An important issue comes up in my office, now and again, and it is worth sharing with those who utilize, or may utilize, legal funding services. The issue is: Can one enter into a lawsuit financial contract with an incapacitated client?
Mentally incapacitated, minors, or wrongful death victims whose rights are being pursued by estate representatives can be funded, in some circumstances, but, both the lawsuit financing company and the attorney must be very careful. In a wrongful death action, for example, an attorney should advise a lawsuit funding company the names of the heirs and likely distributions. Is the recovery to go to one person or split among several? If split, what is the case's projected value and likely percentage splits? Case funding can only be provided against the share of proceeds that belong to the heir seeking funding; a legal finance company cannot fund one heir on the larger case value. If an inexperienced or uneducated litigation finance company attempts to do that, the attorney should point out and prevent the mistake, because the case will be difficult to resolve with a lopsided legal cash advance standing in the way. The legal finance company may be able to provide funding to several heirs, but only to each against each heir's potential share.
As to the minor or incapacitated plaintiff, lawsuit funding should not be provided in most instances. If a lawsuit finance company is willing to do such a transaction for a minor or incapacitated person the attorney should usually step in and stop it. A lawsuit funding company (or any vendor) must contract only with someone who has the requisite capacity. On the other hand, if a lawsuit cash advance is absolutely necessary for plaintiff's sustenance or medical treatment, the attorney might consider taking a proposed legal finance contract to the handling judge and get a transaction approved on a ‘best interests of the client’ basis, with the personal representative signing off on an agreement. This should only be done upon a showing of absolute need.
If the representative person is responsible for medical care or is receiving a portion of the proceeds for the recovery of money he/she has provided for medical care, household help, nursing services, etc., it is possible to provide lawsuit financial services to the representative against his/her own share of the recovery. There are no capacity issues there. The attorney must deal with the legal funding company in a fair and ethical manner. An attorney who directs funds to one plaintiff or another to avoid the legal finance company's lien could face a lawsuit or a bar complaint for ethical violations.
If you are presented with a situation where a client is seeking legal finance services under any of the scenarios presented herein, I advise caution. Call me at Lawsuit Financial, toll free, at 1-877-377-SUIT (7848), even if you are pursuing pre-settlement funding with a competitor. I am happy to provide practical advice and assistance to lawyers, their clients and, even to competitor litigation funding companies, so that clients receive the legal financial help they need in an ethical and sensible manner.