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Cory Doctorow @pluralistic@mamot.fr Red Team Blues

Jun 6 • 65 tweets • 16 min read Twitter logo

When a giant company wrecks your life, what are you gonna do? They can hire more and better lawyers, and they have people whose sole job is fighting off suits - are you gonna beat those people by suing as as a side-hustle? Do you wanna be a full-time, professional litigant?

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If you'd like an essay-formatted version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

pluralistic.net/2023/06/06/tha…

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For some people, the answer is yes: some people are angry enough, or sufficiently morally offended, to make suing a giant company their life's mission. Sometimes, they succeed, and force companies to cough up gigantic sums of money.

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Obviously, this is good for plaintiffs, but it can also be good for all of us. Money talks, bullshit walks, and once it's clear that 300% of the profits from harming people will be sucked up by a lawsuit, shareholders will revolt and force the company to clean up its act.

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Shareholders don't invest in companies that ruin our lives because they are committed to an ideology of cruelty. Ideology only gets you so far: the pursuit of profit incentivizes far worse conduct than mere sadism ever can:

pluralistic.net/2023/06/02/plu…

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Incentives matter. Companies above a certain size become too big to fail and too big to jail. They capture their regulators and ensure that any damages the government extracts are less than their profits - a fine is a price.

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Juries can and do *whack* companies for bad conduct. They understand incentives matter. They understand saving $1,000,001 by cutting back on workplace safety can't be fixed by a fine of $1,000,000 after killing of workers. If profit outstrips penalties, penalties don't work.

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A dirty $1m profit needs to be met with a $100m judgment. As the #Untouchables MBA teaches us, this is just sound business: "They pull a knife, you pull a gun. He sends one of yours to the hospital, you send one of his to the morgue."

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But suing these giant companies is *hard*. They can tie you up in court for years - decades, even. They can outspend and outwait you. The more profits a company has racked up through its evil deeds, the more claims it can fend off.

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Incentives matter, so if you're gonna commit corporate murder, you'd better do a *lot* of it to build up the cash needed to scare off your victims and their survivors.

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However: the bigger a company is, the more cash it has, the more money there is to extract from it if you can prevail in court. If the company has genuinely injured you.

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If you can mobilize the capital and resources to pursue it to final judgment, there's a *huge* payoff at the end of the process - and a less for all the *other* companies contemplating their own course of action.

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That's the Voltaire MBA: "you have to execute an admiral from time to time, in order to encourage the others."

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For hundreds of years, rich, powerful people have observed their colleagues' abuses and thought, "They only pull that shit on peasants - but if they did it to *me*, I could sue them for everything!"

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This led to an obvious course of action: strike a bargain with the mutilated, ruined peasants to finance their suit against the toff that so abused them, in exchange for a (large) share of the proceeds. Medieval courts called this #champerty.

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Today, we call it #LitigationFinance: investing in other peoples' grievances against deep-pocketed monsters, in the expectation of reaping huge cash payouts.

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On paper, litigation finance seems like a neat solution to a messy problem. The bigger a company is, the worse the abuses it commits - and the more it can be made to pay for its sins.

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The normal economics of litigation are turned upside-down: rather than avoiding the largest companies, you pursue them. This is the Willie Sutton MBA: "That's where the money is."

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Litigation finance is a large, growing chunk of finance. For about a decade, hedge funds and private equity have bankrolled law-firms to represent people mangled by corporations, keeping the money flowing through entanglements the target throws up:

nytimes.com/2015/10/25/mag…

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Litigation finance can be thought of as the no-win/no-fee "ambulance chaser" business on steroids. A local lawyer can make a tidy living going after slip-and-falls and fender-benders, splitting the proceeds with their clients.

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A firm backed by a huge investment fund can do the same to companies with *billions* in the bank and hundreds of millions on the line.

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Litigation finance is also closely related to #ImpactLitigation, which is when a nonprofit uses charitably raised funds to chase corporations and governments through the courts to establish precedents that overturn bad laws or pave the way for future judgments.

