The collapse of a planned battle of the sexes tennis tournament featuring Venus and Serena Williams couldn't have come at a worse time in would-be promoter Carol Clarke's life. About the same time it became clear that the tennis phenoms would not participate in the December 2001 event despite their father's written promise, Clarke's granddaughter was diagnosed with autism. Her daughter's and granddaughter's needs overwhelmed her own. "I've been her full-time primary caretaker since 2001," the 59-year-old West Palm Beach woman testified last month.

Clarke, who thought she had cut a deal that would make her comfortable, possibly even rich, quickly became strapped for cash, said her attorney, John Romano. She went down a little-known avenue for help. Clarke used her possible winnings in the multimillion-dollar lawsuit she filed against the Williams' sisters and their father, Richard Williams, to secure $40,000 from a company that targets those involved in litigation. The revelation to a jury of Clarke's financial dealings prompted Palm Beach County Circuit Judge Jeffrey Winikoff on Dec. 13 to declare a mistrial in the case, delaying it for another year.

The practice of lending money against a future verdict ignites fierce passions among lawyers. Although some say the so-called non-recourse companies are as shady and unscrupulous as loan sharks, others insist they provide needed cash for people who have nowhere else to turn. Count West Palm Beach attorney Bill Bone among the naysayers. "Think Las Vegas," he said. The firms are gambling that people will win lawsuits so they can recoup their money. They are called non-recourse firms because they have no recourse if the lawsuit is unsuccessful. It is the amount of interest the firms charge that makes them so dangerous, Bone said. "It is usury interest rates," he said. "Lawyers who like their clients won't let their clients use them."

Fellow West Palm Beach attorney Greg Barnhart agreed. "We don't use them. I don't like them. I don't think it's an advantage to clients," said Barnhart, former president of the Academy of Florida Trial Lawyers. He acknowledged that some people may be forced to use such companies because of extreme situations, such as those severely injured in an accident, who are unable to work and become buried in bills. "But if they try hard enough, usually people can get a small loan to get by," he said. Jeff Azis, a certified public accountant who has owned such a firm for about three years, readily admitted that what he is offering isn't for everyone. People who become Azis' clients usually have maxed out their credit cards, squeezed the last coin out of the pockets of family and friends and can't get a loan from a bank. "We tell people to come to us only as a last resort," the Palm Beach Gardens resident said. "We don't want you until you've tapped out all your other resources."

The interest rates are high — as much as 60 percent a year, he said. A $10,000 loan would swell to $16,000 after a year. But, he said, the money doesn't have to be paid until and unless the person is successful at trial. And, he said, the advance — between $2,000 and $100,000 — is often enough to tide someone over to continue the lawsuit. With bills mounting, some plaintiffs will urge their lawyers to settle their lawsuit out of court for a fraction of what they deserve. Once they get the loan, he said, creditors get off their backs and they feel they can pursue their claims. "This buys the client additional time," he said. "It's a win-win situation for the client and a win-win situation for the attorney."

Three years ago, when such firms began proliferating, the Florida Bar looked at them and issued guidelines for attorneys about how they should deal with them. About the same time, the Florida Department of Financial Services questioned whether they should regulate them as they do banks and other financial institutions, said Don Saxon, a commissioner for the state agency. Because the firms are giving people money contingent on a verdict in a lawsuit, technically they aren't loaning money. So, courts have ruled they aren't subject to banking laws, including those that prohibit charging excessive interest rates. Faced with such court rulings, state officials decided it would be difficult to impose any regulations on such companies. Further, Saxon said, he's not convinced regulations are needed. "I don't know or haven't heard of an outpouring of complaints," he said.

Objections from attorneys probably stem from the actions of companies in the 1990s, when interest rates of 15 percent to 20 percent a month, compounded monthly, were common, Azis said. These days, he said, interest rates hover between 3 percent and 5 percent a month, he said. Romano said such loans are life-savers for people like Clarke and those who have sustained a catastrophic injury. "People in litigation generally don't have a lot of money and they need money for their own expenses," he said. "Non-recourse funding can hold you over."

Source: Jane Musgrave, Palm Beach Post Staff Writer