“Profiting From Divorce”

There’s an interesting article in the NY Times this morning about the apparently shameful business of investing in people’s divorces. Hard for me to get too worked up about it.

The story, which you cannot read without registering (but it’s free), is entitled “Taking Sides in a Divorce, Chasing Profit.” It’s about companies that are setting up funds to pay for the costs incurred in an adversarial divorce by parties (usually women) seeking to recover more than their spouse is willing to provide to them. The “divorce lender,” if you will, evaluates a divorce case and decides whether it looks like additional funding would pay off in the form of a higher recovery than Daddy Warbucks is offering. If so, the company will advance money to his wife in exchange for a share of the additional recovery.

It’s obvious that the writer finds the whole idea unseemly. I’ll let you read for yourself, but the message I get from reading the article is that the businesses that choose to enter this field are profiting from the suffering of those whose marriage is breaking up. Yes, they are. Just like undertakers profit from death, preachers profit from sin, police profit from mayhem, and NY Times writers profit from boredom. And in fair disclosure, just like I profit from the misery of people whose marriage is ending.

The article likens the practice of divorce lending to that of lending for personal injury cases, but there’s a distinction. A personal injury lawyer can take a case on a contingency fee, an arrangement in which the lawyer gets a share of any payment actually made by the defendant but gets no fee unless there’s a recovery. That contingency fee assigns to the personal injury lawyer a significant part of the risk of litigation. In a judicial system that works well, the lawyer decides in advance whether the case is likely to result in a significant recovery and devotes the most resources to those cases where the injury is most egregious and the defendant most wealthy.

That option’s not available to divorce litigants. The ethical rules of my bar association and almost all others prohibit me from taking a divorce case on a contingency fee. As a society we have decided that we are willing to allow personal injury lawyers to become financially interested in a case but not divorce lawyers. The result is that when Daddy Warbucks divorces his wife, he has a huge tactical advantage, some would say a strategic advantage. Divorce court judges often attempt to level the playing field by awarding attorney’s fees and other costs to the party with lower income, but those awards almost always come – if they come at all – at the end of the litigation. What’s a woman to do during a lengthy, protracted divorce case while Daddy Warbucks works actively to starve her into submission?

That’s where these divorce lenders come in. If you’re unfamiliar with my practice, you might think I’m sympathetic to divorce lending because it makes more money available to divorce lawyers. It does, but that doesn’t do me any good. My practice is focused on couples who are able to be reasonably cooperative, so these $100,000 divorce cases just aren’t my gig. I’m more the $250 plus filing fee type.

No, my recognition of the value of divorce lending comes from hearing hundreds of stories, year in and year out, of women who know their husbands are stiffing them, who know their husbands are hiding assets from them, but who can’t prove it and therefore settle for far less than a judge would give them. If divorce lenders can level the playing field a little for a few of those women, I say good for them.