Civil Suit-Proof Investments: What You Can't Touch

Civil lawsuits are a broad category that includes suits for breach of contract, personal injury, divorce proceedings, child custody cases, and lawsuits against government officials and agencies. They can be brought by individuals, organisations, businesses, or government bodies. In a civil suit, the plaintiff files a complaint, and the defendant files an answer. The plaintiff may seek monetary compensation or request the court to order the defendant to stop the harmful conduct. The defendant can move to dismiss the complaint before filing an answer on several grounds, including lack of jurisdiction or failure to state a valid claim.

To fund their litigation, litigants can turn to legal financing companies, credit cards, or personal loans. However, legal financing is not considered a loan and is instead viewed as a form of asset purchase or venture capital. It is an investment in the case, and if the litigant loses, the funding company does not receive anything and loses the money invested. This guide will explore the types of investments that cannot be used in civil suits and the implications for plaintiffs and defendants.

Monetary relief

In addition to compensatory and punitive damages, there are other forms of monetary relief available in civil cases. For example, some contracts may stipulate how much will be awarded in the event of a breach of the agreement, known as liquidated damages. Another form is equitable monetary relief, which includes restitution and disgorgement. However, the ability to recover equitable monetary relief varies depending on the specific laws and regulations involved in the case. For instance, the US Supreme Court has held that the Federal Trade Commission (FTC) lacks the authority to seek equitable monetary relief under FTC Act Section 13(b).

Declaratory judgment

A declaratory judgment is a court-issued judgment that defines and outlines the rights and obligations of each party in a contract or statute. It is a legally binding form of preventive relief that does not require any action or imply damages or an injunction. However, it may be accompanied by other remedies.

In the context of investments, a declaratory judgment could be relevant if there is a dispute over the terms of a contract or agreement related to an investment. For example, if there is uncertainty about the rights and obligations of the parties involved, a declaratory judgment could be sought to provide legal clarity and resolve the dispute. This could include disputes over investment contracts, partnership agreements, or other financial arrangements.

Injunctions

An injunction is a court order that compels a party to do or refrain from doing specific actions. It is considered a remedy and is often used to prevent or address violations of the law, such as trespass, infringement of patents, or the violation of constitutional rights. Injunctions can be mandatory or prohibitory. A mandatory injunction requires someone to do something, such as cleaning up an oil spill, while a prohibitory injunction prevents someone from engaging in certain actions, such as using illegally obtained trade secrets.

There are several types of injunctions:

Temporary Injunction

A temporary injunction is a legal remedy that prevents a party from performing a specified act until the disposal of a suit or until a further court order. It is granted based on specific provisions in the Code of Civil Procedure and the Specific Relief Act.

Interlocutory Injunction

Also known as an interim injunction, this type of injunction falls under the category of temporary injunctions. It remains in effect during the legal proceedings and aims to maintain the status quo of the subject matter. The courts consider factors such as the petitioner's ability to establish a prima facie case and the potential for irreparable harm when deciding whether to grant an interlocutory injunction.

Preliminary Injunction

A preliminary injunction, also called an ad-interim injunction, is granted to a plaintiff before a trial. It aims to maintain the status quo and prevent any potential infringement of the plaintiff's rights.

Permanent Injunction

A permanent injunction, also known as a perpetual injunction, is granted by the court after hearing the merits of the case. It permanently prohibits the defendant from asserting a right or engaging in an act that violates the plaintiff's rights. The legal basis for perpetual injunctions is the Specific Relief Act, rather than the Code of Civil Procedure.

Mandatory Injunction

A mandatory injunction compels an individual to undertake a specific action. There are two types: restorative, which restores the status quo, and enforcing, which involves the performance of a positive act on a continuous basis.

Prohibitory Injunction

Governed by the Specific Relief Act, a prohibitory injunction is a legal directive that mandates an individual or organisation to refrain from performing a specific action to prevent harm or infringement of rights.

Quia Timet Injunction

A Quia Timet Injunction is used when a plaintiff's right has not yet been violated but is feared or threatened. It can be permanent or temporary, prohibitive or mandatory, depending on the circumstances.

Mareva Injunction

A Mareva injunction is a legal remedy used in cases of fraudulent activities or asset misappropriation. It involves an asset preservation order that restricts a party from disposing of or dissipating their assets, ensuring their availability to satisfy a prospective judgment.

Anton Piller Order

This type of injunction is commonly used in intellectual property cases. It enables one party to gain access to the premises of another party to search for and confiscate infringement materials and evidence, preventing the obliteration or displacement of vital evidence.

John Doe Order

Also known as a "Rolling Anton Piller" or "Ashok Kumar order" in Indian Law, a John Doe order is used to protect the creator's intellectual property rights in artistic works. It can be issued if the plaintiff has good reason to believe that their information will be used to violate trade secrets, copyrights, or trademarks.

Dynamic Injunction

A dynamic injunction is a relatively new concept used to combat digital piracy. It is an injunction order that automatically extends to mirror websites and URLs, providing an efficient remedy for intellectual property holders.

Settlements

In a settlement, the parties agree on the terms to resolve their dispute, which may include compensation or other remedies. Settlements can be reached at any time during the civil case process, from the early stages of filing a complaint and conducting discovery to later stages such as during or after a trial.

The process of reaching a settlement typically involves negotiations between the parties, who may be assisted by their attorneys or other representatives. It is important to note that a settlement is a voluntary agreement, and neither party is required to agree to the terms proposed by the other side. If a settlement cannot be reached, the case will proceed to trial, where a judge or jury will make a decision based on the evidence and arguments presented.

It is worth noting that settlements may not always be possible or desirable in all cases. In some situations, the parties may have strongly opposing views or be unable to reach an agreement that satisfies both sides. In such cases, the civil case will proceed through the court system, and a judge or jury will make the final decision.

Litigation funding

Third-party litigation funding (TPLF) is a specific type of litigation funding where hedge funds and other financiers invest in lawsuits in exchange for a percentage of any settlement or judgment. This type of funding is not considered a loan but rather as a form of asset purchase or venture capital. If the litigant loses the case, they do not have to repay the funder.

There are two main types of litigation funding: consumer and commercial or investment. Consumer litigation funding generally involves a plaintiff seeking financial support for living or other expenses, usually related to tort or personal injury claims. Investment or commercial litigation funding, on the other hand, often involves large-scale tort and commercial cases and alternative dispute resolution proceedings.

While litigation funding can provide much-needed financial support for plaintiffs, there are some concerns about its potential impact on the legal system. For example, allowing outsiders to secretly invest in lawsuits may incentivize the filing of non-meritorious litigation and prioritize profit over justice. Additionally, litigation funding can be costly for plaintiffs, with funders taking a significant cut of any settlement or judgment.

To address these concerns, some courts and states in the US have implemented disclosure requirements for litigation funding agreements. This helps to ensure transparency and allow courts and parties to know the identity of the litigation funder and determine whether there are any conflicts of interest or undue influence being exerted.

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