DRI Professional Liability: Episode 2

WEBVTT
1
00:00:19.000 --> 00:00:22.079
Welcome to the next episode of the DRI podcast from
2
00:00:22.079 --> 00:00:25.000
the Professional Liability Committee. My name is Zach Piers and
3
00:00:25.000 --> 00:00:26.920
I'm going to be your host today and I am
4
00:00:27.039 --> 00:00:29.519
joined by Patrick Eckler, who is one of the managing
5
00:00:29.559 --> 00:00:33.479
partners of the Chicago office of Freeman Mathis and Geary,
6
00:00:34.039 --> 00:00:38.159
also an esteemed member of and the Professional Liability Subcommittee,
7
00:00:38.439 --> 00:00:40.600
and we are excited today to be talking to you
8
00:00:40.719 --> 00:00:45.479
about a handful of acronyms, tplf abs and MSOs and
9
00:00:45.560 --> 00:00:48.719
kind of how they are reshaping the legal markets and
10
00:00:48.880 --> 00:00:53.399
as such are legal practices before we jump into that. Patrick,
11
00:00:53.439 --> 00:00:55.679
thanks for joining us, and if you would please just
12
00:00:55.759 --> 00:00:58.719
tell our listeners a little bit about your experience and
13
00:00:58.799 --> 00:00:59.880
your practice areas.
14
00:01:01.039 --> 00:01:02.759
Thank you, Zach, and thank you for having me on
15
00:01:02.799 --> 00:01:03.280
the show.
16
00:01:03.479 --> 00:01:05.439
I will say if I am an esteemed member of
17
00:01:05.480 --> 00:01:07.200
the DRI, I will pick up I think it was.
18
00:01:07.959 --> 00:01:11.640
I think it was I'm drawing a blank on the
19
00:01:11.719 --> 00:01:13.400
name of the comedian who said it. I would never
20
00:01:13.439 --> 00:01:14.920
be a member of a club who would have me,
21
00:01:15.879 --> 00:01:18.560
and I certainly will not if I'm an esteem member,
22
00:01:18.599 --> 00:01:23.040
we need to leave quickly. But thank you very much.
23
00:01:23.079 --> 00:01:25.159
I am a proud member of the DRI and also
24
00:01:25.319 --> 00:01:27.760
a leader in the Illinois Defense Council, which is the
25
00:01:27.799 --> 00:01:31.920
Illinois SLDO. More acronyms. That is, for those of you
26
00:01:32.040 --> 00:01:35.359
unfamiliar the state and state and local defense organization.
27
00:01:36.640 --> 00:01:37.959
I am in Chicago.
28
00:01:38.040 --> 00:01:41.120
As you said, I do professional liability and insurance coverage
29
00:01:41.599 --> 00:01:44.200
in Illinois and Indiana, and I'm in the process of
30
00:01:44.280 --> 00:01:47.319
expanding my practice to Tennessee, where my wife and I
31
00:01:47.359 --> 00:01:49.599
will be moving to Nashville shortly and I'll be commuting
32
00:01:49.640 --> 00:01:51.439
back and forth because as you said, I'm still an
33
00:01:51.439 --> 00:01:56.519
office chair in our Chicago office, So that is i've been.
34
00:01:56.799 --> 00:02:00.359
We opened the Chicago office about four years ago, over
35
00:02:00.400 --> 00:02:03.079
four years ago, and we'll be thirty lawyers year before
36
00:02:03.079 --> 00:02:07.040
too long. So we started with four and we've expanded
37
00:02:07.079 --> 00:02:09.840
quite nicely and it's been a great ride so far.
38
00:02:10.280 --> 00:02:14.759
Good I'm glad to share that. So as we talked
39
00:02:14.800 --> 00:02:18.280
about these acronyms, kind of just delay the framework because
40
00:02:19.360 --> 00:02:23.199
I know you've written extensively and you've spoken on these
41
00:02:23.280 --> 00:02:26.479
topics before. But for some of our listeners who may
42
00:02:26.520 --> 00:02:29.800
not be familiar with them, as we throw these acronyms out, well,
43
00:02:29.840 --> 00:02:34.599
the TPLF and I'll say it's third party litigation funding
44
00:02:35.240 --> 00:02:38.919
kind of explain to our listeners from a high level
45
00:02:39.000 --> 00:02:41.120
kind of what that is and how that's playing a
46
00:02:41.240 --> 00:02:43.159
role in the legal markets.
47
00:02:43.800 --> 00:02:44.840
Thanks Zach.
48
00:02:44.879 --> 00:02:48.599
And so TPLF takes a variety of different forms, but
49
00:02:48.680 --> 00:02:52.879
at its core, it's a non recourse loan made to
50
00:02:53.039 --> 00:02:55.400
either the it can be made to either side. And
51
00:02:55.439 --> 00:02:59.400
commercial litigation you'll have third party, particularly intellectual property litigation,
52
00:02:59.439 --> 00:03:03.000
you'll have you'll have third party litigation funders, perhaps on
53
00:03:03.039 --> 00:03:07.360
both sides. It's a non recourse loan to either the
54
00:03:07.400 --> 00:03:12.039
party or its council, and it is done, and there's
55
00:03:12.039 --> 00:03:13.520
a variety of ways that.
56
00:03:13.439 --> 00:03:14.120
It can be done.
57
00:03:14.159 --> 00:03:18.719
We'll be back up. Historically, a non party taking an
58
00:03:18.759 --> 00:03:23.199
interest in litigation wasn't allowed, going going back a millennia,
59
00:03:23.800 --> 00:03:28.120
that was called champerty. You weren't allowed to treat the
60
00:03:28.599 --> 00:03:31.360
in the words of a recent decision in Karina versus
61
00:03:31.360 --> 00:03:35.319
Pilgrim's Pride from a concurrence by Judge Maldonado of the
62
00:03:35.360 --> 00:03:38.360
Seventh Circuit, you weren't allowed to treat the civil justice
63
00:03:38.400 --> 00:03:43.120
system as a trading floor, to use her expression. But
64
00:03:43.199 --> 00:03:49.439
that has changed and those rules were loosened, and in
65
00:03:49.479 --> 00:03:52.159
fact the Supreme Court of Minnesota and a decision several
66
00:03:52.199 --> 00:03:57.800
years ago abolished the doctrine of champerty entirely. Now, champardy
67
00:03:57.919 --> 00:04:00.520
wasn't a doctrine that you could use to as a
68
00:04:00.560 --> 00:04:02.960
defendant for such a litting, but it was a way
69
00:04:03.360 --> 00:04:05.479
in which a party who took a loan could defend
70
00:04:05.479 --> 00:04:09.439
against the enforceability of that contract. So let's talk about
71
00:04:09.479 --> 00:04:12.599
the modern situation. So in the modern world, third party
72
00:04:12.680 --> 00:04:15.759
litigation funding takes several forms. As I said, direct non
73
00:04:15.840 --> 00:04:21.160
recourse loan to consumers, they then evolved into loans to
74
00:04:21.439 --> 00:04:26.240
lawyers on an individual case basis, that then developed into
75
00:04:26.800 --> 00:04:30.360
those being done on a portfolio basis, almost wrapped up
76
00:04:30.360 --> 00:04:30.879
in secure.
77
00:04:30.920 --> 00:04:31.800
It almost like they.
78
00:04:33.319 --> 00:04:37.160
Got securitized in the same way that non standard or
79
00:04:37.680 --> 00:04:40.199
subprime loans got securitized.
80
00:04:40.720 --> 00:04:41.680
And then you have.
81
00:04:44.240 --> 00:04:48.199
Medical funding that's done ween doctors things of that nature,
82
00:04:48.199 --> 00:04:51.959
and that's evolved even further, probably beyond the scope of
83
00:04:51.959 --> 00:04:55.800
what we're talking about, but things like move docs where
84
00:04:56.160 --> 00:05:01.199
the doctors take an interest and they creaked the situation
85
00:05:02.160 --> 00:05:05.800
as a they almost act like an insurer of what
86
00:05:05.839 --> 00:05:08.120
they're going to allow, what they're not going to allow.
87
00:05:08.800 --> 00:05:11.000
And it's kind I have a case right now where
88
00:05:11.000 --> 00:05:14.319
that's involved, and it's it's kind of wild, but it
89
00:05:14.360 --> 00:05:16.480
takes on a number of different forms. There have been
90
00:05:16.879 --> 00:05:21.439
some regulations. Illinois, for example, has one where it limits
91
00:05:21.480 --> 00:05:24.560
the amount of the interest it can be taken because
92
00:05:24.600 --> 00:05:29.199
it's non recourse can it doesn't usery laws typically don't apply.
93
00:05:29.560 --> 00:05:32.279
So in Illinois, the third party litigation funders on the
94
00:05:32.319 --> 00:05:35.680
consumer loans are limited to eighteen percent every six months
95
00:05:35.759 --> 00:05:38.800
or thirty six percent per year for seven periods, for
96
00:05:38.879 --> 00:05:41.439
a total of just over one hundred percent. So they
97
00:05:41.519 --> 00:05:45.560
lend you twenty thousand or maybe twenty dollars, but unlikely
98
00:05:45.759 --> 00:05:49.120
twenty thousand, and then they come back after a year
99
00:05:49.120 --> 00:05:53.480
and they say they want more than forty and that's
100
00:05:53.560 --> 00:05:55.519
the or they come back after I'm sorry, after three
101
00:05:55.560 --> 00:05:56.759
and a half years and they tell you they want
102
00:05:56.800 --> 00:06:00.360
more than forty. But they also are funding. The real
103
00:06:01.360 --> 00:06:04.680
impact is having is on the portfolio basis, particularly in
104
00:06:04.720 --> 00:06:09.600
the mass Torque context, and that we'll talk more about
105
00:06:09.600 --> 00:06:14.160
how how this has evolved. But that's the rudiments of
106
00:06:14.199 --> 00:06:17.079
what third party litigation funding is. And the largest litigation
107
00:06:17.199 --> 00:06:19.920
funder is Burford, which is a publicly traded English company,
108
00:06:20.680 --> 00:06:23.560
but there are many many others, both private equity firms,
109
00:06:23.600 --> 00:06:27.639
publicly traded firms, private firms, all kinds of ways in
110
00:06:27.680 --> 00:06:29.399
which this is done.
111
00:06:30.920 --> 00:06:35.240
Okay, so that's TPLF. Now the next acronym I want
112
00:06:35.279 --> 00:06:38.800
to talk about is ABS. And my understanding is this
113
00:06:38.879 --> 00:06:41.959
kind of sprung out of the state of Arizona, or
114
00:06:41.959 --> 00:06:43.680
at least they were the first ones to do this,
115
00:06:43.720 --> 00:06:46.680
so kind of really Okay, well then correct me.
