Thursday, December 27, 2007

Venture Capital Lawsuits:

“The notion of litigation as a separate asset class is a novel one. It's hard to imagine fund managers one day allotting a bit of their portfolio to third-party lawsuits, alongside shares, bonds, property and hedge funds.

But some wealthy investors are starting to dabble in lawsuit investment, bankrolling some or all of the heavy upfront costs in return for a share of the damages in the event of a win.

Profiting from other people's lawsuits, a practice known as champerty, is illegal in some jurisdictions and risks accusations of ambulance-chasing, is concentrating on backing business plaintiffs, where the practice is better established and more accepted.

Pursuing legal claims can be frighteningly expensive. Plaintiffs have to commit management time and cash years into the future with no certainty of success. Getting an outside investor to share some of the financial pain can be very attractive. So can tapping their litigation experience. While most large companies are well resourced with in-house lawyers, few have litigation experience. “

An unfounded lawsuit can put tremendous strain on your restaurant, even if you are properly insured. The United States needs meaningful tort reform where genuine wrongs are righted and where cases brought about as a fishing expedition (cases taken on a flyer to see what shakes from the tree) are costly both to the plaintiffs and their attorneys.

(Link Marginal Revolution)