|A Practice Smart(TM) Feature
DOWN TO BUSINESS
BY MICHAEL BLUM
hedge your bets
Non-recourse financing for money
judgments on appeal
|ATTORNEYS WORK HARD FOR MONTHS OR YEARS TO ACHIEVE A FAVORABLE TRIAL OUT-
COME. CLIENTS AND ATTORNEYS INVEST THOUSAND OF DOLLARS IN FEES AND COSTS. AN
APPEAL ENTAILS PUTTING MORE TIME AND MONEY AT RISK. IT SUBJECTS THE JUDGMENT TO
REVERSAL OR REMAND. AT BEST, IT MEANS ANOTHER YEAR OR TWO UNTIL RECOVERY. IN
THE MEANTIME, THERE ARE BILLS TO PAY, FOR CLIENT AND ATTORNEY ALIKE.
LEVELING THE FINANCIAL PLAYING FIELD FOR PLAINTIFFS AND THEIR ATTORNEYS
Non-recourse appeal financing allows judgment creditors to convert part of the money judgment on appeal into immediate cash, before an appeal is decided. By selling a portion of the judgment on appeal, the judgment creditor eliminates all risk of recovery on the portion of the judgment sold. This is because no repayment is required if the appeal is ultimately lost. The seller gets his money in advance of the appellate decision, risk free.
The money may be used by clients to pay trial or appellate attorney fees, personal bills, reimburse costs, or just to have the peace of mind that they can set cash aside, free from the risk of loss, if ultimately there is no recovery. In addition, attorneys can receive an advance on their lien interest in the judgment on appeal, essentially monetizing the lien before the appeal is decided.
The service may be critical for financially burdened judgment creditors with money judgments on appeal. Immediate funds are made available for appellate attorney’s fees to vigorously defend a judgment on its merits and to minimize the economic strains which often result during the one or two year appeal period.
Experienced trial and appellate counsel are well acquainted with the financial difficulties with which many plaintiffs, ensnared in litigation, must cope. The financial strains on the judgment creditor may compel a settlement for substantially less than the amount awarded at trial. Often unfair settlements are consummated because judgment creditors cannot afford to vigorously defend their judgments on appeal. Appeal financing may provide the resources to sustain plaintiffs and attorneys during the appellate process and bolster the ability to achieve a more just outcome, whether through appellate decision or settlement terms.
WHAT INTEREST IS CHARGED? WHAT INSTALLMENTS MUST BE PAID?
None. The funding is not a loan. There is no interest. No points are paid. There are no installment payments. The purchaser is not a lender. Instead, the finance company purchases a portion of the judgment from the plaintiff or attorney, or in some cases, both. The funds received provide a measure of financial security, safe from loss.
WHAT HAPPENS IF THE CASE IS OVERTURNED?
By acquiring a portion of the judgment, the purchaser runs the same risk of recovery in the appeal as the plaintiff. However, if the plaintiff ultimately loses and recovers nothing, the plaintiff keeps the funds advanced and the purchaser is owed nothing.
WHAT BENEFITS DOES AN APPEAL FINANCE PROGRAM OFFER PLAINTIFFS?
With financial strength and qualified representation, a judgment creditor is more likely to receive a fair settlement offer or favorable appellate result. Financial assistance can remove the urgency for a settlement and send the appellant a message that the plaintiff has the financial resources to go for- ward vigorously. This may prompt the appellant to come forth with a fair settlement proposal, Rather than risk the consequences of a defeat in the appeal. There are no restrictions as to how a judgment creditor uses the money received. If not used to finance the appeal, funds advanced may be used to pay living expenses, legal expenses, or just be set safely aside, free from loss, if there is no recovery.
WHAT BENEFITS DOES AN APPEAL FINANCE PROGRAM OFFER ATTORNEYS?
Attorneys sometimes find themselves in need of cash. An outstanding contingent fee interest in a judgment on appeal with a claim for costs advanced can create tremendous financial pressure on an attorney, a law practice and a family. Appeal financing may convert an attorney’s lien interest in the money judgment into immediate cash, safe from the risks of a court reversal. Like a plaintiff, if the case is ultimately lost and there is no recovery, the attorney keeps the funds advanced and the purchaser is owed nothing.
DO THE CLIENT AND THE LAWYER LOSE CONTROL OF THE CASE?
Emphatically, NO! Only financial assistance is provided to plaintiffs and attorneys. The purchaser maintains a strict “hands off” policy. The purchaser does not provide legal advice or legal services to the judgment creditor, and does not require access to, or review of, privileged client information. Control of the case rests solely with the client and attorney.
WHAT ARE THE ETHICAL CONSIDERATIONS OF A TRANSACTION?
Reputable companies have designed their transactions and business procedures to meet the highest standards of practice and legal ethics. Finance companies do not offer legal advice and do not interfere in the attorney client relationship. Client and counsel maintain control of the appeal and determine all matters of strategy, representations, case management and settlement. Many companies have had their programs reviewed by legal ethics experts, and will provide copies of opinions that the financing transaction fits squarely within the parameters of legal ethics.
A WORD OF CAUTION.
Do your homework. Choose a company wisely. The terms of an appeal financing transaction vary greatly from company to company, so it may be in the seller’s best interest not to base their decision on price alone. Weigh the benefits of selling without recourse a portion of the money judgment on appeal. Consider the benefits to the seller of a non-recourse trans- action if there is no recovery. Consider the experience and reputation of the company with whom you intend to do business. Get references from reputable sources and talk to attorneys who have sold portions of their interests or advised clients who have sold portions of their judgments on appeal. Appeal finance provides a unique, risk-free opportunity to monetize a case long before the appeal has been resolved.
The information in this article is provided for informational purposes only and with the understanding that the author is not engaged in rendering legal, accounting, tax or other professional advice or services.
Reprinted with permission: The American Trial Lawyer
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