Jamie Huff
LOS ANGELES - A lawsuit-reform group is calling on California to “shine a light on lawsuit loansharking” in the wake of a Los Angeles Times investigation that concluded shadowy hedge funds and other entities are advancing questionable litigation by preying on sexual abuse survivors.
The Civil Justice Association of California (CJAC) noted that revelations about large social media advertising buys by out-of-state law firms to secure clients for sexual abuse litigation come in the wake of Los Angeles County last year agreeing to pay nearly $5 billion to settle litigation relating to sexual abuse claims that allegedly occurred at county-run juvenile detention centers.
The CJAC indicated that hedge funds have issued high-interest loans to finance sexual abuse litigation, meaning investors can secure large financial gains if such cases are settled while victims can be left with reduced compensation.
“These hedge funds aren’t advocates for survivors – they’re lawsuit loansharks,” the CJAC’s president and CEO, Jaime Huff, said in a statement emailed to the Southern California Record. “They profit by indebting vulnerable people and steering public agencies toward massive settlements that enrich their investors – all under the cover of darkness.”
One of the law firms involved in the social media ad blitz, the Washington, D.C.-based Sheldon Law Group, has received financial backing from private investors, according to the Times investigation. The law firm did not respond to a request for comment.
The total number of sex abuse claims filed against the county stands at more than 14,000, as of mid-November, according to the Los Angeles County District Attorney’s Office. This number includes the 6,800 claimants involved in a $4 billion payout announced in April of last year and more than 400 claims included in an $828 million settlement last fall.
District Attorney Nathan Hochman has said the office is investigating potential false sexual abuse claims filed against the county after the passage of Assembly Bill 218 in 2019, which extended the statute of limitations for the reporting of child sexual abuse.
Information uncovered by the Times prompted the county’s acting CEO, Joseph Nicchitta, to urge the State Bar of California to push for new reforms since a significant portion of sexual abuse settlement funds may be going to attorney fees and repayments to private investors.
The State Bar told the Record it cannot confirm it has initiated an investigation into the funding of sexual abuse claims or related legal matters because such probes remain confidential until a notice of disciplinary charges or a stipulation acknowledging disciplinary charges is filed with the State Bar Court. But the bar pointed out that state lawmakers last year approved two measures dealing with attorney advertising (Senate Bill 37) and litigation funding (AB 931).
It’s unclear if the measures would apply to the sexual abuse claims since their effective date is Jan. 1 of this year.
AB 931 requires certain details about contracts involving legal funding companies to be put in writing and bars attorneys from paying or promising anything of value to people to secure them as clients. It also prohibits licensed attorneys in the state from sharing legal fees “directly or indirectly with an out-of-state entity that provides legal services.”
And SB 37 allows people to file civil lawsuits over violations of the law relating to restrictions on the solicitation of business for attorneys.
The CJAC said hedge fund-backed litigation is undermining public trust in the civil justice system.
“If California doesn’t shine a light on lawsuit loansharking, hedge funds will keep cashing in – and survivors and taxpayers will keep paying the price,” the association reported.
Another tort-reform group, California Citizens Against Lawsuit Abuse, declined to comment on the financing of sexual abuse claims.
