Beware Lawsuit Loans
Greg Land of The Fulton County Daily Report recently wrote an article about an Atlanta Law Firm Getting Into Trouble for Lawsuit “Loans”
In the article, it notes that Lawsuit Financial Inc. of Southfield, Mich., sued Atlanta lawyer Earl A. Davidson and his firm, Giddens, Davidson & Mitchell, in Fulton County Superior Court earlier this month to collect its $25,000 loan plus much more than that in fees and interest. Lawsuit Financial was charging 100% a year in interest.
Davidson, the attorney that was sued for taking the loan, was disbarred earlier this year by the Georgia Supreme Court for misusing funds in his trust account, not paying his dues to the State Bar of Georgia and not complying with continuing legal education requirements.
Lawsuit Financial is one of a number of businesses that finance lawsuits by providing money to personal injury victims who pledge to pay back the funds if they successfully resolve their cases. While these are frequently called loans, the documents fine print shows that the advances are generally regarded by state regulators as investments. As a result, Georgia bank regulations and usury laws don’t apply.
According to Lawsuit Financial's Complaint filed March 4 in Fulton County Superior Court, Davidson assigned portions of the outcomes of 10 suits in Fulton and DeKalb County State Courts to Lawsuit Financial for $25,000.
According to the DeKalb County court records, at least two of the cases were settled several years ago; one could not be located. In Fulton State Court, all of the cases had settled by 2003.
Lawsuit Financial’s representative noted, "Obviously, anytime an attorney is getting advances from a company like mine, they may be having issues," he said. "But he was with a well-regarded firm, [and had a] good reputation, member of the bar in good standing when I checked."
Another company specializing in funding for lawyers and law firms, Advocate Capital, located in Brentwood, Tenn., did not respond to a request for comment. But its Web site says, "If a case is abandoned or lost, you would be required to repay the amount advanced against the case and any outstanding interest."
Most loans to injured plaintiffs average $3,500 or so. Some law firms may borrow as much as $250,000 and $1 million, although they can go much higher.
The case is Lawsuit Financial v. Giddens, Davidson & Mitchell, No. 2008CV141417.
The article is found at http://www.law.com/jsp/law/LawArticleFriendly.jsp?id=1206528548016