Litigation Funding Company Successful $1.2 Million Claim Against Funded Lawyer

In a claim that District Judge Micaela Alvarez was hearing, a lawsuit funding company sued a Texas attorney. In the lawsuit, the funder accused the attorney of revealing substantial information about his relationship with a Judge presiding over the case, which was detrimental to their cause. 

After looking into the party’s arguments, the honorable district Judge pronounced that the disclosure of information by the lawyer about his relationship with a judge violated the principle of conflict of interest, which amounts to a severe breach of duty. 

Considering the severity of the violation, the Honorable Court has imposed a penalty on the lawyer, and he will have to pay 1.2 million dollars to the litigation funding company as an award.

The case

In litigation funding arrangements, third-party funding companies provide capital to claimants and law firms during the pendency of a trial or claim in exchange for a specific percentage in the settlement or the jury award. 

According to reports, Law Funder LLC V Munoz was a case of malpractice. Law Funder LLC, the victim, was a client of Texas-based attorney Sergio Munoz Jr., owner of “The Law Offices of Sergio Munoz Jr., P.C., located in Edinburg, Texas. 

The funding company invested in a case that Munoz was litigating. However, Munoz did not disclose that he had a business relationship with Judge Jesse Contreras presiding in the case in which Contreras was a co-principle in professional cooperation with Munoz. As part of a litigation finance agreement between the funder and the attorney, the lawyer is bound to disclose any information which may fall in the ambit of a conflict of interest in the case invested. Nevertheless, the attorney failed to disclose this information and deliberately concealed that he had a working relationship with a Judge who was presiding over the claim they invested in.

During the proceeding, when the relationship between the attorney and the concerned judges surfaced, the Judge was removed from the case, and another judge was appointed as his replacement. 

Similarly, the litigation funder also withdrew from the proceedings because they could not pay to start over again. After the relationship information was revealed, the funders filed a suit against Munoz. 

After hearing both sides, The District Judge imposed heavy penalties on Munoz and held that Munoz’s law firm must return over a million dollars to the litigation funder plus over $21,000 as fee forfeiture.