116
00:06:47.160 --> 00:06:51.839
So in nineteen ninety one, the District of Columbia allowed
117
00:06:52.040 --> 00:06:55.839
for lawyers to be in an arrangement with non lawyers,
118
00:06:55.879 --> 00:07:01.920
and that's what an alternative business structure is. And you
119
00:07:01.920 --> 00:07:05.519
can understand why DC may be a special case. DC
120
00:07:05.680 --> 00:07:07.480
is a special case because it turns out there's a
121
00:07:07.519 --> 00:07:10.160
small government there and some of the people that would
122
00:07:10.199 --> 00:07:11.839
want to talk to the people that were in that
123
00:07:11.879 --> 00:07:15.639
small government aren't lawyers. Many of them are, but many
124
00:07:15.680 --> 00:07:18.240
are not. And so if you're going to have a
125
00:07:18.279 --> 00:07:21.800
lobbying firm that's offering both legal services as well as
126
00:07:21.839 --> 00:07:24.600
lobbying services, as well as a whole suite of other services,
127
00:07:25.160 --> 00:07:27.279
you may need to be in an alternative business structure.
128
00:07:27.319 --> 00:07:28.240
So they loosened it.
129
00:07:28.160 --> 00:07:30.279
To an extent, and then they also had an opinion
130
00:07:30.319 --> 00:07:33.319
that allowed for success fees as long as it was disclosed.
131
00:07:33.319 --> 00:07:37.920
But the DC program, though, it has expanded and there
132
00:07:37.920 --> 00:07:40.560
are instances of it being used in the mass toork context.
133
00:07:40.600 --> 00:07:43.519
The most obvious example of which I can point to
134
00:07:43.519 --> 00:07:45.279
as a book you all should read called The Pain
135
00:07:45.360 --> 00:07:50.120
Brokers by Professor Liver Elizabeth Birch from the University of Georgia.
136
00:07:50.560 --> 00:07:54.639
The ABS that was involved in that scheme was a
137
00:07:55.879 --> 00:07:59.639
Arizona strike that a Washington d C. Based ABS. Because
138
00:07:59.639 --> 00:08:03.879
this this incident occurred in the mid teens, arising out
139
00:08:03.920 --> 00:08:07.360
of the Pelvic Mesh MDL, when Arizona, which we'll talk
140
00:08:07.360 --> 00:08:10.720
about next, had not yet begun its program. So then
141
00:08:10.839 --> 00:08:13.839
you mentioned Arizona. They have, their program is ongoing, it
142
00:08:13.920 --> 00:08:18.560
is expanding. They have over one hundred and fifty firms
143
00:08:18.839 --> 00:08:21.879
that are of that. They've had Big four accounting firms
144
00:08:21.920 --> 00:08:24.560
come in, They've had personal injury firms come in, They've
145
00:08:24.600 --> 00:08:26.439
had all kinds of mass tort firms come in, and
146
00:08:26.519 --> 00:08:31.519
all the rest. You had a sandbox in Utah which
147
00:08:31.920 --> 00:08:37.399
allowed some flexibility and they had a number of these
148
00:08:37.559 --> 00:08:40.759
kinds of firms, but they were horrified, I think when
149
00:08:40.759 --> 00:08:44.039
they saw the personal injury people coming in and they
150
00:08:44.039 --> 00:08:46.600
were horrified by what happened. They pulled back. Many of
151
00:08:46.600 --> 00:08:49.159
those firms have left, some have gone to Arizona, some
152
00:08:49.200 --> 00:08:52.200
have gone away all together. Puerto Rico has a program
153
00:08:53.519 --> 00:09:02.679
It includes a requirement that you fund to legal laid.
154
00:09:02.840 --> 00:09:06.080
Essentially you give charity for having this ABS, like ten
155
00:09:06.120 --> 00:09:10.440
thousand dollars. And then Tennessee and Washington have they're exploring
156
00:09:10.440 --> 00:09:14.480
pilot programs. The purpose of the ABS structure certainly in
157
00:09:14.639 --> 00:09:17.279
Utah and the claim in Arizona, but that it's not
158
00:09:17.600 --> 00:09:21.080
not with all. What's happened is to deal with access
159
00:09:21.080 --> 00:09:24.120
to justice and legal deserts, and legal deserts are as
160
00:09:24.159 --> 00:09:27.200
they as you would imagine places where you can't get
161
00:09:27.279 --> 00:09:29.759
legal services, kind of like grocery deserts that we've heard of.
162
00:09:30.879 --> 00:09:32.759
And so you take a state like Iowa or they
163
00:09:32.799 --> 00:09:35.639
have counties that have entire entire counties that have one lawyer,
164
00:09:36.080 --> 00:09:38.159
not one lawyer that does criminal law, and one lawyer
165
00:09:38.240 --> 00:09:40.600
that does civil and one little right no one lawyer
166
00:09:41.200 --> 00:09:45.039
that's it. And you have similar issues Indiana ware I'm licensed.
167
00:09:45.039 --> 00:09:47.000
There's certainly a concern there, and they kind of looked
168
00:09:47.000 --> 00:09:51.440
at ABS structures as an alternative way to get lawyers
169
00:09:51.480 --> 00:09:56.519
to alternative ways to deliver legal services. And so that's
170
00:09:56.600 --> 00:09:59.799
the claim is that it's going to by allowing outside funding,
171
00:10:01.240 --> 00:10:05.279
then you can incur you can overcome some of this
172
00:10:06.000 --> 00:10:08.919
the difficulties in funding law firms. So what Arizona did
173
00:10:09.000 --> 00:10:15.279
is they eliminated their version of rule five point four
174
00:10:15.440 --> 00:10:19.080
gone doesn't exist, And what five point four says in
175
00:10:19.200 --> 00:10:22.120
essence is a lawyer can't share fees with non lawyers.
176
00:10:23.639 --> 00:10:29.480
DC had previously modified their rule, Utah modified their rule.
177
00:10:30.679 --> 00:10:32.080
Puerto Rico modified their rule.
178
00:10:32.279 --> 00:10:34.879
Arizona got rid of it and replaced it with this
179
00:10:35.120 --> 00:10:40.559
ABS commission that evaluates the proposals and allegedly regulates them.
180
00:10:41.000 --> 00:10:42.000
I can tell you.
181
00:10:41.840 --> 00:10:46.440
That go on the ABS Registry and in a lot
182
00:10:46.480 --> 00:10:48.080
of what you will see is a lot of white
183
00:10:48.080 --> 00:10:50.960
space where there should be information about these firms, what
184
00:10:51.039 --> 00:10:53.200
they do, who their contact is, and all the rest.
185
00:10:53.240 --> 00:10:58.080
They're supposed to have a compliance lawyer, they're supposed to
186
00:10:58.320 --> 00:11:02.639
be invested reviewed. Ever so often this kind of a
187
00:11:02.679 --> 00:11:05.200
thing I would commend to you, if you're interested in
188
00:11:05.240 --> 00:11:06.840
looking into this, and if you wanted to, if you
189
00:11:06.879 --> 00:11:10.600
take seriously their claims of regulation, to watch the hearing.
190
00:11:10.639 --> 00:11:13.559
It's publicly available on a recorded zoom. It's a link
191
00:11:14.279 --> 00:11:18.759
of Sterling Legal Shield and this is it's a truly
192
00:11:18.879 --> 00:11:23.960
stunning hearing where they approved this, and the words of
193
00:11:24.000 --> 00:11:27.080
one of the commissioners before he voted for it was,
194
00:11:27.200 --> 00:11:31.919
quote one more personal injury. ABS isn't going to ruin
195
00:11:31.919 --> 00:11:39.159
the system. So ABS's have proliferated.
196
00:11:39.840 --> 00:11:40.440
They have.
197
00:11:41.960 --> 00:11:45.600
They the third party litigation funders. It was part of
198
00:11:45.639 --> 00:11:48.360
their effort to say we're going to skip the middleman
199
00:11:48.440 --> 00:11:51.879
and just own the lawyers. I've heard anecdotes of lawyers
200
00:11:51.919 --> 00:11:54.679
being approached by doctors in Arizona say and we'll just
201
00:11:54.720 --> 00:12:00.360
buy your firm in That lawyer was in Illinois. They
202
00:12:00.879 --> 00:12:04.039
so it's leading to that kind of thing. And then
203
00:12:04.120 --> 00:12:06.240
we're going to get to the next one. So that's
204
00:12:06.559 --> 00:12:10.080
ABS in a nutshell alternative business structure.
205
00:12:11.080 --> 00:12:14.240
Okay, so the last one. And I will tell you
206
00:12:14.320 --> 00:12:17.759
that the first time I actually heard about this MSOs
207
00:12:18.320 --> 00:12:20.679
was actually just a couple of months ago. So I
208
00:12:21.320 --> 00:12:24.440
obviously I didn't know about the ABSs in DC, or
209
00:12:24.480 --> 00:12:30.480
at least I fully understand or appreciate their history. So MSOs,
210
00:12:30.840 --> 00:12:34.720
what are they? How long have they been around? And
211
00:12:34.960 --> 00:12:37.200
kind of you know, how are they working.
212
00:12:38.480 --> 00:12:44.440
Like third party litigation funding. We have to look in
213
00:12:44.480 --> 00:12:49.559
the past a little bit, and MSOs originally grew up
214
00:12:49.720 --> 00:12:55.879
at least in America as healthcare and accounting practices, and
215
00:12:55.879 --> 00:12:59.240
that'll become relevant in a moment, but that's where they
216
00:12:59.279 --> 00:13:05.200
started because traditionally, doctors couldn't share fees with non doctors,
217
00:13:05.200 --> 00:13:07.960
and accountants couldn't share fees with non doctors. My father's
218
00:13:07.960 --> 00:13:10.600
an engineer, he couldn't share fees with non engineers. The
219
00:13:10.639 --> 00:13:14.480
firm had to be owned, they controlled by engineers because
220
00:13:14.480 --> 00:13:21.919
we had certain ethical requirements accountants, doctors, engineers even there's
221
00:13:21.919 --> 00:13:25.720
an ethical rules, and so they grew up around these
222
00:13:25.759 --> 00:13:29.159
and there's been MSOs. Then what's happened in the accounting
223
00:13:29.200 --> 00:13:34.240
space and in the medical space is that most doctors
224
00:13:34.240 --> 00:13:36.840
are employees. Now it's happened with doctors all differences. They're
225
00:13:36.879 --> 00:13:39.639
part of health systems or so forth. But where there
226
00:13:39.720 --> 00:13:44.240
was private practices before, they have sold the equity interest
227
00:13:44.320 --> 00:13:48.039
in the practice to a management service organization. And what
228
00:13:48.080 --> 00:13:51.320
that management service organization does is it runs all the
229
00:13:51.320 --> 00:13:54.480
back office. And in the legal context, the claim is
230
00:13:54.480 --> 00:13:56.960
is that the lawyers remain independent because even if you
231
00:13:57.000 --> 00:13:59.559
get rid of or even if you have five point four,
232
00:14:00.720 --> 00:14:03.519
you still have Rule two point one. Two point one
233
00:14:03.559 --> 00:14:08.200
says a lawyer's professional judgment shall not be impaired words
234
00:14:08.200 --> 00:14:11.159
to that effect, And so this applies, you know when
235
00:14:11.159 --> 00:14:13.639
you learn this in law school. The example that's given
236
00:14:13.840 --> 00:14:18.159
is little Johnny gets a DUI, Johnny's dad buys, gets
237
00:14:18.200 --> 00:14:21.159
him a lawyer, and Johnny's dad wants to have an
238
00:14:21.159 --> 00:14:24.000
influence on how the case is going to be litigated
239
00:14:24.039 --> 00:14:28.000
and wants to and the lawyer has to say no, Johnny.
