What would you think if the owner of a grocery store chain took aim at the private financing of chicken farms, and demanded that the federal government ban partners from investing in the farms in exchange for a share of the gross revenues? Wouldn’t you think that critic shouldn’t butt his nose into someone else’s business arrangements, and that Uncle Sam should stay out of the business of chicken farming?
And let’s say that critic also charged that private farm financing encourages the farm operators to test questionable chicken-raising methods and produce substandard chickens. And that third-party financing raises a serious ethical question whether the farmer is more interested in the quality of his chickens or the outside financial backers. Wouldn’t you think that the critic is also illogical in his thinking about the farmer’s motivation and methods to produce good chickens? Isn’t it more logical to believe that a chicken farmer would protect his partners (and his own position) by trying to raise the best chickens, using the best methods?
Yet that is the unique logic behind what the President & CEO of the U.S. Chamber of Commerce said in his annual “State of American Business” address. Thomas Donohue said the following:
We’re also aiming to stop the alarming rise of third-party litigation financing. That’s where outside investors fund lawsuits in exchange for a share of the award or settlement. This encourages the filing of frivolous claims. It invites testing questionable claims in court. It provides an incentive to prolong cases. And it raises serious ethical questions. Who does the lawyer really represent–his client or the outside financial backers? In our business, we hear dumb ideas every day of the week. But this one takes the cake!
Really? Let’s walk through that statement.
First, the financing arrangements of any legally operated private law firm and its lawsuits are nobody else’s business, and there’s nothing in the U.S. Constitution that makes it Uncle Sam’s or any state government’s business. I don’t care if you hate trial lawyers more than any profession in America, it’s their business and their client’s decision to file a particular lawsuit. And if the lawyers are running the firm and filing lawsuits legally, it’s nobody’s business how they get financed and paid (assuming, of course, they’re not publicly selling stock in their firm). No privately held member of the U.S. Chamber wants Uncle Sam overseeing its financing arrangements. Isn’t that why the Chamber fought the Dodd-Frank bill and actually sues to prevent excessive regulation of American business? What makes privately owned law firms so unique that the federal government should regulate their financial deals? And what would the Chamber say if Uncle Sam pried into its dues structure and contributors’ list? Law firms are already subject to the the same government oversight regulations and mechanisms as any other privately held business.
Second, how does using third-party financing in any business invite poor decision-making with substandard inputs and a deterioration in quality? Why would a lawyer want to look like an idiot to his investors by filing crummy lawsuits with no chance of victory? Where in American business, or in any business in the world for that matter, does that happen? What made Mr. Donohue ascribe that type of illogical behavior to trial lawyers? Does he believe that third-party financing of any service industry results in poorer quality?
And if third-party financing of lawsuits is such a “dumb idea,” as Mr. Donohue put it, why does it happen at all? Doesn’t he trust “destructive capitalism” to put an end to any business practice that doesn’t work?
Third, the statement is evidence of the Chamber’s distrustful attitude towards local juries. Don’t they think that a group of average Americans is smart enough to smell a truly frivolous claim from a mile away and deny the claim? The Founding Fathers trusted local juries and millions of Americans still do – apparently including the Chamber, whose member companies bring lawsuits to court all the time?
Nothing in that statement makes any sense to me, except that it’s another way for the Chamber to infringe on our 7th Amendment right to a civil jury trial, and to cap the revenues earned by trial lawyers in their business. The business community fights against federal laws which would cap compensation for Wall Street executives, oil company executives, and any other business owner in America, and I agree with that position. But when it comes to contingent fee trial lawyers, the business community does a 180 and hypocritically wants Uncle Sam to tell the lawyer how much he can make and NO MORE.
The “cake” in this discussion belong to the Chamber for proposing such a dumb, unconstitutional and un-American idea.