Pluralistic: 09 Feb 2022

Today's links

A smiling judge bearing a bar/line-chart depicting an upwards rise; above the chart is a flaming dumpster.

Litigation finance pits greed against greed (permalink)

Early in the 19th century, political philosophers like Jeremy Bentham began to rail against champerty, whereby "unscrupulous nobles and royal officials would lend their names to bolster the credibility of doubtful and fraudulent claims in return for a share of the property recovered."

On its face, the practice of inviting investors to back litigation against deep-pocketed, corrupt parties sounds pretty good. Large corporations and wealthy individuals have enormous litigation warchests that allow them to abuse people with impunity, using their cash to draw out lawsuits until their victims run out of money for lawyers.

Opening litigation against these bullies to investors tips the balance. Think of class-action suits and no-win/no-fee cases: a law-firm locates someone with a good grievance against a deep-pocketed foe and foots the bill for the case. The longer the bully drags out the litigation, the more billable hours the plaintiff's lawyer racks up, which they can seek to recover as part of an eventual judgment in their favor.

Champerty – called "litigation finance" these days – allows third parties to step in and directly fund litigation by providing plaintiffs with money to hire any lawyer, not just lawyers willing to work on contingency. Contingency lawyers have always been able to seek finance secured against eventual damages and fees, but with litigation finance, the investment can flow through the plaintiff, theoretically giving them more of a say in the ligitation.

Litigation finance has been in the air for a long time. It's a major subplot of my 2009 novel Makers, which follows boom-and-bust cycles in a number of exotic financial fads, starting with commercialized makerspaces selling through Etsy-like hubs, then pivoting to litigation finance against large entertainment companies that use bogus trademark and copyright to attack participants in the first bubble.

In the mid-2010s, the litigation finance industry started to pick up steam – naturally enough. After all, corporate America is a factory for generating aggrieved parties with legitimate legal cases that entitle them to vast cash damages, which they can only claim if they can afford to spend a decade in court. A long New York Times think-piece from 2015 examines the burgeoning industry:

As late-stage capitalism ran out of productive ways to make money and private equity and other forms of looting took over broader swathes of our economy, the opportunities for litigation finance grew. The looter playbook derives its profits by gutting worker safety and product safety, producing a bumper-crop of dead, maimed or injured people who were theoretically owed giant payouts by the world's largest corporations.

In 2017, Equifax doxed the world, leaking sensitive financial dossiers it had nonconsenually compiled on nearly every American, along with millions of Britons, Canadians and others. The breach was the result of sloppy systems integration following waves of mergers, and the company's top execs responded to early warnings by selling off millions in shares, but doing nothing else.

That hideous breach kicked off a fresh wave of investment in "algorithmic litigation finance" by companies like Legalist, who promised a highly automated form of litigation against Equifax and offered to effectively buy the grievances of the people whom Equifax had wronged.

But litigation finance is complicated. Remember when Peter Thiel was revealed to be the financial backer of Hulk Hogan's suit against Gawker, a suit that ultimately destroyed a news network in an act of petty revenge by an embarrassed billionaire?

Litigation finance has colonized some of the ugliest corners of industry. Lax FDA regulation allows companies to roll out new medical implants without conducting safety testing, which has led to millions of maimings and deaths:

These maimings and killings are quite an opportunity for the litigation finance industry. Cathy O'Neil's 2015 editorial rails against the perverse incentives that subjected women to unnecessary and dangerous surgeries:

Basically, med-tech companies rolled out transvaginal mesh technology without adequately testing it, causing horrible injuries in many (but not all) of the women who received them. Litigation finance companies partnered with medical practices to convince women to have complex and dangerous surgeries to remove their meshes whether or not they needed it, and sued the med-tech companies to pay for these surgeries. To top it all off, the finance companies and the surgeons colluded to gouge these women on surgeries, saddling them with massive medical debts.

But for all these problems, litigation finance holds out a tantalizing promise: the answer to a bad guy with a law firm is a good guy with a law firm. If you accept the principle that capitalism doesn't care where its profits come from – the Schumpeterian promise of "creative destruction" – then it's a potentially exciting idea indeed.

