“Virage has achieved its reputation in the litigation funding market through loyal borrowers, repeat business, and a sustainable business model. Borrowers view Virage as a partner in their business, and these relationships have driven Virage’s growth.”
That’s how Virage Capital Management describes itself on its website, emphasizing that it “does not participate as an equity partner in the back-end of the case.”
One borrower who appears not to be loyal, and who most likely will not engage in repeat business with Virage, is Sulpher Springs attorney B. Gregg Price. Price and his law firm borrowed more than $3 million from Virage but didn’t bother to pay back the loan after the firm’s cases settled.
Not surprisingly, Virage filed suit against Price and was granted summary judgment for more than $6 million in principal and interest. Denied a new trial, Price appealed, but the First Court of Appeals ruled in favor of Virage.
“In sum, we hold that the trial court did not abuse its discretion in denying the Law Firm and Price’s motion for new trial on the asserted grounds,” the court declared. “We affirm the trial court’s judgment.”
That was an expensive gamble for Price, but it’s hard to feel sorry for him, since he asked for the loan in the first place and agreed to the terms. Still, lawsuit lending has its critics, and their criticisms are well-founded.
Like most states, Texas once prohibited third-party financing of lawsuits. Putting up the money for someone else’s litigation in exchange for a share of the anticipated settlement constituted the crime of champerty. It still does in some states.
But champerty had its champions, particularly among lawyers and lenders looking to profit from it, and beginning in the late 1990s they recast this age-old vice as a newly-minted virtue and succeeded in having laws against it overturned in many states, including Texas.
That’s too bad, because criminalization of champerty discourages frivolous lawsuits, preserves the integrity of our courts, and protects potential plaintiffs from the lures of loan-shark lenders.