Thursday, March 24, 2011

Hedge Funds for Lawsuits

This is awesome. As if there aren't enough shady financial instruments out there for nefarious money making purposes. We now enter the era of the hedge fund- financed medical malpractice lawsuit.

I get it. Mounting a malpractice trial is expensive. You have to spend hours upon hours (at $500-800 per) taking depositions. You have to pay off, er, compensate whores, er, I mean, expert witnesses for their time. For a garden variety med mal case, trial attorneys can expect to spend upwards of 100 grand of their own stash. Given that physicians end up winning 70-80% of med mal cases that go to trial, this anticipated outlay of personal funds prior to a verdict can be somewhat discouraging to the less testicularly fortified litigation firms.

And this is part of the reason why malpractice lawsuits have declined over the past ten years. It doesn't have anything to do with the merits of cases; it's just simply too damn expensive to take a complaint to trial. This is the moral hazard that dissuades too many "frivolous" lawsuits. But it also hurts patients. Patients who have been injured through possible negligence may find that there are fewer firms willing to acept the case.

So what to do if you're a med mal lawyer without a fat bankroll? Contact one of these rapacious "lending firms" to front the costs of the litigation. You then pass the burden of the exorbitant interest payments on to your client. Awesome! So if you win the case, the first chunk goes towards your fee (did you think otherwise?). The second chunk pays off the interest on the loan. And whatever is left goes to the patient/client. And you aren't required by law to inform your client that you have leveraged the costs of the litigation. What a country!

3 comments:

rlbates said...

Awful!

M and A said...

Yes, what a country, indeed. Glad you are blogging again. These are the same folks who brought Obamacare on

Marc Stewart said...

I'm a medical malpractice attorney. I actually learn a lot from your blog. Please resume publishing!

I agree that leveraging case expenses is awful. The good news is that this is very rare. I practice in 3 states (not Ohio). I've never once seen an attorney do it.