash.
- March 12, 2020 – the lawyer for Pierce Bainbridge in the “he said, it said” litigation moves to withdraw from the representation in a filing that implies it would be unethical for the lawyer to continue to represent that firm.
- March 16, 2020 – news comes out that Pierce Bainbridge has been sued by another former lawyer, this time in Philadelphia, over claims that he was forced out over one of the cases that Pierce had made allegedly over-inflated representations of the value of in connection with the original litigation funding deal that started all of this about two years ago.
And, about that deal, that is the deal with Parvati Capital that was front and center in the allegations in the “he said, it said” litigation. As a result of the Philadelphia suit, the details of that arrangement have come out and involve a highly -unusual approach to litigation funding where the law firm was given the sole responsibility for placing a value on their cases as part of agreeing to a 50-50 split with the litigation funder on the fees obtained in such future cases.
If you have access to Law360, you can read a pretty good article about that piece of the puzzle, one in which a former law partner of mine (who I practiced with back when I had the chance to represent a good litigation funding company many years ago) speaks on the ethical problems with the Parvati Capital deal. (Spoiler: pretty squarely an RPC 5.4 problem since it quacks very much like a fee-sharing duck.)
There are lots of aspects to dealing with litigation funding arrangements that can raise difficult ethics issues. But there are a variety of ways to obtain litigation funding within the ethics rules. Interestingly enough, while the Parvati arrangement seems very problematic as to some issues, and while having the lawyer assign a value to cases is bad news for a variety of reasons, such an approach does avoid altogether problems with navigating how to share documents and other details with a litigation funder for purposes of evaluating a case while doing what can be done to comply with RPC 1.6 and seek to protect privilege and work product.