240
00:14:28.320 --> 00:14:32.639
Assuming Johnny is an adult, Johnny and I will talk.
241
00:14:32.879 --> 00:14:36.360
You are not in the circle of trust communications with you.
242
00:14:36.399 --> 00:14:38.440
Doesn't matter how big those checks are. You do not
243
00:14:38.559 --> 00:14:41.320
get to know what's going on unless Johnny wants to
244
00:14:41.320 --> 00:14:42.600
tell you. And I'm going to tell him not to
245
00:14:42.639 --> 00:14:45.240
tell you what we talk about, because that'll waive the privilege.
246
00:14:45.360 --> 00:14:47.240
And you don't get to decide if Johnny wants to
247
00:14:47.279 --> 00:14:49.720
try the case, its case is getting tried, If Johnny
248
00:14:49.720 --> 00:14:52.000
wants to settle the case or plea out the case,
249
00:14:52.039 --> 00:14:55.360
the case getting played, doesn't matter what you want. Johnny's
250
00:14:55.360 --> 00:14:57.279
going to get to decide it. His case doesn't matter
251
00:14:57.279 --> 00:15:01.240
if you're pain. That's professional that the lawyer has to
252
00:15:01.279 --> 00:15:04.720
exercise no matter who's paying the bill. That's the traditional
253
00:15:04.759 --> 00:15:06.559
way and one of the ways in which we illustrate
254
00:15:06.600 --> 00:15:09.799
two point one. Well, here, what's happening in the legal
255
00:15:09.840 --> 00:15:12.720
space is they're buying out the back office everything but
256
00:15:12.879 --> 00:15:18.480
the lawyers. So they're employing the staff, the paralegals, the HR,
257
00:15:18.720 --> 00:15:24.480
the AR, the AP, the copy machines, the you name it,
258
00:15:25.159 --> 00:15:28.440
and for an infusion of cash. The claim is for
259
00:15:28.519 --> 00:15:30.759
a couple things. Number one so we can have AI
260
00:15:30.799 --> 00:15:33.440
and number two so we can pay the associates. Now
261
00:15:33.440 --> 00:15:38.200
they say that this is being done without sharing fees.
262
00:15:38.559 --> 00:15:40.960
But the people that are principally involved in providing this
263
00:15:41.039 --> 00:15:44.080
are called private equity firms. And the word equity is
264
00:15:44.120 --> 00:15:48.559
in the name. And one of those entities that's interested
265
00:15:48.759 --> 00:15:52.360
in investing in MSOs as an entity I mentioned a
266
00:15:52.399 --> 00:15:55.240
moment ago Burford. Now Burford is not a private equity firm.
267
00:15:55.279 --> 00:15:58.159
They're a publicly traded company on the New York Stock Exchange.
268
00:15:58.720 --> 00:16:04.080
And in their last year in twenty five, in their
269
00:16:04.279 --> 00:16:09.279
shareholder day spreadsheet, it's in there twice or three times,
270
00:16:09.320 --> 00:16:13.000
actually at least three times. They say one of our
271
00:16:13.000 --> 00:16:17.559
area's growth is law firm equity. And they have a
272
00:16:17.639 --> 00:16:20.120
statement in there about what they want, how they want
273
00:16:20.159 --> 00:16:23.039
to do it, and they refer specifically to the loosening
274
00:16:23.639 --> 00:16:30.080
of rules, and they refer specifically to how they want
275
00:16:30.320 --> 00:16:33.759
to do this. They're not hiding the ball. They're telling
276
00:16:33.799 --> 00:16:37.679
you exactly what they want to do, and they're doing
277
00:16:37.720 --> 00:16:40.840
it in a way that says we are going to
278
00:16:40.879 --> 00:16:44.559
own the law firms because there's money to be made here.
279
00:16:44.600 --> 00:16:47.039
And as I mentioned the pain Broker's book, I'll do
280
00:16:47.080 --> 00:16:50.840
a plug again. It was a proof of concept that
281
00:16:50.879 --> 00:16:53.799
there is money to be made in the civil justice system,
282
00:16:54.200 --> 00:16:57.159
and those who are not bound by our rules, the
283
00:16:57.240 --> 00:17:01.440
rules of lawyers, and not bound by our requirements are
284
00:17:01.480 --> 00:17:05.480
coming to get our equity, which is what we spend
285
00:17:06.359 --> 00:17:11.160
our lives trying to get as a lawyer. So on
286
00:17:11.279 --> 00:17:20.319
page eighty three of their shareholder meeting that day, they
287
00:17:20.359 --> 00:17:24.559
have a slide and the slide says and I'm sharing
288
00:17:24.599 --> 00:17:28.519
my screen it says law firm equity. That's the title
289
00:17:28.559 --> 00:17:31.759
of the slide, And there's this So they talk about
290
00:17:31.839 --> 00:17:36.200
trend towards fewer restrictions Arizona more than one hundred ABSs
291
00:17:36.200 --> 00:17:37.359
since twenty twenty one.
292
00:17:37.720 --> 00:17:39.240
Now there's over one hundred and fifty.
293
00:17:39.400 --> 00:17:44.400
And then here we come with MSOs Synthetic ownership slash
294
00:17:44.480 --> 00:17:49.160
service company structures similar to a public accounting and healthcare.
295
00:17:50.359 --> 00:17:54.839
Sound familiar. It should, because that's exactly what they want
296
00:17:54.880 --> 00:17:58.880
to do. They want they call it synthetic ownership. You know,
297
00:17:58.960 --> 00:18:03.160
I had a contracts professor. You have this thing called
298
00:18:03.240 --> 00:18:06.640
constructive notice or he said, anytime you see the word
299
00:18:06.720 --> 00:18:11.079
constructive in front of something constructive, trust, whatever, get ready
300
00:18:11.079 --> 00:18:15.000
for somebody that didn't actually happen. I don't know what
301
00:18:15.119 --> 00:18:18.319
synthetic ownership is, but it sure sounds like ownership to me,
302
00:18:18.440 --> 00:18:22.000
especially when you're talking about it's under a slide called
303
00:18:22.079 --> 00:18:25.480
law firm equity. And there are I will use a
304
00:18:25.519 --> 00:18:27.240
word I probably shouldn't.
305
00:18:27.279 --> 00:18:28.279
It's a bit pejorative.
306
00:18:28.319 --> 00:18:31.599
There are some sofists among us who are arguing that,
307
00:18:31.680 --> 00:18:36.160
oh no, you can do this without, you know, sharing fees.
308
00:18:36.480 --> 00:18:40.480
And so there is an Arizona, I'll plant its firm
309
00:18:40.640 --> 00:18:42.480
so it's in a state where you could share fees.
310
00:18:42.480 --> 00:18:45.240
You could set up an ABS. They sold the back
311
00:18:45.279 --> 00:18:48.559
office of their firm, the back office for one hundred
312
00:18:48.599 --> 00:18:52.319
and twenty five million dollars. I don't know a back
313
00:18:52.400 --> 00:18:55.720
office of Kirkland Analyis's back office eight worth one hundred
314
00:18:55.720 --> 00:18:58.039
and twenty five million dollars and they're a nine billion
315
00:18:58.079 --> 00:18:58.759
dollar law firm.
316
00:18:58.759 --> 00:18:59.440
Now maybe they are.
317
00:19:00.200 --> 00:19:03.640
They spend that, they probably did, but is there really
318
00:19:03.640 --> 00:19:06.200
profit to me? Because is that what they bought? They
319
00:19:06.240 --> 00:19:09.599
bought the AP, they bought, the AR, they bought the
320
00:19:09.599 --> 00:19:13.079
the HR, they bought the copy machines and the paralegals
321
00:19:13.079 --> 00:19:18.200
and the Legalistit really that's it. They didn't buy the
322
00:19:18.240 --> 00:19:20.200
law firm. And then you look at what happened to
323
00:19:20.279 --> 00:19:24.200
Dudley de Boser, a Louisiana firm. They entered into an
324
00:19:24.319 --> 00:19:28.200
ms O where they sold their firm, and the private
325
00:19:28.720 --> 00:19:32.279
or the public statements are all PC and they stay
326
00:19:32.319 --> 00:19:35.119
in line with where they're supposed to be in.
327
00:19:35.119 --> 00:19:36.039
Terms of no, we didn't.
328
00:19:36.079 --> 00:19:38.200
Then you get the private emails they sent to the
329
00:19:38.200 --> 00:19:41.240
Planets lawyers in Illinois telling them, hey, you should do
330
00:19:41.279 --> 00:19:44.480
this too, and the articles they writer saying you can
331
00:19:44.640 --> 00:19:46.599
sell out your firm and let us run it.
332
00:19:46.640 --> 00:19:48.480
Won't that be fun? Uh?
333
00:19:48.480 --> 00:19:52.039
That's what they're telling people it privately. I've gotten emails
334
00:19:52.200 --> 00:19:54.519
they think my firm is the plants firm. Uh, they
335
00:19:54.599 --> 00:19:56.240
they want to they want to buy my firm. Now,
336
00:19:56.519 --> 00:20:00.039
our firms of Amlock two hundred law firm. We we
337
00:20:00.119 --> 00:20:02.680
would be if you're private equity. We are slow and steady.
338
00:20:02.920 --> 00:20:05.240
We're we represent a lot of We do a lot
339
00:20:05.240 --> 00:20:07.599
of work for insurance companies. There's one thing insurance companies do.
340
00:20:07.640 --> 00:20:10.519
They don't pay us high rates. That's true, but they
341
00:20:10.519 --> 00:20:12.519
do pay us on time, and they do pay us
342
00:20:12.559 --> 00:20:15.359
on the regular and there is consistent We are we
343
00:20:15.440 --> 00:20:19.319
are growth We're growth stock, baby, I mean, we're Remenser, Freeman,
344
00:20:19.400 --> 00:20:22.240
Mathis and Gary, you name the firm. We are growth stock.
