Will Divorce Financing Cause a Change in Behavior?

Posted By Pasadena Family Law Attorney || 6-Dec-2010

On December 4, 2010, the New York Times published an article entitled, "Taking Sides in a Divorce, Chasing Profit." The article profiles a growing industry that seeks to "profit from the often contentious and emotional process of ending a marriage" by investing in those cases "in exchange for a share of the winnings." According to the article, the need for such financing exists because "state laws uniformly require" parties in a divorce "to pay lawyers upfront, rather than promising them a contingency fee, or a share of any winnings, as is common in other civil cases." The American Academy of Matrimonial Lawyers supports the concept of such divorce financing because "it furthers the concept of putting both spouses on an equal playing field." Balance Point Divorce Funding, a fairly new addition to the divorce financing industry, finds that its "customers fall into a pattern. They are women. They generally do not have jobs. They often are raising small children. And their husbands run their own businesses, making it tough to obtain financial information."

It is an unfortunate reality that the need exists for such companies to profit from divorce, considering that the legislature has enacted statutes (at least in California), the express purpose of which "is to level the playing field for the spouses and/or parents with children from non-marital relationships." In fact, on September 6, 2010, I published a Blog article entitled, "Family Law and Attorneys Fees," which described how "Judges (intentionally or unintentionally) play into the hands of "Pit Bull Attorneys" in bankrupting a party through guerrilla warfare tactics." Such attorneys "are not concerned with resolving a case in a fair and equitable manner, despite the fact that the family law court is considered a court of equity, or fairness. Instead, these attorneys take advantage of the flaws and imperfections in the legal system to make the case for the other side so costly that they either cannot or will not continue to fight for that to which they are otherwise legally entitled. Such attorneys are focused on 'winning," no matter what the cost, irrespective of right and wrong, and in total disregard of equity."

In my Blog article entitled "Family Law and Attorneys Fees", I concluded that "California has a broken process that produces extended and contentious litigation, poisons feelings between the parties and harms the interests of those persons -- too often women -- who do not have sufficient financial wherewithal to protect their legal rights." After reading that article, a member of the Elkins Family Law Task Force in California commented, "Excellent Blog on the topic and appreciate the difficulties with sanctions orders for attorney fees. As a continuing member of the Elkins Family Law Task Force in California,our Task Force is now in the implementation phase of our recommendations that we unanimously adopted by the Judicial Council this April. The Elkins Task force recognized that early needs- based fee awards are critical to address disparity in access and lack of parity in representation. The Elkins Task force will also addressing the need for sanctions to include restitution or fines and not only attorneys fees. We are also assessing mechanisms to handle perjury and whether there are adequate civil remedies." In other words, this growing industry, which profits as a result of financing the costs of divorce, only exists because of the Judiciary's interference with implementation of legislation specifically enacted to level the playing field in divorce cases.


I am hopeful that by leveling the playing field through divorce financing, individuals who previously retained "Pit Bull Attorneys" in an effort to " cause the other party to spend down their limited resources until they outspend them and then go for the kill" will think twice now that their spouse's resources may not be quite so limited. After all, the financing "offers to cover the cost of breaking up - paying a lawyer, searching for hidden assets, maintaining a lifestyle - in exchange for a share of the winnings." This money must ultimately come from somewhere and the company financing the divorce does so in exchange for a "share of the winnings." I want to point out that the "winnings" the "underdog" receives in a divorce are what was rightfully theirs under the law. The only reason that they would not otherwise receive a fair resolution was because the system, the Judges and the lawyers involved have systematically protected the spouse controlling the assets. They have done so by promoting, protecting and otherwise encouraging the use of "Pit Bull Attorneys" by a spouse in control of the assets. After all, "money, then, is power either if the amount: is overwhelming and, the holder is ruthless in its use, or if the recipient accepts the exercise of this power."

As soon as spouses in control of the money begin to realize that they no longer have the power to act in a ruthless manner by manipulating a broken legal system because of the advent of divorce financing, maybe they will learn to act like mature adults and negotiate fair settlements. Until then, such financing will allow "Pit Bull Attorneys" on both sides to line their pockets with the transfer of wealth that will ensue. Too bad for the families involved that "a disinterest in emotions and in interpersonal concerns" is common among such attorneys.

An article entitled, "Family Law Par Excellence" in the November/December 2010 edition of the Beverly Hills Bar Association's Newsletter stated, "Because Baer recognizes the importance of diffusing emotions in family law matters and often involves mental health care professionals to assist in that regard, he joined the San Gabriel Valley Psychological Association as an affiliate member. Since September of 2008, he has been a regular columnist for their newsletter. Baer makes it a point to always remind his clients that if there are children, the family still exists even after the relationship ends. Mark, who was trained in mediation by Forrest 'Woody' Mosten, is a mediator and collaborative law practitioner who is also an experienced litigator." What would I know about the destruction that "Pit Bull Attorneys" cause when they are used in the family law arena?


Ultimately, I expect that by "leveling the playing field" through divorce financing or otherwise, people will no longer be able to "cause the other party to spend down their limited resources until they outspend them and then go for the kill" and willtherefore increasingly seek out attorneys for mediation or collaborative divorce. After all, the manner in which you end a relationship will determine whether your family will be functional or dysfunctional from that day forward.

Meanwhile, for those of you interested in obtaining divorce financing, Balance Point Divorce Funding "wants to focus on people with marital assets between $2 million and $15 million" because "investing in smaller disputes was not worthwhile."