Posted Oct 01, 2007 05:30 pm CDT
Once upon a time, plaintiffs lawyers had to front their own litigation costs. Today, companies lend them the money—at a price.
A retired New York judge, for instance, runs Counsel Financial Services, reports the Buffalo News. It loans lawyers money to fund litigation at annual interest rates ranging from 18 to 32 percent. Credit lines run from $50,000 to $25 million. Partners who borrow are required to provide personal guarantees and get term life insurance to cover the debt.
Founded in 2000 by a suspended attorney who had reportedly pleaded guilty to filing a false federal tax return, the company is now owned by a family trust that he says he doesn’t manage. Although it took a couple of years for the Amherst, N.Y.-based company to become profitable, it grew its lawyer loan portfolio from $3 million to $160 million to in just five years. It now employs 24, and expects to have 35 workers by next year.
Among the 150 law firms to which it has lent money: Masry & Vititoe. Its real-life paralegal Erin Brockovich became a household name when Julia Roberts portrayed her in a movie about her work on a major environmental cleanup case. Now, with the help of Counsel, the California firm doesn’t have to bring in another law partnership to fund its biggest cases, the article reports. But, at the time of the case portrayed in the movie, “We really had no other options. When you’re out of capital, you really have nowhere else to turn,” said Christopher Levinson, the firm’s administrator.