What if, for every dollar a company derives in profit from poisoning the Earth and its people, they risked $100 in damages?

This week in Businessweek, Lucca de Paoli, Mariana Durao, and William Louch write about a new wave of litigation finance focused on financing lawsuits by indigenous people whose lands have been destroyed by multinational corporations:

In Brazil, the Krenak people are suing the mining giant BHP Group for $7b over a dam collapse that killed 19 and destroyed lands and waterways. They're backed by North Wall Capital, headquartered in London, who are paying 700 lawyers to run the ligitation. Other suits over the dam collapse are backed by Brazilian financiers SPS Capital.

These funds have a track record of delivering 300% returns to their investors, significantly outperforming traditional funds, including the PE funds that are so often behind these calamities. That holds out the tantalizing possibility that punishing corporate murder might be more profitable than committing corporate murder.

The litigation finance sector is small – $13b/year – but Businessweek argues that it's poised for growth, since there's so much money in ESG funds that are supposed to invest in "ethical" projects. These funds are notoriously bad at locating investments that are both profitable and ethical and keep getting caught plowing billions into greenwashing scams:

But there is an effectively bottomless inventory of grotesque corporate crimes whose statute of limitations has not run out. As a thought-exercise, it's exciting to ponder what happens if all of those wronged people are matched with the "dry powder" of the ESG sector and hooked up with armies of remorseless white-shoe lawyers.

It's especially interesting to ponder in light of Steven Donziger's tribulations: Donziger is an environmental lawyer who won a multibillion-dollar judgment against Chevron for its genocidal, ecocidal crimes in Ecuador.

In retaliation, Chevron pulled off a breathtaking act of corporate corruption of the courts, convincing a friendly judge to let it pursue a private, criminal prosecution of Donziger that saw him locked up for more than 800 days, mostly at home, but also at Riker's Island.

The corporate takeover of the US courts is part of a long-run project by big business to deprive the public of the right to redress for its crimes. Think of the McDonald's "hot coffee lawsuit" myth, which brainwashed millions into thinking McDonald's was the victim of "sleazy ambulance chasers."

The combination of ESG with litigation finance could create a giant, well-resourced big business lobby in favor of corporate accountability and massive fines for corporate misconduct. Like, what if half of the Federalist Society takes up the cause of litigation finance as a high-growth, secure financial instrument?

I can see a million ways this can go wrong. Hell, I wrote a novel about how this could go wrong all the way back in the 2000s. But it's a fascinating turn of events, and one I'll be watching closely.

The Occupy the SEC logo, that is, the SEC's crest with the word OCCUPIED diagonally superimposed on it in decaying red capital letters.

Occupy the SEC on bank mergers (permalink)

It's a new day in America. After 40 years in a coma, antitrust law is rising again. The DoJ and FTC are both seeking advice on how to conduct "merger review" – that is, deciding whether to allow companies to grow by buying each other.

This is a dangerous practice in every industry, one that lets companies take away our self-determination while collapsing labor markets and putting the screws to their workers. Nearly everything in your grocery store is made by either Procter & Gamble or Unilever. If a little local company manages to gain a toehold, one or both of these companies will try to destroy it by pricing their rival products below the cost of producing it. If that fails, they'll just buy the company, and issue a press release celebrating the "choice" they afford "consumers" by buying everything that succeeds.

As troublesome as typical corporate mergers are, bank mergers are far more dangerous. Too-big-to-fail banks launder their profits to buy off their regulators, letting them commit finance crimes that bring us to the brink of collapse. When that happens, they get bailouts, merge some more, and do it again.

The SEC is now seeking (long overdue, sorely needed) guidance on bank merger approvals. In response, the brilliant Occupy the SEC collective – a group of "lawyers, bank compliance experts, and financial services industry product specialists" – have filed a brilliant, scorching reply:

Writing on Naked Capitalism, Yves Smith provides important analysis, starting with the fact that the DoJ's bank merger guidelines are illegal, as they ignore the Bank Merger Act's strict standards:

Instead, the DoJ applies the weaker "size/concentration" analysis from the Clayton Act. The DoJ's analysis depends on "Herfindahl-Hirschman Index" calculations, a notoriously easy-to-game, technical metric that can be used to prove that any merger is good for the public.