345
00:20:23.039 --> 00:20:25.640
We're We're not the big ticket. You know, we're not
346
00:20:25.680 --> 00:20:27.799
going to get you, you know, some some eight figure,
347
00:20:27.920 --> 00:20:30.839
nine figure that's true, that's not going to happen. But
348
00:20:31.319 --> 00:20:34.960
our firm when we joined was seventy three million dollars
349
00:20:35.039 --> 00:20:37.359
or something. This is all public. Our firm last year
350
00:20:37.400 --> 00:20:40.440
grossed over two and a million dollars. We are what
351
00:20:40.559 --> 00:20:44.720
you're looking for if you're in that space. So they're
352
00:20:44.720 --> 00:20:46.359
coming for us, and let me be given now will
353
00:20:46.759 --> 00:20:50.240
now let me put a real fine point on it.
354
00:20:50.880 --> 00:20:55.200
One of the largest firms in the country, McDermott, will
355
00:20:55.240 --> 00:20:57.559
and Shulty. I think I checked the other day. They
356
00:20:57.559 --> 00:21:00.319
were like twenty eight in the amant two hundred. We're we're
357
00:21:01.000 --> 00:21:03.319
and they were close to two billion in revenues. So
358
00:21:03.319 --> 00:21:05.440
we're pikers compared to them. We're about a tenth the
359
00:21:05.519 --> 00:21:10.839
size by revenue, never mind by profit. By partner, We're
360
00:21:10.839 --> 00:21:13.240
not even in the order their orders of magnitude larger
361
00:21:13.240 --> 00:21:17.240
than us private by partner. They've announced that they in
362
00:21:17.319 --> 00:21:19.599
the last fall that they are going they're looking at
363
00:21:19.680 --> 00:21:21.440
selling ten, fifteen, twenty percent.
364
00:21:21.160 --> 00:21:21.640
Of the law firm.
365
00:21:23.119 --> 00:21:26.200
And in the article in Reuters, there's a quote from
366
00:21:26.240 --> 00:21:29.319
a lawyer who helps with healthcare onto this and what
367
00:21:29.400 --> 00:21:32.160
she says is this is attractive because they want to
368
00:21:32.160 --> 00:21:33.920
do to the law firm is what they've done to healthcare.
369
00:21:34.759 --> 00:21:38.759
And I ask you, has healthcare been helped by private
370
00:21:38.799 --> 00:21:43.039
equity firms getting involved? I think the question answers itself.
371
00:21:44.160 --> 00:21:48.000
I know the question answers itself, and so one asks,
372
00:21:49.240 --> 00:21:51.240
when we're cashing out, it's good for some of the
373
00:21:51.319 --> 00:21:53.279
some of the lawyers are going to do very well.
374
00:21:53.279 --> 00:21:55.960
Their equity is going to be in the words of
375
00:21:56.000 --> 00:21:59.079
one of the lawyers who's big into this and is
376
00:21:59.279 --> 00:22:03.559
argued for the propriety of this, it's a liquidity event. Yeah,
377
00:22:03.759 --> 00:22:06.960
I agree. It's a liquidity event, all right. When you
378
00:22:07.000 --> 00:22:10.319
convert your equity into cash, it's called liquidity, and it
379
00:22:10.319 --> 00:22:13.160
means they bought what you sold. What did you sell ownership?
380
00:22:13.200 --> 00:22:16.000
And how is that not sharing fees with a non
381
00:22:16.079 --> 00:22:18.319
lawyer in a state where you're not allowed to do it.
382
00:22:18.319 --> 00:22:21.440
I don't care what you call it. It's what it is,
383
00:22:22.079 --> 00:22:25.039
and what it is is the sale of the ownership
384
00:22:25.160 --> 00:22:28.599
of the law fer And in a state like Illinois
385
00:22:28.599 --> 00:22:31.319
that still has five point four, and in the forty
386
00:22:31.799 --> 00:22:34.759
eight or so other states that still have the rules,
387
00:22:34.759 --> 00:22:36.880
because you've met the place to the place I mentioned.
388
00:22:36.880 --> 00:22:39.599
One's a territory and one's not a state. The two
389
00:22:39.640 --> 00:22:41.480
others are states, and the other two are looking at it.
390
00:22:41.559 --> 00:22:44.839
So okay, But the forty eight other states haven't abolished
391
00:22:44.839 --> 00:22:50.839
five point four. There are lawyers in MSOs, both in
392
00:22:50.960 --> 00:22:53.519
Arizona and Utah where sharing fees would be allowed, or
393
00:22:53.640 --> 00:22:58.200
DC or Puerto Rico where that would be allowed, practicing
394
00:22:59.680 --> 00:23:02.799
with well in there may be licensed in Illinois or
395
00:23:02.799 --> 00:23:05.680
other states in practicing in those states. I ask you,
396
00:23:06.119 --> 00:23:09.359
how often have you gotten a case where you handle
397
00:23:09.400 --> 00:23:12.319
a personal injury case where the lawyer is in a
398
00:23:12.400 --> 00:23:15.720
state that has no rational relationship to where the where
399
00:23:15.720 --> 00:23:21.000
the loss occurred happens every day, and dollars to donuts
400
00:23:21.640 --> 00:23:25.079
that state or that that lawyer or his firm has
401
00:23:25.079 --> 00:23:32.200
some connection to Arizona or Utah somehow. That lawyer may
402
00:23:32.240 --> 00:23:34.640
be sitting in your state that has five point four,
403
00:23:34.720 --> 00:23:36.559
or they may be sitting in Arizona, or they may
404
00:23:36.599 --> 00:23:39.599
be sitting in a third state. But it almost is
405
00:23:39.680 --> 00:23:42.720
uncanny that there's some relationship to Arizona. And so what's
406
00:23:42.759 --> 00:23:47.759
happened is the virus is spread the camel's nose under
407
00:23:47.759 --> 00:23:50.720
the tent. You know that this kind of use your analogy.
408
00:23:50.799 --> 00:23:56.960
You use your analogy, and they want us to ignore
409
00:23:57.599 --> 00:24:01.279
what's happening. And that is the fundamental change to how
410
00:24:02.599 --> 00:24:03.960
legal services are offered.
411
00:24:04.000 --> 00:24:04.279
Now.
412
00:24:05.559 --> 00:24:09.519
There's an old expression that if you want to tear
413
00:24:09.559 --> 00:24:12.839
down a fence, before you tear down the fence, you
414
00:24:12.880 --> 00:24:16.359
should find out why it was there, because usually there
415
00:24:16.400 --> 00:24:20.160
was a good reason why it was there before you
416
00:24:20.200 --> 00:24:22.400
start tearing down the fence and saying, well, there's two
417
00:24:22.400 --> 00:24:24.759
point one. So the lawyers are already bound to do
418
00:24:24.799 --> 00:24:32.319
this still maintain their professional judgment. That's not enough. It
419
00:24:32.400 --> 00:24:37.759
turns out lawyers are people too. Lawyers respond to incentives.
420
00:24:38.119 --> 00:24:45.039
They're humans. Absent the structural safeguard of saying you can't
421
00:24:45.160 --> 00:24:48.359
do this thing, this thing being sharing fees with non lawyers,
422
00:24:49.799 --> 00:24:56.680
you get more of people not following their independence or
423
00:24:56.680 --> 00:25:00.640
not maintaining their independent judgment. Now, is it true that
424
00:25:00.799 --> 00:25:04.359
lawyers are influenced by things they shouldn't be influenced buy
425
00:25:04.920 --> 00:25:08.680
and they fail to exercise independent judgment? Like when little
426
00:25:08.720 --> 00:25:13.039
Johnny's daddy buys the hires the lawyer, they sometimes follow
427
00:25:13.400 --> 00:25:18.359
Johnny's daddy. Yes, that occurs, it's true. But absence the
428
00:25:18.359 --> 00:25:21.119
structural safeguard, do you think it's more likely or less
429
00:25:21.200 --> 00:25:24.640
likely that that's going to occur more often? And I
430
00:25:24.680 --> 00:25:28.279
would submit no doubt it will occur more often. And
431
00:25:28.359 --> 00:25:30.880
when you have the structural safeguard, most of us like
432
00:25:30.920 --> 00:25:34.240
our licenses, and most of us are going to follow
433
00:25:34.279 --> 00:25:39.359
the rules number one, because we understand the consequences if
434
00:25:39.400 --> 00:25:42.640
we get caught, even though it's unlikely will will get caught.
435
00:25:42.880 --> 00:25:46.559
It's true, you probably won't get get caught, but if
436
00:25:46.599 --> 00:25:50.480
we do, the consequence will be severe but also putting
437
00:25:50.559 --> 00:25:56.759
aside the consequential argument. We have it. We have a vow,
438
00:25:57.000 --> 00:26:00.359
an oath we took to follow the rules, and our
439
00:26:00.400 --> 00:26:04.400
obligation is to follow the rules, and that is what
440
00:26:04.440 --> 00:26:09.200
we should do. And the idea that we can find
441
00:26:09.200 --> 00:26:11.480
a loophole or we can find a way to skirt
442
00:26:11.519 --> 00:26:15.039
around is not how we should be conducting ourselves, which
443
00:26:15.079 --> 00:26:18.680
is how some of us are saying, well, this is
444
00:26:19.400 --> 00:26:21.720
or arguing that it should be allowed. Well, then let's
445
00:26:21.759 --> 00:26:25.799
have that argument. What is happening to the legal profession?
446
00:26:26.079 --> 00:26:29.160
And it's open Burford, there was a program. They're saying
447
00:26:29.200 --> 00:26:32.920
it openly what they're wanting to do. The bar regulators,
448
00:26:33.000 --> 00:26:35.440
the judges, many of the judges, not all, we'll talk
449
00:26:35.440 --> 00:26:39.079
about that are ignorant entirely of what's going on. I
450
00:26:39.079 --> 00:26:41.319
don't know how they are. They're not reading the legal press,
451
00:26:41.440 --> 00:26:45.680
because it's every day it's in the legal press what
452
00:26:45.720 --> 00:26:49.880
they're doing. They're not hiding it. When uber beat out
453
00:26:49.880 --> 00:26:53.559
the taxis everywhere, they did it quietly, and they did
454
00:26:53.559 --> 00:26:54.799
it in a way that no one knew it was
455
00:26:54.839 --> 00:26:58.200
happening until it was done, and the taxis were dead,
456
00:26:59.559 --> 00:27:03.400
dead dead. These people are telling you what they're going
457
00:27:03.440 --> 00:27:07.200
to do. At a symposium put on my Texas A
458
00:27:07.319 --> 00:27:10.480
and M here at the University Club last October, Texas
459
00:27:10.519 --> 00:27:13.400
and M Law School A representative, Burford said, we don't
460
00:27:13.440 --> 00:27:16.599
care what your rules are. We're going to do this
461
00:27:17.200 --> 00:27:19.720
and there's nothing you can do to stop us. Capital
462
00:27:19.759 --> 00:27:22.920
will find a way. These are his words. They're not
463
00:27:23.000 --> 00:27:26.599
hiding the ball. They're putting it in their shareholder statements.