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Impact litigation can be thought of as the trailblazer for litigation finance: for-profit lawsuits are risk averse and stick to pursuing cases that have a high likelihood of eventually succeeding.

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Impact litigators are legal entrepreneurs, advancing new, uncertain theories in the hopes of making new law. Once that law is created, litigation finance drums up thousands of similarly situated plaintiffs sueing tons of companies on the same theory, citing the precedent.

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Litigation finance's first big scores was going after med-tech and pharma companies. A lax regulatory environment allowed medical companies to market deadly products that maimed or killed people wholesale - think #Vioxx, #VaginalMeshes or #MetalOnMetal hip replacements

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(a doc about this, *The Bleeding Edge*, will give you persistent nightmares):

en.wikipedia.org/wiki/The_Bleed…

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Suing the companies that killed your family or permanently disabled you is a slow and ugly process, but it's a lot more certain than asking Congress to patch the loopholes the company that hurt you exploited.

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Let alone hoping that a future President will appoint an agency head who gives a shit, and that the Senate will confirm them.

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And since money talks and bullshit walks, corporations that can't pay dividends or do stock buybacks because they owe all their cash to their victims will suffer in the stock market, and their rivals will clean house and tread carefully.

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Which brings me to the latest turn in litigation finance: #climate litigation. As money sloshes into #ESG funds that are supposed to profit by investing in ethical, climate-friendly firms, the idea of suing giant oil companies and other wreckers has grown more attractive.

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18 months ago, *Businessweek* covered the nascent-but-growing phenomenon:

pluralistic.net/2022/02/09/gri…

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That growth has only continued. With more, larger ESG funds chasing returns, there's lots more money available to represent, say, poisoned indigenous people in the global south whose ancestral lands were rendered an toxic hellscape by a mining or petrochemical company.

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The returns from these cases aren't correlated with wider economic trends: whether the market is up down, it makes no difference to the size of the judgment or settlement that is extracted in the end.

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@FT

A new piece in the @FT by @CamillaHodgson does an excellent job rounding up the state of litigation finance, starting with oil giant #PTTEP paying $102m to 15,000 Indonesian farmers to settle claims from a massive, ocean-killing oil spill in 2019:

ft.com/content/055ef9…

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The suit was financed by Harbour Litigation Funding. They paid for a lot of shoe-leather lawyering, sending reps on off-road motorbikes to each farmers' plot to sign them up. It cost more than $21m, and Harbour creamed off $53.5m - about 40% of the total.

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Those numbers are pretty compelling investment story: there aren't a lot of opportunities to make a >100% return on a $21m investment in 15 years - let alone ones that let you claim to be bringing justice to poor farmers who've been abused by rapacious corporate murderers.

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Other cases are still ongoing: mining giant BHP is facing a £36b class action case over the 2015 collapse of Brazil's #Fundão dam, which released poisoned mine-tailings into waterways serving millions of people.

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700,000 plaintiffs are in the class, and the investors, Prisma Capital (Brazil) and North Wall Capital (UK) have already fronted £70m pursuing the case.

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There is a *vast* inventory of cases like these, just lying around, waiting for someone to stake a claim. One barrier is that most of the world's large law firms are conflicted out of pursuing these cases - they represent these same companies in other actions.

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But a new sector of specialized, un-conflicted firms is growing up, and tackling more and more of these cases.

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These firms are chasing relatively easy claims, but there's an even bigger fish out there, waiting to be caught: class actions against carbon-intensive companies, especially coal and oil companies, for their knowing contributions to the global climate emergency.

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These corporations are sitting on hundreds of billions of dollars, and they have inflicted trillions in harms. There's gold in them thar wildfires.

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The *FT* cites experts who predict a massive wave of litigation finance climate suits in the next 2-3 years, and notes an increasing tempo of shareholder motions demanding that big oil and mining companies disclose their litigation risks in their investor reports.

