Two years ago I suggested in a Marketplace Trial that “a financial market to value and hedge law suits” could emerge. Hedge funds are on edge of making that happen.
Hedge Funds Find Returns in Making Small Loans in the New York Times (2/21/06, $) explains that hedge funds seek returns in new and seemingly unusual markets. Several funds are financing businesses that lend cash to injured people. The collateral – pending personal injury suits. One lawyer is helping a client who is “preparing to start hedge funds that will invest in class-action lawsuits and precious coins.” Lawsuits and coins?? Exactly. From Wall Street’s perspective, lawsuits may be like any other financial asset.
An active market in lawsuits could drive legal technology. If Wall Street invests, you can bet that they have consultants, analysts, and financiers analyzing the cases. That can propel data collection, early case assessment, business intelligence and supporting technologies. Hedge funds may even care how much it costs to litigate, so they could be a disruptive event that forces firms to become more efficient.