464
00:27:26.799 --> 00:27:28.920
They're putting it on the front page of every piece
465
00:27:28.920 --> 00:27:33.640
of legal press there is. They're not hiding the ball.
466
00:27:34.440 --> 00:27:38.000
They're coming to take the profession. They're coming to take
467
00:27:38.079 --> 00:27:42.079
our equity. And ask yourself where how that has worked
468
00:27:42.079 --> 00:27:45.559
out for doctors, and how it's worked for accountants. As
469
00:27:45.640 --> 00:27:48.960
accountants put aside the clients and patients, it's not worked
470
00:27:49.000 --> 00:27:51.000
out well for them either. And one of the reasons
471
00:27:51.039 --> 00:27:53.240
why it's not working for them very well is the
472
00:27:53.240 --> 00:27:54.480
same thing will happen to lawyers.
473
00:27:55.400 --> 00:27:56.400
Who's going to want to do that?
474
00:27:57.160 --> 00:28:00.559
Who is going to go through what we go through
475
00:28:00.640 --> 00:28:05.119
as lawyers, the hours and the time and the energy
476
00:28:05.279 --> 00:28:07.720
and the stress and all of it. If at the
477
00:28:08.039 --> 00:28:11.119
at the end of that rainbow there is not equity.
478
00:28:11.759 --> 00:28:13.880
It's the only thing reason why we would go through
479
00:28:13.880 --> 00:28:18.200
this is because we want to own and you want
480
00:28:18.240 --> 00:28:21.200
to sell that. So who's going to go into this?
481
00:28:21.240 --> 00:28:24.039
Who's going to want to do this? When we talk
482
00:28:24.119 --> 00:28:26.319
to young lawyers or you talk to young partners, we
483
00:28:26.359 --> 00:28:30.559
say to them, hey, you've got the talent to be
484
00:28:30.640 --> 00:28:33.359
an owner here one day. It's not right now, it
485
00:28:33.400 --> 00:28:36.839
may be ten years from now, but trust me, it's
486
00:28:36.839 --> 00:28:39.599
worth it. And if you do what's necessary, if you
487
00:28:39.680 --> 00:28:45.160
do what's required, you have a chance. And that's the dangle.
488
00:28:46.400 --> 00:28:49.559
And then they sometimes I ask is it really worth it?
489
00:28:49.680 --> 00:28:51.599
Do you think I would put all this into it
490
00:28:51.640 --> 00:28:55.799
if it wasn't. Trust me, it is. You'll be fine.
491
00:28:57.279 --> 00:29:03.519
And it's when you take that away, what kind of
492
00:29:03.559 --> 00:29:06.720
service are you going to get? It isn't going to be.
493
00:29:07.720 --> 00:29:10.480
You're going to kill the profession. You're going to kill service.
494
00:29:11.519 --> 00:29:15.599
You're going to destroy how the business of wall works,
495
00:29:15.599 --> 00:29:17.960
which impacts how clients get delivered service.
496
00:29:19.119 --> 00:29:22.519
So, I mean you talked a lot there, right, There's
497
00:29:22.519 --> 00:29:25.400
a lot of points we can discuss. No, no, no, no,
498
00:29:25.559 --> 00:29:27.799
not in a bad way. There's just no there's so
499
00:29:28.119 --> 00:29:30.480
much to discuss on this topic. So one of the
500
00:29:30.519 --> 00:29:33.359
things that I think that we were talking about, because
501
00:29:33.599 --> 00:29:35.279
you know, when I started, when I went to law
502
00:29:35.279 --> 00:29:37.759
school and when I started practicing law. I mean, I've
503
00:29:37.759 --> 00:29:40.319
been at my firm for almost twenty years now. I'm
504
00:29:40.680 --> 00:29:44.440
I'm kind of idealistic still on what I've envisioned the
505
00:29:44.480 --> 00:29:47.640
cause of justice to be. And I still think, you know,
506
00:29:47.759 --> 00:29:50.519
when you see two parties, because I do civil litigation
507
00:29:50.720 --> 00:29:53.359
enter the courtroom, I think, you know, you've got a
508
00:29:53.400 --> 00:29:55.799
plaintiff and a defendant. You've got their lawyers as their
509
00:29:55.839 --> 00:29:59.799
representatives advocating for them, and I you know, when a
510
00:30:00.359 --> 00:30:03.119
sitting in that box, they see the plaintiff and they
511
00:30:03.119 --> 00:30:07.000
see the defendant, and they're making decisions based upon those
512
00:30:07.039 --> 00:30:12.400
two individuals standing or sitting before them. And one of
513
00:30:12.440 --> 00:30:15.079
the things that I think is interesting, right is with
514
00:30:15.200 --> 00:30:18.200
all of the things you just talked about third party
515
00:30:18.240 --> 00:30:23.039
litigation funding ABS, MSOs, both of those are all of those,
516
00:30:23.079 --> 00:30:26.519
I should say, are now outside sources of funding that
517
00:30:26.680 --> 00:30:30.960
have kind of some effect on the litigation process. Right,
518
00:30:31.200 --> 00:30:35.720
they are going to be impacting the way justice kind
519
00:30:35.759 --> 00:30:39.920
of plays out. So it kind of at what point
520
00:30:39.960 --> 00:30:42.279
do we start to do we start to see this
521
00:30:42.359 --> 00:30:47.279
looking less like dispute resolution and looking more like a
522
00:30:47.359 --> 00:30:50.359
scalable business platform.
523
00:30:50.680 --> 00:30:52.960
So there's a lot there and let me and so
524
00:30:53.039 --> 00:30:55.240
let's start with the third party litigation fundy, which is
525
00:30:55.279 --> 00:30:57.599
kind of how I started into this, and what I
526
00:30:57.680 --> 00:31:00.480
began to understand was is that the litigation funds were
527
00:31:00.480 --> 00:31:02.720
no longer interested in being litigation funders. They were interested
528
00:31:02.759 --> 00:31:06.240
in owning law firms, and that while we should continue
529
00:31:06.240 --> 00:31:10.680
to work on third party litigation funding, that's really fighting
530
00:31:10.759 --> 00:31:15.079
the last war. Because what we're fighting for now, as
531
00:31:15.119 --> 00:31:17.119
one of my colleagues in a group that I'm involved in,
532
00:31:17.240 --> 00:31:20.759
we're working on legislation here in Illinois to mirror legislation
533
00:31:20.799 --> 00:31:25.279
that's passed in California, is we're fighting for the profession. Now,
534
00:31:25.920 --> 00:31:31.599
this is well beyond civil litigation. They the litigation fund
535
00:31:31.720 --> 00:31:34.519
capital is doing what capital does I get? They want
536
00:31:34.519 --> 00:31:36.559
to make money, that's fine, that just do it somewhere else,
537
00:31:36.559 --> 00:31:42.119
please the litigation funding. So you make a good point,
538
00:31:42.160 --> 00:31:43.599
you say, well, how does it.
539
00:31:43.519 --> 00:31:45.240
Affect or how does it impact the system.
540
00:31:45.880 --> 00:31:50.119
So what DRI's policy has been, and this is going
541
00:31:50.200 --> 00:31:54.440
back at least a decade, is that the DRIs advocated
542
00:31:54.480 --> 00:31:57.319
for disclosure of the third party litigation funding agreements. And
543
00:31:57.359 --> 00:31:59.640
actually there was an article this morning in Law three
544
00:31:59.720 --> 00:32:05.079
six that the federal I can never I practice primarily
545
00:32:05.119 --> 00:32:07.160
in state court. I'm a schlubber. I don't spend much
546
00:32:07.160 --> 00:32:09.680
time in federal court. The committee or whoever they are
547
00:32:09.680 --> 00:32:11.440
that deals with the federal rules has said they are
548
00:32:11.440 --> 00:32:15.920
going to seriously look at having a third party a
549
00:32:16.039 --> 00:32:19.039
uniform third party litigation funding disclosure requirement. That was in
550
00:32:19.119 --> 00:32:22.440
Law three sixty this morning, and so this morning is
551
00:32:22.519 --> 00:32:29.119
April fifteenth, and so that I saw that, and that's great.
552
00:32:29.240 --> 00:32:33.119
It's kind of been piecemeal up until now. And people
553
00:32:33.200 --> 00:32:36.279
we've got, there's a great deal of pushback on disclosure.
554
00:32:37.279 --> 00:32:40.960
It's really kind of shocking. The opposition to disclosure. It's
555
00:32:40.960 --> 00:32:46.839
almost like a crucifix to a vampire. They just don't
556
00:32:46.920 --> 00:32:50.119
want or garlic or whatever, choose your way to scare
557
00:32:50.119 --> 00:32:55.960
away the evils. They do not want disclosure. Now, we
558
00:32:56.119 --> 00:33:00.640
oftentimes will analogize it to the disclosure requires that came
559
00:33:00.680 --> 00:33:05.039
into the Federal Rules of Civil Procedure sixty or so
560
00:33:05.160 --> 00:33:08.079
years ago of insurance. And the argument against it at
561
00:33:08.119 --> 00:33:10.799
the time was, well, the insurance policy will rarely, if
562
00:33:10.839 --> 00:33:14.079
ever be admitted, and that's true. Similarly, the third party
563
00:33:14.119 --> 00:33:16.680
litigation funding will rarely, if ever get admitted, But the
564
00:33:16.720 --> 00:33:20.480
insurance policy is always disclosed. Why because the insurance company
565
00:33:20.519 --> 00:33:23.880
is controlling whether that case settles. They have control over
566
00:33:23.920 --> 00:33:29.400
the case. In no world, even if even if the
567
00:33:29.440 --> 00:33:34.920
third party litigation funder doesn't have control over settlement. And
568
00:33:34.960 --> 00:33:37.079
Burford among others, said, oh, we never control. Now we
569
00:33:37.119 --> 00:33:38.599
know that's a hoax, and we'll talk about.
570
00:33:38.440 --> 00:33:39.000
That in a second.
