Matthew C. Turk (Indiana University) and Suneal Bedi (Indiana University – Kelley School of Business) have posted The Secondary Market for Lawsuits on SSRN. Here is the abstract:
Litigation finance is an important trend in civil litigation that involves the funding of lawsuits by outside third parties with no affiliation to the plaintiff or defendant. While there is now a substantial law literature on the “market-for-lawsuits” that litigation finance creates, the particular focus of this Essay is on an emerging secondary market within that space. In the secondary market for lawsuits, investors buy-and-sell existing litigation funding contracts in a manner that resembles trading in securities or other financial assets.
This Essay is the first piece of legal scholarship to address the secondary market for lawsuits. In doing so, it makes three contributions to the literature. First, it provides a much needed overview of the development of secondary markets for litigation funding and explains how they differ from the more familiar and longstanding primary market in litigation finance. Second, this Essay shows how the secondary market raises immediate, practical problems for the administration of existing disclosure requirements in civil litigation and arbitration, which to-date have been the primary means of regulating the use of third-party outside funding in legal disputes. Third, from a more theoretical perspective, it identifies the potentially far reaching implications that secondary markets raise as a mechanism for pricing and settling lawsuits.
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Lawrence Solum