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It's a compelling idea, a kaiju boss-fight where we recruit monsters to fight other monsters. It's such a fun idea I wrote a novel about it, 2009's *Makers*, where corporate misconduct becomes the new oil, prompting a huge investment bubble:

craphound.com/category/maker…

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@mathbabedotorg

But is the answer to a bad guy with a law firm a good guy with a law firm? There are ways this can go very wrong (which end up in *Makers*). In 2015, @mathbabedotorg published an excellent critique of litigation finance for vaginal mesh cases:

mathbabe.org/2015/09/01/lit…

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O'Neill's point is *incentives matter*. The incentive for a litigation finance fund is to win settlements, not justice. Time and again, we've seen financial tactics severed from societal strategy. GDP can be goosed to towering heights without improving national prosperity.

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There's even a name for this phenomenon: #GoodhartsLaw: "When a measure becomes a target, it ceases to be a good measure." The finance sector is spookily good at decoupling positive societal outcomes from positive investor outcomes.

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The real answer to medical companies that mutilate women with vaginal meshes, or destroy the planet with CO2, is *criminal sanctions* and regulation, not private lawsuits.

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That said, I think there's a case for the one leading to the other. Right now, climate wreckers devote very large sums to preventing effective action on climate. Suborning regulators and politicians all over the world isn't cheap.

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If we take away the money they've saved up for this project through stonking, eye-watering judgments. and If we convince capital markets not to to give them money lest it be extracted to pay for redress of grievances, perhaps we take away their capacity to corrupt politics.

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One way to understand whether something is a genuine threat to a company's power is to look at how viciously the company attacks it.

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If you doubt that unions could do good for workers, just take a peep at the all-out violent blitzes that Amazon and Starbucks mount in the face of union drives. I mean, imagine if the Democratic Party took unions *half* as seriously as the GOP!

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The corporate lobby exhibits the same terror over plaintiff-side lawsuits as it does over unions. A massive, decades-long campaign to villify plaintiff-side lawyers has convinced many of us that corporations are the *victims* of the legal system, rather than its masters.

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The PR campaign is surprisingly effective, despite its reliance on lies about the "McDonald's hot coffee lawsuit" and other urban legends:

pluralistic.net/2022/06/12/hot…

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Corporate plunderers are *terrified* of being dragged into court by their victims, and devote titanic amounts of blood and treasure into making it harder and harder to do so. On the "the more scared the are, the better" metric, litigation finance is a slam dunk.

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@SDonziger

But winning a case isn't the same as getting a judgment or disciplining a firm. When @SDonziger won a landmark judgment against Chevron on behalf of indigenous people whose lands and bodies had been permanently poisoned, the company struck back:

pluralistic.net/2020/09/02/fre…

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#Chevron bribed a judge in Ecuador to claim that Donziger had rigged the case, then brought a case in the US against Donziger for racketeering, judge-shopping to get judge #LewisAKaplan on their case.

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Kaplan is a former tobacco industry lawyer who never met a corporate criminal he didn't love. When the prosecutor declined to press charges against Donziger because the case was absurd, Kaplan appointed a lawyer - whose firm acted for Chevron! - to act as prosecutor.

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The case against Donziger was obviously trumped up - the Ecuadoran judge who accused him of corruption later recanted and multiple countries' Supreme Courts upheld the judgment Donziger won against Chevron.

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Nevertheless, Kaplan got Donziger locked up under house arrest for *years*, and even got him banged up in Riker's for a time. Donziger's lost his law license and his clients are still awaiting judgment.

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This is the best law that money can buy, and Chevron has a *lot* of money. The massive expenditures needed to railroad Donizer were a pittance compared to the $9.5b judgment Chevron owed its victims in Ecuador.

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The lesson of Donziger is that these companies won't go genrly to their graves. They are enormously, unimaginably wealthy and act with the ruthlessness born of greed, which makes mere sadism pale by comparison.

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Litigation finance is exciting and promising, but it's only a tactic - and it's a tactic that's always in danger of being turned against the goal it nominally serves. The people funding litigation finance don't want to save the world - they just want to get rich.

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