Abstract

http://ssrn.com/abstract=2423541
 


 



Incorporating Legal Claims


Maya Steinitz


University of Iowa - College of Law

May 27, 2014

Notre Dame Law Review, 2015, Forthcoming
U Iowa Legal Studies Research Paper No. 14-15

Abstract:     
Recent years have seen an explosion of interest in commercial litigation funding. Whereas the judicial, legislative and scholarly treatment of litigation finance has regarded litigation finance first and foremost as a form of champerty and sought to regulate it through rules of legal professional responsibility (hereinafter, the ‘legal ethics paradigm’) this Article suggests that the problems created by litigation finance are all facets of the classic problems created by ‘the separation of ownership and control’ that have been a focus of business law since the advent of the corporate form. Therefore, an ‘incorporation paradigm,’ offered here, is more appropriate. ‘Incorporating legal claims’ means conceiving of the claim as an asset with an existence wholly separate from the plaintiff. This can be done by issuing securities tied to litigation proceed rights. Such securities can be issued with or without the use of various business entities. The incorporation paradigm also opens up the possibility of applying practices of corporate governance to litigation governance.

Indeed, in certain previously–overlooked real life deals, creative lawyers used securities tied to litigation proceed rights as well as corporate governance mechanisms. The Article analyzes and then expands upon such instances of financial–legal innovation suggesting how various business entities can be used to deal with the core challenges presented by the separation of ownership of and control over legal claims, specifically, the problems of (1) extreme agency problems; (2) extreme information asymmetries; (3) extreme uncertainty; and (4) commodification.

In addition, the Article discusses how incorporation of legal claims can reduce various costs that litigation imposes in other transactions, such as mergers & acquisitions.

Number of Pages in PDF File: 65

Keywords: litigation finance, alternative litigation funding, third party funding, mergers, acquisitions, finance, corporate governance, champerty, securities, business organizations

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Date posted: May 28, 2014 ; Last revised: August 5, 2014

Suggested Citation

Steinitz, Maya, Incorporating Legal Claims (May 27, 2014). Notre Dame Law Review, 2015, Forthcoming; U Iowa Legal Studies Research Paper No. 14-15. Available at SSRN: http://ssrn.com/abstract=2423541

Contact Information

Maya Steinitz (Contact Author)
University of Iowa - College of Law ( email )
Melrose and Byington
Iowa City, IA 52242
United States
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