571
00:33:39.920 --> 00:33:42.559
That's just not true, and we have we have not
572
00:33:42.880 --> 00:33:44.920
We only have anecdote to go by. Well, we have
573
00:33:44.960 --> 00:33:51.000
a very good anecdote to dispute that even if they
574
00:33:51.160 --> 00:33:53.799
all they have is a lean, they have a very
575
00:33:53.799 --> 00:33:57.480
bigle in many cases, and they have ability to make
576
00:33:57.519 --> 00:34:00.200
it so that the planoff doesn't get any money. Now, well,
577
00:34:01.000 --> 00:34:04.279
the lawyers lean the medical lean at least in Illinois
578
00:34:04.319 --> 00:34:07.839
and I imagine other states, that the judge can write down
579
00:34:07.839 --> 00:34:10.119
the lien if he You know, I had a case
580
00:34:10.320 --> 00:34:13.679
years ago where the treatment was nonsense. We had an
581
00:34:13.719 --> 00:34:16.280
expert say the treatment was nonsense, and he adjudicated the
582
00:34:16.280 --> 00:34:18.199
medical lean to zero. So the only way we could
583
00:34:18.199 --> 00:34:20.559
get the case settled right before trial, which we did,
584
00:34:20.840 --> 00:34:23.760
got it settled. In one of the great ironies the
585
00:34:23.760 --> 00:34:30.440
point iff attached my client my client's experts evidence deposition
586
00:34:30.639 --> 00:34:34.880
as exhibit A quite literally of his motion to adjudicate
587
00:34:34.920 --> 00:34:40.079
that all the treatment was unnecessary, unreasonable and unwarranted. Uh,
588
00:34:40.360 --> 00:34:43.000
and that was he used my client's expert to get
589
00:34:43.000 --> 00:34:44.400
it down to zero and then we were able to
590
00:34:44.440 --> 00:34:45.039
settle the case.
591
00:34:46.639 --> 00:34:48.400
I thought I knew where this was going as soon
592
00:34:48.440 --> 00:34:52.159
as you started talking about your clients. Are your experts exhibit?
593
00:34:52.280 --> 00:34:53.800
So yeah, that was it my client.
594
00:34:53.840 --> 00:34:56.039
Yeah, we had an evidence deposition taken to my expert
595
00:34:56.079 --> 00:34:58.000
and that's what he testified to and the PLAINTOFF turned
596
00:34:58.000 --> 00:35:00.440
around and used it to write down this gat built.
597
00:35:00.960 --> 00:35:03.239
They've got no such control over the third party litigation
598
00:35:03.320 --> 00:35:05.320
funder even if they know about it. But we've got
599
00:35:05.320 --> 00:35:08.079
to have them at the table. How do you negotiate
600
00:35:08.239 --> 00:35:11.679
your shadow boxing? You have no idea. You don't know
601
00:35:11.719 --> 00:35:13.440
if it was done on a portfolio, but maybe you
602
00:35:13.480 --> 00:35:15.519
could have it done on a portfolio basis, Maybe you
603
00:35:15.519 --> 00:35:18.440
could have it done on a consumer base. Maybe I
604
00:35:18.440 --> 00:35:20.079
have both in the same case. Maybe you have a
605
00:35:20.159 --> 00:35:23.400
lean doctor. Now the doctor's lean will be available and
606
00:35:23.480 --> 00:35:25.800
known and able to be adjudicated, but the third party
607
00:35:25.800 --> 00:35:29.000
litigation funder. No, so it needs to be disclosed so
608
00:35:29.079 --> 00:35:31.719
that you understand who has an interest in this litigation.
609
00:35:32.559 --> 00:35:37.719
The argument from DRI has not been abolish TPLF go
610
00:35:37.800 --> 00:35:40.159
back to champerting. That's not been the argument. The argument
611
00:35:40.199 --> 00:35:43.239
has been disclosure. And I think that's a fair argument. Now,
612
00:35:43.719 --> 00:35:46.119
when we talk about abs as and MSOs, we're talking
613
00:35:46.119 --> 00:35:49.719
about a bird of a completely different feather. These things
614
00:35:49.760 --> 00:35:53.559
started out as third party litigation funders and they've turned
615
00:35:53.599 --> 00:35:57.079
into owners of law firms. That is a different thing entirely.
616
00:35:58.360 --> 00:36:00.480
There is no disclosure. There is no way to know.
617
00:36:01.199 --> 00:36:03.760
And I'm going to make one more plug. I promised
618
00:36:03.760 --> 00:36:05.119
I would only make two. I'm gonna make a third
619
00:36:05.159 --> 00:36:08.199
for the pain brokers because in her epilogue, Professor Birch
620
00:36:08.559 --> 00:36:13.679
posits this idea, what if a manufacturer who's the subject
621
00:36:13.719 --> 00:36:17.960
to an mb to MDL or any product claim is
622
00:36:17.960 --> 00:36:21.000
a defendant, Sure, what's to stop them from buying an
623
00:36:21.119 --> 00:36:24.679
Mso what's to stop them from funding the lawyers on
624
00:36:24.719 --> 00:36:27.239
the other side and hedging their bets. This wouldn't be
625
00:36:27.320 --> 00:36:32.280
the first time we're now gonna arbitrage litigation in order
626
00:36:32.360 --> 00:36:35.119
to hedge our bets. That's what arbitrage is of course,
627
00:36:35.519 --> 00:36:37.800
there's nothing that would stop them from doing that. And
628
00:36:37.840 --> 00:36:40.800
that gets to the other fundamental problem beyond the erosion
629
00:36:40.800 --> 00:36:44.119
of professional judgment, it's how do you maintain confidentiality when
630
00:36:44.159 --> 00:36:47.400
you're sharing the information with non lawyers who have control
631
00:36:47.440 --> 00:36:50.639
over that information. And I'll deal with the objection in
632
00:36:50.679 --> 00:36:53.239
a moment, And how do you do how do you
633
00:36:53.239 --> 00:36:56.480
prevent conflicts when you don't know who owns the mso
634
00:36:56.559 --> 00:36:58.000
they could be on both sides of vacation.
635
00:36:58.079 --> 00:36:58.880
You're never gonna know.
636
00:36:59.360 --> 00:37:01.880
And from the dary's perspective, and this was brought up
637
00:37:01.920 --> 00:37:04.119
and mentioned in the law three sixty article this morning,
638
00:37:04.639 --> 00:37:06.519
is how do the judges know they're not involved in
639
00:37:06.519 --> 00:37:09.079
a conflict of interest? Well, I have no idea of
640
00:37:09.119 --> 00:37:11.159
knowing because they don't know who's invested in the case.
641
00:37:11.519 --> 00:37:13.519
And you know, that's an interesting point because when you
642
00:37:13.559 --> 00:37:17.480
were talking about the disclosure of third party litigation funding,
643
00:37:18.639 --> 00:37:21.280
I couldn't help but think about you know, when I'm
644
00:37:21.320 --> 00:37:23.559
in federal court, one of the questions that they ask
645
00:37:23.679 --> 00:37:26.079
is I have a corporate disclosure that I haven't one
646
00:37:26.159 --> 00:37:28.639
too right that I have to disclose that I And
647
00:37:28.679 --> 00:37:32.280
they ask, is this a publicly traded company. And one
648
00:37:32.280 --> 00:37:34.840
of the reason they're asking is because they want to
649
00:37:34.840 --> 00:37:37.639
make sure that the judges don't have a conflict of interest.
650
00:37:38.480 --> 00:37:40.679
But if you're if all of a sudden an ownership
651
00:37:40.719 --> 00:37:44.119
interest in these firms isn't clear, I mean, that does
652
00:37:44.239 --> 00:37:46.639
raise the point that you know you've just raised, is
653
00:37:46.679 --> 00:37:49.360
that how can we guarantee that the judges that are
654
00:37:49.360 --> 00:37:52.280
hearing this case don't have an interest in the litigation?
655
00:37:54.000 --> 00:37:56.440
And how do the lawyers make sure they're not operating
656
00:37:56.519 --> 00:37:57.360
under a conflict?
657
00:37:57.880 --> 00:37:58.480
How do they know?
658
00:37:59.599 --> 00:38:04.440
Uh, how do we know? We just don't know. There's
659
00:38:04.480 --> 00:38:08.679
no way to know. So let me talk about I
660
00:38:08.800 --> 00:38:11.199
mentioned two things, and I want to go back to them.
661
00:38:11.199 --> 00:38:14.039
One is how we know Burford isn't always telling the truth.
662
00:38:14.039 --> 00:38:16.480
Burford's always taken the position that we don't have any
663
00:38:16.480 --> 00:38:19.400
control over the litigation. I would commend to you their
664
00:38:19.440 --> 00:38:24.480
conduct in the Boiler Chicken MDL, which was where they
665
00:38:24.519 --> 00:38:28.000
funded to the tune of one hundred and forty million dollars.
666
00:38:29.599 --> 00:38:30.000
Cisco.
667
00:38:30.239 --> 00:38:34.559
That's Sysco, the food service company, not the technology company,
668
00:38:35.360 --> 00:38:39.639
and to sue among others, Pilgrim's pride for and I
669
00:38:39.719 --> 00:38:43.079
mentioned the decision a little earlier, the most recent decision
670
00:38:43.480 --> 00:38:47.199
among others who were allegedly in an anti trust in
671
00:38:47.280 --> 00:38:49.960
violation of anti trust law, colluding to set the prices
672
00:38:50.000 --> 00:38:56.320
of pork, beef and boiler chickens. And they it turns
673
00:38:56.320 --> 00:38:58.159
out that if you lend someone one hundred and forty
674
00:38:58.199 --> 00:39:00.199
million dollars, you want to have some control over other
675
00:39:00.239 --> 00:39:02.559
the case sett us, I sure would. I don't have
676
00:39:02.599 --> 00:39:04.679
one hundred and forty million dollars at the moment, but
677
00:39:04.760 --> 00:39:06.760
if I did, and I decided to loan it out,
678
00:39:06.960 --> 00:39:10.719
I'd want some control. Well, somehow, I forget how they
679
00:39:10.719 --> 00:39:12.239
did it. They got a hold of this agreement and
680
00:39:12.280 --> 00:39:14.679
it turned out contrary to what Burford had said, No, no, no,
681
00:39:14.719 --> 00:39:19.800
they had control. Shocking, and they rejected the settlement when
682
00:39:20.800 --> 00:39:23.960
Cisco reached it for fifty million dollars with one of
683
00:39:24.000 --> 00:39:28.239
the defendants in one of the mdls. To make a
684
00:39:28.320 --> 00:39:31.639
very long story short, they created an entity called Karna
685
00:39:31.960 --> 00:39:38.920
that substituted in for for Cisco replaced them in the
686
00:39:38.960 --> 00:39:42.039
case return. They're now going to be returning the fifty
687
00:39:42.079 --> 00:39:45.639
million dollars that Pilgrim's Pride paid And now they're going
688
00:39:45.679 --> 00:39:48.840
to go back in a litigate because fifty million wasn't enough.
689
00:39:51.199 --> 00:39:56.119
This was this came to light. It's shocking that we
690
00:39:56.199 --> 00:39:58.800
don't know. So we don't know what agreements they have,
691
00:39:59.440 --> 00:40:01.039
which one's they have control over.
