Earlier this week the New York Times reported on a new “investment fund.”
Instead of investing in stocks or bonds or even mortgage-backed securities, Juridica Capital Management invests in lawsuits. Juridica, says the New York Times, “invests in one side of a lawsuit in exchange for a share of the winnings.” To the legally unitiated, this may seem bizarre. But lawyers who take cases on a contingent fee basis and who enter into co-counsel arrangements in order to finance high-cost litigation, such as class-action lawsuits, do much the same thing.
Juridica seems to be going down a road that is very similar to the one previously taken by bankrupt and near-bankrupt financial services companies, which never seemed to run out of new investment ideas. Will we soon have a new financial market for lawsuits? Will we soon pool together legal risks and sell and resell them so that no one can determine their true value?