The result: a "near-total failure to reject any bank mergers," even as concentration in the sector increased during the covid emergency.

As Smith points out, the SEC and DoJ proceed from the principle that most bank mergers are good for the public, and that their job is to spot and block the rare harmful mergers. But the evidence doesn't support this approach. "Every study of bank mergers ever done" concludes that once banks reached a certain size, they became more costly to operate. At least half of large IT projects fail, and when banks merge, cobbling together their elderly, COBOL-and-mainframe-based systems produces endless disasters.

Any savings that big banks realize by closing branches and firing tellers are gobbled up by the higher costs of running more complex operations, and paying top executives astronomically larger salaries.

After the Great Financial Crisis, the Dodd-Frank Act required banks to create "living wills" describing how they could be continued in a crisis. The banks failed to produce these, and then Trump gutted the provision:

Banks today are too big to fail and they're doomed to fail and they're getting bigger. Occupy the SEC's three-page missive is a vital, urgent wake-up call, with specific recommendations for derisking the finance sector before it's too late.

This day in history (permalink)

#10yrsago Nevada police beat the hell out of man immobilized with diabetic shock, screaming “Do not resist, motherfucker!”

#10yrsago NYT publishes “infringement is theft” column and rips off another paper’s article in the same weekend

#5yrsago Not just Kellyanne: Sean Spicer also repeatedly references nonexistent terrorist attack

#5yrsago UK’s Digital Economy Bill is a gift to copyright trolls, with 10 years in prison for watching TV the wrong way

#5yrsago Wikipedia policy declares the Daily Mail to be “unreliable” and not suited for citation

#5yrsago Steve Bannon sunk $60M of Goldman Sachs’ money into a failed World of Warcraft goldfarming scheme

#5yrsago Indefensible: The W3C says companies should get to decide when and how security researchers reveal defects in browsers

#5yrsago Trump wants to reinstate and expand civil asset forfeiture so cops can steal your stuff

#1yrago The ECB should forgive the debt it owes itself

#1yrago Favicons as undeletable tracking beacons

#1yrago Snowden's young adult memoir

Colophon (permalink)

Today's top sources: Naked Capitalism (

Currently writing:

  • Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. Yesterday's progress: 501 words (60743 words total).

  • Moral Hazard, a short story for MIT Tech Review's 12 Tomorrows. Yesterday's progress: 253 words (5637 words total).

  • A Little Brother short story about remote invigilation. PLANNING

  • A Little Brother short story about DIY insulin PLANNING

  • Spill, a Little Brother short story about pipeline protests. FINAL DRAFT COMPLETE

  • A post-GND utopian novel, "The Lost Cause." FINISHED

  • A cyberpunk noir thriller novel, "Red Team Blues." FINISHED

Currently reading: Analogia by George Dyson.

Latest podcast: The Internet Heist (Part I)
Upcoming appearances:

Recent appearances:

Latest book:

Upcoming books:

  • Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin, nonfiction/business/politics, Beacon Press, September 2022

This work licensed under a Creative Commons Attribution 4.0 license. That means you can use it any way you like, including commercially, provided that you attribute it to me, Cory Doctorow, and include a link to

Quotations and images are not included in this license; they are included either under a limitation or exception to copyright, or on the basis of a separate license. Please exercise caution.

How to get Pluralistic:

Blog (no ads, tracking, or data-collection):

Newsletter (no ads, tracking, or data-collection):

Mastodon (no ads, tracking, or data-collection):

Medium (no ads, paywalled):

(Latest Medium column: "Crypto + Copyright = 🤡💩"

Twitter (mass-scale, unrestricted, third-party surveillance and advertising):

Tumblr (mass-scale, unrestricted, third-party surveillance and advertising):

"When life gives you SARS, you make sarsaparilla" -Joey "Accordion Guy" DeVilla