Max Volsky’s “Investing in Justice: An Introduction to Legal Finance, Lawsuit Advances and Litigation Funding” is the first comprehensive overview of the rapidly growing plaintiff financing industry. Plaintiff financing junkies that we are, we lapped the book right up and highly recommend it to anyone who wants to better understand the world of plaintiff financing, from personal injury financing to commercial litigation finance.
We also interviewed Volsky, an attorney and founder of the commercial legal funding group LexStone Capital. He offered up his thoughts on plaintiff financing and where he thinks it’s headed, and he called out the Chamber of Commerce for opposing plaintiff financing, which he believes can be beneficial to its members. His excitement over the industry and its potential for growth was evident, encouraging, and dare we say, infectious. Ten questions with Max Volsky follows.
When I finished law school, I worked in finance and was looking to combine my expertise in both fields. That is when the thought came to me about a new type of financing that would allow litigants to monetize their legal claims. I started to research the industry on the internet, and there was not that much information. But what fascinated me about it was its ability to help people access justice and the industry’s potential to disrupt an inefficient model.
I don’t think there was any one experience, but rather a confluence of factors. Being in this industry for more than a decade, I often interacted with lawyers, policymakers and financial professionals who were only vaguely familiar with plaintiff financing. There were a lot of misconceptions and confusion about what the industry does, what the various niches of the industry are, and how the funding process worked. There was some information out there, like law review articles, that addressed these topics piecemeal, but I wanted to provide a comprehensive overview of these topics. I’ve always wanted the industry to be more transparent and better understood.
Definitely. I wanted this book to be useful to a wide audience — not just practitioners — because each audience has their own misconceptions and questions with respect to the industry.
I think it has done very well. I am very happy with the results. I regularly get positive feedback from people who have read it. I do hope to update the information in the book next year and make it even more useful.
The funding of commercial litigation is definitely a growth segment that is going to become more and more popular. Other niches, like defense-side funding and divorce funding, are widely talked about but are very underdeveloped at the moment. I believe both of those will also be growth segments in the medium-term.
There are a number of reasons. There has historically been a perception that the medieval doctrines of champerty, maintenance and barratry made investment in this area particularly risky. Because of this perception, investors demanded higher premiums for their capital, making litigation finance expensive. However, these doctrines have for the most part become obsolete in the U.S. and investment in legal claims is permitted by the majority of states. As more people begin to understand the potential of the industry to make the legal system more efficient and that the law in most states is favorable to plaintiff financing, I expect the industry to become more mainstream.
As an attorney, my practice is very limited, but if a client involved in litigation needed money for experts, working capital, or personal expenses, I definitely would recommend plaintiff financing as a way of monetizing the lawsuit before it is resolved.
Two things. The first is why commercial funding companies are not as active in responding to challenges that affect the industry. Commercial funders need to have a bigger seat at the table, because any legislation that is enacted usually affects the entire industry. I would like to see commercial funders become far more proactive in educating policymakers about the benefits of litigation finance . The other thing that puzzles me is the position of the Chamber of Commerce as an opponent of the industry. It is very clear that litigation finance supports meritorious cases, while denying funding to cases without merit, making the legal system more efficient. There is no incentive to invest in bad claims, because investors don’t make money when claims fail. What the Chamber of Commerce doesn’t realize is that a lot of its constituents, namely businesses, are potential recipients of plaintiff financing. The Chamber of Commerce is in effect arguing against the best interests of its members, who stand to gain from a financing option that increases legal access, while providing a number of other benefits.
Ten years is very far in the future and it is very difficult for me to predict where the industry will be then. Right now the field certainly is in a hyper-growth stage, with new technologies enabling products that will disrupt and improve the industry. In the near future, I believe that most of the top law firms will use plaintiff financing in one form or another, and litigants will view this type of financing as a mainstream option.
Plaintiff financing is a very nuanced industry, but perhaps the most important point is that plaintiff financing really empowers participants in the legal system, improves access to the legal system, and makes the legal system more efficient.
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