Originally Published November 20, 2016
While Donald J. Trump won't be the first president to enter the White House carrying a load of civil lawsuits - just ask Theodore Roosevelt, Harry Truman, John Kennedy, and Bill Clinton - he will be the most legally laden president in the history of the United States.
According to a USA TODAY analysis, Mr. Trump will enter the Oval Office with "at least 75" open lawsuits, and that number is expected to grow thanks to unpaid campaign vendors and several women considering defamation suits.
What this means for legal funding, though, is anyone's guess. There is much speculation about what Donald Trump's election means, but if there is one thing we are certain of, it is that many of the predictions will prove to be wrong.
Just look what happened already with two examples:
1. Predictions were abound that if Trump won, markets would drop sharply, and stay down. In fact, after an initial sell-off immediately following his election, markets have rebounded and skyrocketed due to an anticipated increase in infrastructure spending and less regulation within the financial sector. Bank stocks have also risen in anticipation of a possible repeal of many regulations including Dodd-Frank.
2. The stock of Time Warner fell immediately after the election, certainly because the president-elect promised to block their merger with AT&T, but it recently went back up when a member of Trump's transition team suggested the merger might well go through.
Just because early predictions are already proving untrue doesn't mean that we shouldn't throw our hat in the ring and make a few educated guesses about how a Trump presidency may affect the litigation finance industry.
Here are 10 points legal funders should keep in mind about Trump's background and campaign promises when considering how his election might affect the industry.
1. Donald Trump knows the civil justice system well
He has been involved in over 1,900 lawsuits as a plaintiff and over 1,450 cases as a defendant. He is famous for his legal squabbles, especially when it comes to the every man. For example, In February of this year, he filed suit against five neighbors of his Doral golf club in Miami for "destroying" and "vandalizing" the landscaping between their homes and the golf course. The homeowners argued that the plants blocked their views of the golf course, and Trump replied that was never the intention. In actuality, the foliage was planted to block the golfers' view of the homes.
At the very least this signals that he sees litigation as a tool to be wielded, rather than curtailed.
2. Peter Thiel is one of Trump's most visible benefactors
Since Trump's election, Thiel was appointed to the executive committee of Trump's transition team. While eschewing a formal role in the administration, it is clear Thiel will exert his influence.
Undoubtedly, the more people who are familiar with legal funding and its power to do good, the better-especially if they have the ear of the President of the United States.
3. Regulatory agencies may be gutted
Trump called for a 70% reduction in regulations during the campaign, and while that number was most likely hyperbole, it nonetheless signals his mindset towards regulation. Many experts speculate that Donald Trump will indeed gut regulatory agencies and federal oversight, leaving much of that regulation to the states.
That could mean taking the teeth out of agencies such as CFPB, SEC, and FCC. Trump's path towards reshaping regulation has already became much more clear with Mary Jo White's, head of the SEC, resignation.
Some legal funders may see this development as a harbinger for more predictability. Others may still towards long for the days when regulation provided universal rules that all businesses could abide by no matter the state they transacted in.
4. Less federal regulation would likely mean a heavier burden on states
If the reduction in federal oversight and regulation programs comes to fruition, it could shift the burden of oversight to the states. This would force them to develop programs of their own for financial products that are far more ubiquitous than legal funding.
Legal funders may hope that state governments have bigger fish to fry, and as a result, we as an industry will have more time to make the affirmative case as to why constricting regulation hurts consumer choice and why the industry is sufficiently regulating itself.
5. Less regulation = more consumers getting hurt = more lawsuits
Invariably, there will be less regulation. Whether this is a good or bad thing for our economy, net net, can be debated ad nauseum. What we do know is less regulation across may industries will, in the absolute, create more instances of questionable behaviors, most likely resulting in more lawsuits. Without regulation, the way to stop businesses from taking advantage of consumers is suing them when they do, rather than preventing them from doing it in the first place.
More claims and lawsuits by consumers against companies stretching the limit thanks to laxed regulations is a perversely good outcome for the litigation finance industry.
6. Republicans control the federal government and even more state governments
The average person may think that having a Republican controlled government (see #3) means unequivocally less regulation, such as for legal funding. But not so fast! Litigation finance has some strange bedfellows.
You see, Republicans are supported by big business, which is usually who pushes for less regulation. But what happens when regulation actually helps big business. Such is the case with regulating legal funding, which enables large insurance companies to retain their monopsony power of being the sole party legally authorized to purchase a plaintiff's legal claim.
To outsiders, it seems strange for the Chamber of Commerce to argue for rate caps, but here we are.
7. A more conservative bench could accelerate tort reform
Donald Trump has promised to appoint judges that hold a "conservative bent"
That, combined with the Republican control of more local, state, and federal government offices, means "tort reform" may accelerate. Historically, insurance companies are repeat players, incentivized to limit their payouts at every turn. They lobby for tort reform as a means to reach that end.
Every time a judge refuses to certify a class, or an appeals court narrowly interprets a plaintiff's rights, that decision reflects poorly on our justice system and proves to be disastrous for the plaintiff, and thus legal funders.
8. Donald Trump has promised to repeal The Affordable Care Act
Many people predict that this will dramatically decrease the number of insured citizens, potentially leading to millions losing their insurance overnight. Not having health insurance when tragedy strikes adds complexity and ambiguity to a legal claim. On the flip side, it increases the opportunity for financing associated with paying medical costs and bills.
9. VP-Elect Mike Pence is pro legal funding
Mike Pence is the last sitting governor to sign a legal funding law in effect when Indiana passed regulation in 2016. The law codified the practice into law, set rate caps at 36%, and specifically excluded legal funding from the definition of a loan.
Although many legal funders have issues with the law that Indiana passed and believe it will limit consumer choice, it is less draconian than what was passed in other states, such as Tennessee. Your Vice-President-Elect is a litigation finance fan, ladies and gentlemen!
10. Who knows?
Many industry leaders today are asking the simple question, "Just who is Donald Trump?"
Winston Churchill once used the phrase "a riddle wrapped in a mystery inside an enigma" to describe Russia. Many Trump critics would say the same about The Donald. His successful bid to be the 45th POTUS has thrown many industries into flux, and questions about how his litigious past will predict his future policies will persist well into his presidency.
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