692
00:40:00.960 --> 00:40:01.760
Which we don't.
693
00:40:02.000 --> 00:40:03.519
And we don't have to take your word for it
694
00:40:03.920 --> 00:40:08.039
because we know it at least one instance weren't exactly truthful.
695
00:40:09.559 --> 00:40:12.440
So that's the primary. That's one exam That's the one
696
00:40:12.440 --> 00:40:15.599
thing I referenced with respect to disclosure and why it's
697
00:40:15.599 --> 00:40:19.320
in extreme example to be sure, but it makes the
698
00:40:19.360 --> 00:40:22.559
point anecdotal. But that's all we've got because we don't
699
00:40:22.559 --> 00:40:25.800
have disclosure. We're shadow boxing over here. The second thing is,
700
00:40:25.840 --> 00:40:28.679
as I mentioned, you're sharing documents with non lawyers, how
701
00:40:28.679 --> 00:40:31.519
do you maintain confidentiality? And they are the objection that's
702
00:40:31.519 --> 00:40:34.320
made as well. We do this all the time when
703
00:40:34.360 --> 00:40:37.239
we outsource document reviewed and non oyers and.
704
00:40:37.199 --> 00:40:37.920
These things like that.
705
00:40:38.960 --> 00:40:41.159
I'm going to use the word again, it's that sophistry.
706
00:40:41.920 --> 00:40:45.000
When I use an outside vendor, when I use relativity,
707
00:40:45.079 --> 00:40:47.480
or I use what is one of these people to
708
00:40:47.599 --> 00:40:51.800
do document review? They're under our control. They're no different
709
00:40:51.840 --> 00:40:54.320
than the private investigator that I hire or the expert
710
00:40:54.320 --> 00:40:58.039
that I hire or anybody else, the consulting expert I
711
00:40:58.119 --> 00:41:02.199
hire that stuff's privilege. They remain under my control. But
712
00:41:02.239 --> 00:41:04.440
here it is you have an entire operation of the
713
00:41:04.480 --> 00:41:09.159
firm that's outside. That's a fundamentally different thing, not under
714
00:41:09.159 --> 00:41:13.039
the control of the lawyers, separate from the lawyers. Emphatically
715
00:41:13.079 --> 00:41:14.800
separate from the lawyers. That was the whole point. You
716
00:41:14.880 --> 00:41:17.760
sold that portion of the business. They didn't remain under
717
00:41:17.800 --> 00:41:20.400
the control of the lawyers. When I hire a vendor,
718
00:41:20.440 --> 00:41:25.039
they remain under my control. They serve me as the lawyer.
719
00:41:25.760 --> 00:41:30.440
I decide who's involved who's not involved. And so.
720
00:41:32.000 --> 00:41:32.920
That argument is.
721
00:41:32.960 --> 00:41:40.239
Just specious and it misrepresents what the current arrangements are
722
00:41:40.639 --> 00:41:45.000
and what necessarily must be what these MSR ragors because
723
00:41:45.000 --> 00:41:49.360
we haven't seen these either they claim, and you know,
724
00:41:49.440 --> 00:41:53.280
I don't believe you. I get to trust, but verify.
725
00:41:53.320 --> 00:41:57.760
You won't allow to verify, They won't disclose them. And
726
00:41:57.880 --> 00:42:02.639
so that there we are. There's a lot going on.
727
00:42:03.159 --> 00:42:05.360
We don't know what it is, and they don't want
728
00:42:05.400 --> 00:42:08.239
to prevent the interests who are on the other side
729
00:42:08.239 --> 00:42:10.360
of this don't want people to done. No.
730
00:42:10.440 --> 00:42:11.920
One of the things that you did talk about with
731
00:42:11.960 --> 00:42:17.280
the MSOs is we've seen similar setups in the accounting
732
00:42:17.480 --> 00:42:21.159
and in the healthcare space. What lessons do you think,
733
00:42:21.320 --> 00:42:25.039
you know, if we're looking if for as lawyers, looking
734
00:42:25.079 --> 00:42:28.800
to both the healthcare space and the accounting space, and
735
00:42:28.840 --> 00:42:32.320
I know those aren't necessarily identical professions to what lawyers do,
736
00:42:32.400 --> 00:42:35.639
but I mean they do have a lot of similarities.
737
00:42:36.920 --> 00:42:39.880
What should we be what red flag should we be
738
00:42:39.920 --> 00:42:44.039
looking at? What should we be seeing as potential significant hazards?
739
00:42:44.119 --> 00:42:48.159
You know, if we move forwards more of those MSOs.
740
00:42:49.360 --> 00:42:52.079
I think that what you'll see, as we talked about,
741
00:42:52.360 --> 00:42:56.880
is a move away from or as you begin to
742
00:42:57.039 --> 00:42:59.480
sell equity and take.
743
00:42:59.280 --> 00:43:04.639
Away what it uh uh, take away.
744
00:43:04.400 --> 00:43:07.760
What makes lawyers want to do this job and do
745
00:43:07.960 --> 00:43:09.719
the grind that is necessary.
746
00:43:13.000 --> 00:43:16.280
That you will see fewer lawyers going in to be lawyers.
747
00:43:16.280 --> 00:43:18.000
It's the same thing you've had, You've seen that happen
748
00:43:18.039 --> 00:43:20.199
in accounting, and then you're going to see real impact
749
00:43:20.239 --> 00:43:23.800
on how lawyers decide how to handle matters, just like
750
00:43:23.880 --> 00:43:28.320
you've seen, uh, you know, you've seen any number of
751
00:43:28.320 --> 00:43:32.480
ways in which professional judgment gets interfered with when the
752
00:43:32.480 --> 00:43:35.840
interests of the moneyed interests interfere with what the lawyer
753
00:43:35.880 --> 00:43:38.400
wants to do uh, and the counsel that they give
754
00:43:38.840 --> 00:43:42.559
and we hear arguments, well, the insurance company has controlled well,
755
00:43:43.079 --> 00:43:46.920
the insured contracted for that. And if the insurance company
756
00:43:47.400 --> 00:43:50.119
doesn't protect the interests of the insured because it wants
757
00:43:50.199 --> 00:43:54.559
to save a buck, there's remedies for that. And so
758
00:43:54.840 --> 00:43:58.320
what's the remedy when the MSO decides is there going
759
00:43:58.400 --> 00:43:59.280
to be a they're not in?
760
00:43:59.519 --> 00:44:03.039
Are they in with the MSO when the MS hotel?
761
00:44:03.400 --> 00:44:04.920
Or are we just gonna are gonna have ramp at
762
00:44:04.960 --> 00:44:09.239
malpractice when the lawyers don't remain independent? Is that is
763
00:44:09.280 --> 00:44:13.119
that the solution? Because that's a really a second best
764
00:44:13.440 --> 00:44:18.199
alternative for clients. When the lawyer screws up and says, oh, well,
765
00:44:18.239 --> 00:44:21.400
the MSO told me to do it, is that really
766
00:44:21.440 --> 00:44:25.159
the remedy? I think that that is so far second
767
00:44:25.199 --> 00:44:26.320
best you can't even see it.
768
00:44:27.400 --> 00:44:32.719
You know, that raises a whole interesting Yeah, it's not
769
00:44:32.840 --> 00:44:35.039
something I had necessarily thought about before. But if that
770
00:44:35.159 --> 00:44:39.039
is the remedy, I mean, being somebody who regularly defends
771
00:44:39.159 --> 00:44:43.800
lawyers who are accused of malpractice, it does raise the question,
772
00:44:44.000 --> 00:44:47.480
you know, do we see more malpractice? And then in turn,
773
00:44:47.679 --> 00:44:52.000
do we see insurance carriers who ensure lawyers start to
774
00:44:52.039 --> 00:44:56.320
look at these sort of setups and say, I don't
775
00:44:56.360 --> 00:44:58.360
know about that. I mean because at least in Ohio,
776
00:44:58.960 --> 00:45:00.519
and I don't know about every other state, but at
777
00:45:00.559 --> 00:45:04.480
least in Ohio, you don't necessarily have to carry malpractice
778
00:45:04.519 --> 00:45:08.719
insurance just disclose. Correct, that's same in Ohio, but you'd
779
00:45:08.719 --> 00:45:12.079
have to disclose that. Now, I would never recommend a
780
00:45:12.159 --> 00:45:16.880
lawyer not to carry malpractice insurance, but but I mean,
781
00:45:16.920 --> 00:45:20.000
it does start to raise the question as to how
782
00:45:20.079 --> 00:45:24.360
what type of ripple effects these arrangements may have. Now
783
00:45:24.639 --> 00:45:28.760
one of the things that I guess, and you mentioned this,
784
00:45:28.920 --> 00:45:32.800
or you started talking about California has some legislation in
785
00:45:32.840 --> 00:45:37.800
the works, and you are working on some legislation in Illinois.
786
00:45:38.320 --> 00:45:40.880
I guess my question is kind of as we wrap
787
00:45:40.960 --> 00:45:45.400
up this discussion, what is what is being done, if anything,
788
00:45:45.519 --> 00:45:48.760
to kind of address this situation, Because as you mentioned,
789
00:45:48.760 --> 00:45:54.519
and I've studied and talked about ride sharing in another
790
00:45:54.599 --> 00:45:58.440
platform for a long time, but you mentioned how these
791
00:45:58.519 --> 00:46:02.199
kind of lot of these technology companies do this. They
792
00:46:02.239 --> 00:46:05.039
bust on the scene before regulators even know what's going on.
793
00:46:05.119 --> 00:46:08.039
They set up they start operating and then the regulators
794
00:46:08.039 --> 00:46:09.800
are left to try to catch up. But sometimes it's
795
00:46:09.800 --> 00:46:14.199
impossible to undo what's already been done. And so I mean,
796
00:46:14.239 --> 00:46:18.920
obviously we're we've called ourselves a self regulating profession, although
797
00:46:18.960 --> 00:46:20.320
that's not entirely.
798
00:46:20.440 --> 00:46:22.280
True, but it's not true.
799
00:46:22.880 --> 00:46:28.280
But we are still a relatively regulated industry. What if
800
00:46:28.280 --> 00:46:32.519
anything is being done to kind of regulate these setups.
