Last month, ARC Advisory Council member Jeremy Kidd was published in Law 360 with an article that illuminates the differences between litigation funding—like was recently seen Hulk Hogan’s case against Gawker—and consumer legal funding. The piece talks about the Gawker case’s implications for on journalism and free speech, and also shows why public policy makers need to separate litigation funding and consumer legal funding when determining proper regulatory schema.

He references his own October 2015 research in the article, noting:

“With consumer legal funding… when legitimate claims are brought and justice served, it can actually benefit the economy by deterring bad and inefficient behavior.”

Kidd is Associate Professor of Law at Mercer University’s Walter F. George School of Law and holds both a Ph.D. in Economics from Utah State University and a J.D. from George Mason University School of Law. He is a preeminent thought leader on consumer legal funding, and has testified on the topic before state legislative bodies.

Read the full text Kidd’s article HERE.

Photo Credit: Flickr

Kanye West—the Chicago-raised hip-hop lyricist, rapper, producer, media-monopolizer, and social media instigator—is now claiming he’s $53 million in debt and has asked Facebook’s Mark Zuckerberg and Google’s Larry Page for a $1 billion investment in his art. Even with his new album, The Life of Pablo, it seems like he’s in pretty deep. And his wife, Kim Kardashian, who has perfected the art of monetizing fame, isn’t coming to the rescue. So what’s a Yeezus to do?

For those wanting to get cash to Kanye, according to Forbes columnist Robert W. Wood, a few options are out there for getting him $1 billion tax free, with little to no tax hit for Mr. West: a loan, purchase, joint venture, or something else.

“Mr. Zuckerberg is probably too clever–with both tax and business savvy–to make a straight loan,” notes Wood. If Zuckerberg ever chose to forgive the debt, it would be deemed income for Kanye and be heavily taxed. That would be one tough 1099-C form for him and Kim K to fill out. Instead, Zuckerberg would likely do a purchase, possibly part of Kanye’s intellectual property.

Wood puts forward a novel idea:

How about a prepaid forward sale? Taking a page from the litigation funding industry, it works like this. A prepaid forward contract is basically a sale, not a loan. In the litigation context, the plaintiff selling a piece of his or her claim, or the lawyer selling a piece of the contingent fee. It arguably offers the best tax result for the plaintiff or the lawyer.

He gets how legal funding works:

You are contracting to sell now, but the sale does not close until the case is resolved. The result is that you generally should not have to report income until the conclusion of the case. Only then can the final price be tallied. It sounds similar to a loan, but is actually better in many cases.

Wood says, “sometimes the loan v. purchase dichotomy can become blurred.” But, he’s more than clear about why legal funding isn’t a loan, and why it is a purchase of property. Perhaps this type of transaction could work for Zuckerberg, Page, and Kanye?

Something to think about, Yeezy.

If you have ever tried to look up information on legal funding, it’s immediately clear that these types of transactions have been given many different names over the last decade—the 50 Shades names of legal funding. Less sexy than the titillating best-selling book, legal funding is nevertheless an important topic, so here’s an attempt to explain the many names of legal funding.

Let’s start at the beginning. Legal funding really became widely available in this country about 15 years ago. Since its inception, people have been calling it different things. In the UK, where the industry has been around a bit longer “litigation finance” is the preferred term. But, since the idea of it is so new to most of the general public in the U.S., nothing has really stuck yet.

Compounding the confusion is the fact that the legal funding industry is divided into two types of legal funding: commercial and consumer. The Alliance for Responsible Consumer Legal Funding (ARC) advocates on behalf of consumer legal funding, which helps everyday people when they are seeking a claim after an accident.

Our coalition uses the term “legal funding.” The American Bar Association used “alternative litigation finance” in its Ethics Commission 20/20 white paper. Wikipedia has an entry for “legal financing.”

Many other names might come up with using a simple Google search:  litigation funding, civil procedure funding, advance payment, professional funding, settlement funding, pre settlement funding, alternative litigation financing, or any combination of the previously mentioned terms. Several different terms have been used in legislation across the country.

All of these monikers attempt to accurately describe and brand a transaction that is becoming more widely used on a national scale.

There is power in a name. Marion Michal Morrison knew it. His stage name was John Wayne. David Robert Jones knew it. He became David Bowie. Dana Owens knew it. She’s now Queen Latifah. It can help sell a sultry, provocative bestselling book—like the one referenced in the title of this blog. Names can build associations in peoples mind when they hear it.

For example, a legal funding crowd-sourcing company likes to call legal funding “plaintiff financing” to evoke the feeling of empowerment. The company touts legal funding’s ability to level the playing field and increase access to justice.

The U.S. Chamber of Commerce’s Institute for Legal Reform and Big Insurance often use the terms “lawsuit loans”, “lawsuit lending,” “lawsuit funding,” or “crash cash” in order to create a negative association with aspects of less consumer friendly products, like loans. Loans create debt, have payments, can hurt a person’s credit, put them into collections, or cause repossession of collateral like a car. Legal funding has none of those things, because it is a purchase.

These big players want push this narrative because they want to regulate legal funding like a loan—even if it’s improper and would hurt consumers. The fewer people that have access to legal funding, the more low-ball settlements people will be pressured to take. The more low-ball settlements people take, the more their bottom line grows.

Some legal funding companies have been a little loose with jargon, themselves. They sometimes say they provide “lawsuit loans”—a name that uses more commonplace parlance, though the term is inappropriate. They view it as good marketing. Ultimately, it a free market and it’s their choice.

As legal funding becomes more familiar to the general public, one name will likely dominate. But for now, these “50 names of legal funding” represent a product that helps families get back on their feet after an accident and is a solution to a need in the free market. Whatever you want to call it, it’s a necessary choice for everyday people.