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 legal funding industry.
Legal funding junkies that we are, we lapped the book right up and highly recommend it to anyone who wants to better understand the world of legal funding, from plaintiff personal injury funding 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 legal funding and where he thinks it's headed, and he called out the Chamber of Commerce for opposing legal funding, 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.
1. What prompted your interest in the legal funding industry?
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.
2. Was there one specific, stand-out experience/case that prompted you to begin writing this book?
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 legal funding. 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.
3. In the preface you write that your book is "intended as a resource for investors, consumers, the legal community, policy-makers, business executives, and academia." Did you always plan to target such a wide audience?
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.
4. How has your book done?
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.
5. What type of legal funding do you believe has the biggest opportunity for growth in the United States?
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.
6. Why do you think legal funding isn't more widely used?
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 legal funding, I expect the industry to become more mainstream.
7. Do you encourage your own clients to take legal funding?
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 legal funding as a way of monetizing the lawsuit before it is resolved.
8. What puzzles you most about the legal funding industry or perception of the legal funding industry in the United States?
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 legal funding. 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.
9. Where do you think the legal funding industry in the United States will be in 10 years?
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 legal funding in one form or another, and litigants will view this type of financing as a mainstream option.
10. What is the one thing that you want everyone to know about legal funding?
Legal funding is a very nuanced industry, but perhaps the most important point is that legal funding really empowers participants in the legal system, improves access to the legal system, and makes the legal system more efficient.
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