60 Minutes: Litigation Funding: A multibillion-dollar industry for investments in lawsuits with little oversight
Ever heard of litigation funding? It's a relatively new, multibillion-dollar industry where investors fund lawsuits. Here's the idea: say someone was wronged by a big corporation but has no money to sue it. A litigation funder will pay for their court battle. In essence: they're betting on the lawsuit the way traders bet on stocks. If it's successful – they make money, sometimes a lot of money; if it fails – the funders get nothing – their investment is lost.
Litigation funding can help in cases where otherwise the little guy who's suing would just get crushed or lowballed by defendants with deep pockets. Problem is – this market is exploding with nearly no rules or oversight.
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But Maya Steinitz, a law professor at the University of Iowa, says there are ethics rules for lawyers, but not for these investors.
Maya Steinitz: The funders are not regulated. There's nothing precluding them legally from pressuring a client to settle. The rules of ethics are very clear that the lawyer has to abide by the wishes of the client. But human nature is human nature. There may be an inclination to be pulled towards the person who is paying.
Lesley Stahl: Why is this important? Why should someone out there who's not involved in a lawsuit care?
Maya Steinitz: For multiple reasons. First of all, there is this new industry and a new type of player, "litigation funders," who are reshaping every aspect of the litigation process - which cases get brought, how long are they pursued, when are they settled. But all of this is happening without transparency. So we have one of the three branches of government, the judiciary, that's really being quietly transformed. And there's -
Lesley Stahl: Very little oversight.
Maya Steinitz: Very little oversight.
Lesley Stahl: Who is working to impose regulations, insist on transparency in this industry?
Maya Steinitz: One entity that's been very vocal is the U.S. Chamber of Commerce that represents big businesses because the sector that's most concerned about this is big corporations now there's money to sue them, and there's money to persevere, and not to settle early at a discount.
Lesley Stahl: Big business would like to have regulation? How interesting, 'cause they don't like regulation.
Maya Steinitz: Generally.
Lesley Stahl: Except when it helps them
Maya Steinitz: Generally.
