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Appealing Offer

It's a scenario attorneys know well and plaintiffs learn the hard way: After years of effort, a case finally goes to trial, the plaintiff is awarded a sizeable judgment-and the defendant promptly files an appeal to avoid or at least postpone payment.

Unfortunately, most small and midsized business plaintiffs do not have the necessary cash flow to fund the appellate process, which leaves the frustrating alternative of negotiating a cents-on-the-dollar settlement with the defendant.

To California attorneys and entrepreneurs Michael Blum and Alan Zimmerman, that didn't seem fair. "Why should businesses have to take pennies on the dollar when a jury has determined all the issues and concluded they were wronged and should be compensated?" asks Blum.

The solution, Blum and Zimmerman decided, was to provide plaintiffs with the cash to fight appeals. Their San Francisco company, Judgment Purchase Corp. (JPC), offers what they call a civil appeals finance program. It works like this: If a state or federal trial court money judgment is appealed by the defendant, JPC will purchase an interest in the judgment for immediate cash. When the appeal is decided or a settlement reached, JPC receives its portion of the judgment amount. If the case is ultimately lost, JPC is not paid and the plaintiff keeps the funds already advanced.

"It's not a loan; we don't charge interest. We actually buy [a portion of the judgment], and the plaintiff gets to keep the money if the case is ultimately lost," Blum says.

In one of JPC's first cases, the plaintiff was a business that had won a $3 million judgment against an insurance company. The defendant immediately filed an appeal and refused to even discuss a possible settlement. JPC bought an interest of $140,000 in the judgment, for which they paid $70,000. The cash was used to fund a major portion of the appellate attorney's work. The defendant lost the appeal, and the original judgment of $3 million was paid, out of which JPC recovered their investment plus a $70,000 profit.

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This article was originally published in the November 1996 print edition of Entrepreneur with the headline: Appealing Offer.

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