Litigation Funding Dispute Gets Costly

The fight between prominent plaintiffs’ attorney Thomas Girardi and a litigation funder that claims he and his firm haven’t paid back a $15 million loan has been routed to arbitration. However, a significant, potentially public fight remains over whether Mill Valley-based funder Law Finance Group LLC will be able to go after Girardi’s personal assets if it wins in arbitration.

Law Finance Group sued Girardi and his firm, Girardi Keese, in Los Angeles Superior Court in January. The funder claims that Girardi and the firm refused to hand over recovered fees from cases the parties allegedly agreed would repay the loans.

Girardi asked last month for the dispute to be routed to arbitration, a move that Law Finance Group did not oppose. Los Angeles Superior Judge Gregory Alarcon granted Girardi’s motion to compel arbitration in the case in early April. However, a hearing remains pending on Alarcon’s calendar for April 24 on Law Finance Group’s writ of attachment, which seeks to secure some of Girardi’s assets to pay out damages should the funder succeed on its underlying claims now in arbitration.

Among the assets listed in Law Finance Group’s filing are a home in Pasadena, the Girardi Keese offices on Wilshire Boulevard in Los Angeles, the firm’s bank account and receivables, and nine other bank accounts.

Leslie Corwin of Eisner, Law Finance Group’s lawyer, said in correspondence to Girardi attached to court filing that the lawsuit was filed in state court explicitly so his client could secure assets.

 Girardi notably scored $333 million settlement on behalf of residents of Hinkley in the toxic tort case that inspired the film “Erin Brockovich.” Girardi’s finances and those of the firm, however, have repeatedlybeen the subject of litigation since his wife joined the cast of the Bravo reality television show in 2015.

The lawsuit alleges that the Girardi Keese firm owes $15 Million. Girardi, it alleges, who regards himself as “one of the nation’s top trail lawyers,” is a partner of the firm Girardi Keese. In order to fund the operations of his law firm Griardi sought financing from Law Finance Group, LLC. As security Girard personally secured all obligations owed by the loan agreement. Girardi, it alleged, agreed to immediately pay the lender all proceeds, including legal fees received, from certain cases described in an exhibit.

 It also alleged that Girardi, a principal at the Borrower law firm – agreed to personally guarantee all obligations owed to Lender.

 The lawsuit claims that the lender discovered that Girardi received proceeds from the cases specified in the loan agreement but failed to pay the lender as promised. In addition, the lender learned that Girardi had given the same security to four more lenders in violation of the contract.

The claims are now being pursued by arbitration. The arbitration award could be turned into a court judgment in California.

 New York Proposes a Flawed Method to Interest Whistleblowers in Turning in Insurance Fraud Perps

The New York Legislature has proposed the following as a means to help the police defeat insurance fraud:

Add §405-a, Ins L

Provides that any person who provides information to the attorney general, a district attorney or the insurance frauds bureau concerning a fraudulent insurance transaction or with information about a fraudulent insurance transaction that is about to take place may be entitled to an award of forty percent of the action or claim relating to such fraudulent action.

The statute was designed to reward whistleblowers in NY. Anyone who provides info to the state attorney general, district attorney, or insurance frauds bureau would get 40% of any recovery from an insurance fraud crime.

This bill, as written, needs a great deal of rewriting since people convicted of insurance fraud seldom pay anything from actions brought by the state. At best it would allow a share of criminal fines or orders of confiscation. If that is the intent it should say so. If not, it should be modified as a reward paid for by the state or the defrauded insurer.

 The intent is a good idea but ZIFL wonders, even if enacted, it will have an effect, and it needs clarification. First it is written in the disjunctive. Providing information should not be rewarded unless there is an arrest and conviction. Second, if they defeat a fraudulent claim, where is the money coming from to pay 40% of the false claim that is defeated. With such weak language ZIFL can see fraud perpetrators taking advantage of it by having a co-conspirator report a potential fraud, then withdrawing the claim, and the whistleblower gets 40% of the claim that was never made.

We are shocked that anyone with a high school education would propose this statute and post it on Twitter as @FraudNY.