CAN I SELL SHARES IN A LAWSUIT?

A question for all you lawyers in cyberspace. Can I set up a corporation to persue a lawsuit, and sell shares to investors? I don’t see why not-especially if lawyers can involve me in a class-action lawsuit (without my consent).
Here’s the scenario: I have an idea for a great lawsuit against some huge, well-known corporations. Armed with lots of junk science., I’m confident that this will yield a huge settlement, possibly on the order of the tobacco lawsuits-billions, potentially! My problem-I don’t have the money to hire a topnotch law firm, so can I set up a corporation, and sell shares to investors? Seems like an ethical way to do it, and evens the odds out a bit.
Anybody interested?

If the lawyers are as confident as you that you,re going to win they will be all over you for a piece o the action. In the Texas tobaco case there were lawyers who hadn’t even worked on the case submitting million dollar bills to the state for ‘consultation’,at least one got paid, happened to be a friend of the Attorney General,they had talked about the case in general,so the two of them figured it was a ‘consultation’. As for setting up a corporation,don’t think any one would care where you got the money to start a case. If you win,it’s your money, you can do what ever you want. Of course the defendant will use the fact that you set up this corp. and filed suit purely as a profit making scheme to discredit your case. Lawyer can’t include you in a class action without your permission,that’s why they send me the letters and file a copy of recipients with the court. If I don’t opt out I am part of it. If I later try to sue,they check the records to see if I was mailed a letter and opted out.Doesn’t matter if I got the letter or not.Courts follow the legal fiction that the post office delivers all mail. It is up to me to prove I never got one,or that I never heard of the class action.BTW I don’t think you’re going to suceed in your suit against AOL,just because you keep getting bumped as you are typing a long post to SD. They are gonna blame your local phone company.


“…”-Marx

Well I know ABSOULUTY nothing about this kind of stuff at all. But it seems like the money you get back will go to your “bussiness” and taking it for your self would be some sort of embezzlement (especially since you have investors). So you might not want to do this unless you plan to stay in bussiness or go bankrupt.


Formerly known as Nec3f on the AOL SDMB

No need to setup a corporation. You can have people simply sign a contract with you that they will give you X dollars to be used to hire a topnotch lawyer and you agree in return to give them Y% (or Z dollars) from a successful lawsuit.

If you really have you heart on setting up a business to do this, the you could again set up a sole propreitership (sp) and the people would sign contracts with the company. Once the case was over you could dissolve the company and keep the remaining assets. Keep in mind that this is likely a poor idea since you would get nailed in personal (when you dissolve the company) AND corporate taxes (when the company gets paid from the lawsuit and therefore generates a profit) where as with the above you would only have personal taxes to worry about. I may be wrong about the taxes thing since I am not an expert, but that is my understanding.

I can’t comment on the laws in your 50 states, but I’m pretty sure that your proposal would be illegal in Canada, and likely in the U.K. as well.

In our common law tradition, taking shares in an action for purely financial motives was a tort, called champerty; providing money to maintain an action in which you have no personal interest was a tort called maintenance. These torts were based on the idea that going to court is to vindicate personal rights and interests, and should not be considered a money-making industry.

The rules have been relaxed somewhat in most of the provinces and, I believe, the U.K. For example, donating to a legal defence fund, becuase of one’s personal belief in the cause, is not considered maintenance.

In some jurisdictions, but not all, lawyers are now allowed to take a contingency fee, which at common law was illegal. The reason for the change is that for a person of modest means, if they can’t hire a lawyer on a contingency, they may not be able to go to court at all. The contingency fee is the lesser of two evils. It’s subject to close supervision by the courts to try to ensure that it is not abused.

Sorry folks, what you are discussing is a crime called “Champerty”, which is defined by Black Law Dictionary as “A bargain by a stranger with a party to a suite, by which such thrid person undertakes to carry on the litigation at his own cost and risk, in consideration of of receiving, if successful, a part of the proceeds or subject sought to be recovered.”

