Judge Says Mom Can't Sell A Portion of Daughter's Malpractice Case To Litigation Funding Co.
On January 11, 2019 Justice Paul Marx of the Orange County Supreme Court refused to authorize the payment of appellate fees and litigation funding expenses out of a brain damaged baby's malpractice settlement funds.The plaintiff's attorney arranged a sale of proceeds or loan of approximately $5,000 from a litigation funding company to the mother so she could cover her housing costs during the lawsuit. Since the mother had no claim on her own behalf, the only source of repayment was the infant's recovery. Justice Marx voided the agreement and was critical of the plaintiff's attorney and the litigation funding company (owned by the brother of plaintiff's counsel) stating they both should have known better. He also stated that it was an egregious breach of an attorney's ethical responsibility not to advise the client that the litigation funding company was owned by the brother of plaintiff's counsel.
Since the malpractice retainer agreement excluded appeals, plaintiff's counsel retained an appellate lawyer prior to the trial to handle three appeals. Without consulting his client, the plaintiff's attorney agreed that the appellate lawyer would be paid $10,000 if the appeals were unsuccessful and $40,000 if successful. The result on the appeals were successful. Justice Marx voided that agreement finding that the client had not been consulted or given her approval but allowed the payment from the baby's recovery of $10,000 to the appellate lawyer who just happened to work out of the same office as plaintiff's counsel.
Justice Marx authored a 17 page blistering decision and stated: "Simply put, brain injured children should not be treated by their lawyer's (or lawyer's relatives and colleagues) as cash cows ti be milked with excessive, unwarranted and undisclosed fees." Trelles v St. Luke's Cornwall Hospital, 2019 WL 190597
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