801
00:46:32.079 --> 00:46:37.079
Well, not much. California passed a comprehensive piece of legislation
802
00:46:37.159 --> 00:46:40.039
last year called AB nine thirty one, and what that
803
00:46:40.079 --> 00:46:44.039
did is that they they passed a statute that regulated
804
00:46:44.119 --> 00:46:48.039
the litigation funding piece, and then they had a log
805
00:46:48.039 --> 00:46:50.400
because there turns out they're adjacent to Arizona, and they
806
00:46:50.440 --> 00:46:53.800
didn't like that very much. They passed a bill that
807
00:46:53.960 --> 00:46:57.079
part of that bill was said, you can't share fees
808
00:46:57.639 --> 00:47:00.719
with an ABS in a contingency fee arrangement, and so
809
00:47:00.760 --> 00:47:03.840
they went after the They went after that, and that
810
00:47:03.880 --> 00:47:06.360
got challenged by a firm that had an ABS structure,
811
00:47:07.360 --> 00:47:12.280
claiming they filed a complaint for pulmonary injunction and arguing
812
00:47:12.360 --> 00:47:16.800
for all kinds of constitutional both state and federal constitutional violations,
813
00:47:16.920 --> 00:47:20.679
and the Central District District Court judge and the Central
814
00:47:20.719 --> 00:47:26.400
District of California said no, and so then they just
815
00:47:27.119 --> 00:47:31.960
closed up the ABS and they created an mso so sorry, fine,
816
00:47:31.960 --> 00:47:33.840
we'll do it by ms A if we can't do
817
00:47:33.920 --> 00:47:34.719
it by a BS.
818
00:47:36.000 --> 00:47:36.880
And that's what you've.
819
00:47:36.679 --> 00:47:40.400
Seen, is they've it's it's it's a it's a wolf
820
00:47:40.400 --> 00:47:42.280
in chief's clothing. We're gonna do it. We'll just do
821
00:47:42.320 --> 00:47:47.519
it a different way. Uh and Uh, that's that's what
822
00:47:47.559 --> 00:47:51.199
we've seen happen Illinois. We've taked, We took a group
823
00:47:51.239 --> 00:47:55.800
of us, took the language from the California bill, at
824
00:47:55.880 --> 00:47:59.000
least the section that dealt with a B, s's and MSOs.
825
00:47:59.039 --> 00:48:02.480
We adapted it for Illinois. And that bill has been
826
00:48:02.639 --> 00:48:05.079
pending and we'll see where it goes. You know, the
827
00:48:05.800 --> 00:48:10.280
those that oppose it have been, as you would imagine, vociferous.
828
00:48:11.039 --> 00:48:14.119
They're one thing that private equity and companies like that
829
00:48:14.159 --> 00:48:17.159
have is a lot of money, and politics is influenced
830
00:48:17.199 --> 00:48:20.039
by that thing. And so we'll see if we're able
831
00:48:20.079 --> 00:48:24.800
to be successful. There have been a recent ethics opinion
832
00:48:24.920 --> 00:48:28.440
non binding from South Carolina that says that South Carolina
833
00:48:28.480 --> 00:48:30.719
cannot be involved in an ABS and can't share fees
834
00:48:30.760 --> 00:48:33.960
with an abs The Florida Supreme Court passed a rule
835
00:48:34.000 --> 00:48:36.679
it's kind of mealy, not very strong, but they passed
836
00:48:36.679 --> 00:48:42.039
a rule where a lot of those that favor these
837
00:48:42.239 --> 00:48:46.280
hang their hat is on an opinion from Texas Texas
838
00:48:46.719 --> 00:48:49.239
Opinion seven oh six that says, sure, you can share
839
00:48:49.239 --> 00:48:51.199
a fee, you can have an mso as long as
840
00:48:51.239 --> 00:48:52.639
you don't share fees. The problem is, I don't know
841
00:48:52.639 --> 00:48:55.079
how you do that. They all said, oh, this, this
842
00:48:55.159 --> 00:48:56.800
gives us the answer. This is how you do it,
843
00:48:57.239 --> 00:48:59.119
except how you've described it.
844
00:48:59.119 --> 00:49:03.800
It's not possible. You just can't do it.
845
00:49:03.960 --> 00:49:07.480
Now, there are entire workbooks from lawyers on how to
846
00:49:07.519 --> 00:49:10.159
do this and do it what they say ethically. And
847
00:49:10.239 --> 00:49:12.400
these are ethics experts. This is what they do for
848
00:49:12.440 --> 00:49:14.760
a living, and they're giving you the answers on how
849
00:49:14.760 --> 00:49:18.239
to avoid the spirit of the rules. Now, it's a
850
00:49:18.320 --> 00:49:21.400
really amazing thing when the ethics experts are telling me
851
00:49:21.480 --> 00:49:24.239
how to draw into the gray lines of the rule
852
00:49:25.719 --> 00:49:28.599
in order to avoid the very thing that it's at
853
00:49:28.599 --> 00:49:31.559
the core of the profession. It's a pretty stunning thing.
854
00:49:32.400 --> 00:49:34.599
I didn't think I would see the day when that
855
00:49:35.000 --> 00:49:39.719
was the mainstream view. But you've seen, you know, April,
856
00:49:39.760 --> 00:49:42.840
which is the Association of Professional Responsibility Lawyers, is advocated
857
00:49:42.880 --> 00:49:44.239
for a change to Rule five point four.
858
00:49:44.400 --> 00:49:45.840
Not as radical as some.
859
00:49:45.880 --> 00:49:51.039
Others, but you've seen Professional Responsibility Lawyers I think with
860
00:49:51.119 --> 00:49:55.960
the intention that it's going to aid in access to justice.
861
00:49:56.199 --> 00:49:58.400
But what are we talking about when we're talking with
862
00:49:58.400 --> 00:50:01.840
about access to justice? Talking about a person who is
863
00:50:02.320 --> 00:50:05.400
being foreclosed upon, a person who's being evicted, a person
864
00:50:05.440 --> 00:50:08.159
in a consumer debt, a person trying to get an
865
00:50:08.239 --> 00:50:12.320
order of protection, a who's been accused of a misdemeanor,
866
00:50:12.519 --> 00:50:16.679
a person who you take the kind of or trying
867
00:50:16.679 --> 00:50:19.800
to set up a small business or set up a will,
868
00:50:19.920 --> 00:50:22.800
or do any of these kinds of things. There is
869
00:50:22.920 --> 00:50:26.840
no money in that work now, and there's no reason
870
00:50:26.880 --> 00:50:29.320
to think there's going to be money in that work tomorrow.
871
00:50:29.440 --> 00:50:32.159
After a private equity firm or a publicly traded company,
872
00:50:32.400 --> 00:50:35.119
or any other kind of entity in the business of
873
00:50:35.119 --> 00:50:38.960
making money invests in a law firm, Why would that
874
00:50:39.079 --> 00:50:41.000
all of a sudden create money.
875
00:50:41.719 --> 00:50:44.159
To spend on those things. It wouldn't.
876
00:50:44.679 --> 00:50:47.159
It couldn't if there were money to be made to
877
00:50:47.199 --> 00:50:51.840
be be done now outside of legal aid. But there
878
00:50:51.880 --> 00:50:53.960
are other ways to deal with this problem, and I
879
00:50:54.000 --> 00:51:00.119
think it's some version of lawyer LPNs and nurse practitioners
880
00:51:00.639 --> 00:51:04.119
For the kinds of cookie cutter work that could be done.
881
00:51:04.280 --> 00:51:08.199
You could you could have lower cost under the supervision
882
00:51:08.199 --> 00:51:09.840
of a lawyer, just the way an LPN and a
883
00:51:10.199 --> 00:51:14.000
nurse practitioner works under the supervision of a doctor. You
884
00:51:14.039 --> 00:51:17.480
could offer lower cost services and particular classes of claims
885
00:51:17.559 --> 00:51:19.960
in order to represent people on those kinds of things
886
00:51:20.000 --> 00:51:25.880
traffic tickets and fictions, simple bankruptcies, YadA YadA, and and
887
00:51:25.960 --> 00:51:28.559
ways to deliver legal services for people that need them,
888
00:51:28.599 --> 00:51:32.480
simple wills, setting up an LLC, things like this that
889
00:51:32.639 --> 00:51:35.880
would be that could provide the services and fill the gap,
890
00:51:36.639 --> 00:51:40.280
get people employed in areas that need that, that could
891
00:51:40.320 --> 00:51:42.480
do that without having to make the giant investment in
892
00:51:42.519 --> 00:51:46.639
time and money and going into be a lawyer when
893
00:51:46.679 --> 00:51:48.719
you don't really need a lawyer to do that work.
894
00:51:48.960 --> 00:51:51.920
If I have a sniffle, if my kid has a sniffle,
895
00:51:52.719 --> 00:51:54.079
they don't really need the doctor.
896
00:51:54.920 --> 00:51:56.320
They really don't.
897
00:51:56.920 --> 00:52:00.639
They they got a skin knee, they you know, we
898
00:52:00.679 --> 00:52:04.960
can probably deal with that, but we don't need the time,
899
00:52:05.000 --> 00:52:06.039
money and expense of.
900
00:52:06.079 --> 00:52:07.719
A doctor to do a lot of that stuff.
901
00:52:09.440 --> 00:52:11.639
But when the person comes in and they see, you know,
902
00:52:11.639 --> 00:52:13.760
this really isn't a skin need, This really isn't a sniffle,
903
00:52:13.760 --> 00:52:15.920
this is something else. Now I'm going to bring in
904
00:52:15.960 --> 00:52:18.719
the doctor, right, and so you can deal with that.
905
00:52:18.719 --> 00:52:23.079
There's no reason why you couldn't do that with the
906
00:52:23.119 --> 00:52:26.000
provision of legal services, and you could bring the cost
907
00:52:26.039 --> 00:52:27.920
of those services to the people that really need it
908
00:52:27.960 --> 00:52:30.119
down and you don't have to corrupt the profession of
909
00:52:30.159 --> 00:52:33.400
the process. So that's an alternative.
910
00:52:33.719 --> 00:52:36.679
Yeah, Patrick, I wanted to thank you for taking the
911
00:52:36.679 --> 00:52:38.559
time to talk with us today. I know that this
912
00:52:38.719 --> 00:52:42.159
was a kind of a weighty subject, to say the least.
913
00:52:42.199 --> 00:52:44.320
We were talking kind of in depth on a lot
914
00:52:44.360 --> 00:52:48.519
of new and developing topics, and I appreciate your kind
915
00:52:48.519 --> 00:52:53.239
of insightfulness because honestly, it's super helpful, I think for
916
00:52:53.360 --> 00:52:56.400
us and the profession who are not as well aversed
917
00:52:56.400 --> 00:52:57.840
in some of these things and may have read an
918
00:52:57.880 --> 00:53:03.920
article or two but don't really understand not only the implications,
919
00:53:04.000 --> 00:53:07.840
but really the vastness of it and what's already transpiring
920
00:53:07.880 --> 00:53:10.360
that we may not be totally aware of. So I
921
00:53:10.400 --> 00:53:12.320
really appreciate you taking the time to join us today
922
00:53:12.360 --> 00:53:13.920
and to talk to us about these issues.
923
00:53:14.440 --> 00:53:19.000
Thank you very much. I appreciate the opportunity