In Kentucky champertous contracts are void and unenforceable.


“Owls will deafen us with their incessant hooting!” W. Smithers

It’s illegal here, too (Montana). The thinking is that a suit is instituted to collect damages – meaning, to recover for damage personally done to you or your business or whatever. There is no place for a stranger to the suit, because the stranger did not suffer any damages and therefore is not entitled to any recovery. If you want to finance a lawsuit by taking loans from people, you can do that (subject to the laws regarding usury), but you can’t promise them a particular cut of the damages pie as consideration for floating the suit.

I understand the concept of Champerty, but why are people allowed to sell their judgements? Just yesterday I got an E-Mail from some landshark soliciting me to sell him any legal judgements I might have been awarded. How is it legal to sell a judgement to someone who has no direct interest?
Seems like the lawyers want it both ways!

No, I don’t see it that way. Offering to purchase a judgment you have already received it hardly the same as financing or encourage a pending (or yet to be filed) lawsuit.

A judgment is a final, completed action. It says “Party A owes Party B X amount or dollars (or title to a piece of property, etc, etc)”. It is a final determination of people’s rights and is similar, in a sense, to an IOU. It represents your court-determined right to collect something, ususally money, from someone else. It is your property. Therefore, if you own this right (this judgment), you can sell it to someone else.

In contrast, a law suit is only one party’s allegation that they are owed money (or something else). No final determination has been made by a Court as to validity of the party’s claims. Purchasing a right to receive part of a judgment before it is made is speculative and clearly different from buying (or discounting) someone’s right to receive a final judgment that is due and owing.

To put it another way – Before judgment = you might owe me money. After judgment = you definitely owe me money. Seems pretty clear to me.


“Owls will deafen us with their incessant hooting!” W. Smithers

I want my money back Gene! Either give it to me or I’ll sue!Getting me involved in illegal acts. Thanks,Frank and Jodhi,I did not know that.JT, litigation is the national pastime in the U S of A.That contingency fee has a lot to do with that. And the slackening of the laws against 'soliciting’Yall keep a close eye on the attorneys, solicitors,and barristers over there.Re: Why are people allowed to sell judgement?. Just because you win all the appeals and get a judgement against some one doesn’t mean you’ll get your money any time soon or at all.Loser may not have any assetts.You got a judgement for $500 against those damn owls? I’ll buy it for $25 and I,ll worry about collecting it. You get a sure $25 I may get $500 someday and who knows what i’ll spend to get it.


“Something inciteful that some one else once said”- Suhm Wonn (1397-1334)

gene, I think those kinds of offers are to provide you instant cash for what is legally owed you but which you have not yet collected. For a small consideration they will take all the trouble and worry of collection off your shoulders, give you some fraction of the cash now, and laugh all the way to the bank.

I have seen ads on TV here to purchase lottery winnings (usually paid out over time) as well as legal judgements. I have to assume they have someone on their staff who evaluates the likelihood of ever actually collecting and they only go for the sure things. At the very least there has to be some sort of sliding scale. My guess is that if they’re interested enough to want to buy it from you, then it’s probably worth your while to do it yourself.

“non sunt multiplicanda entia praeter necessitatem”

Sorry, nobody seems to have caught on to the implications of what I propose-it would have the effect of setting up a “futures” market for lawsuits, which would allow financially strapped litigants to seel their expected award in advance; much the same way as a farmer sells his anticipated crop to a factor.
Here’s an example: Grandpa is seriously injured when his Audi 5000 crashes through a wall (unintended acceleration). Because gramps is 86 and may not live to see his suit settled (perhaps 5-10 years from now), he elects to sell his interest to an investor. I don’t see anything wrong with this, or any essential diference from the lawyer advancing funds from his own pocket to the plaintiff.
Establishing a futures market would have other benefits as well-it would increase the amount of legal work available!