October 8, 2025 • 58 mins
In this episode of Litigation Nation, co-hosts Jack Sanker and Danessa Watkins dive into two legal topics currently impacting the U.S. litigation landscape.
- A private equity firm recently expressed interest in ownership stakes of several law firms, raising questions about the ethics of non-attorney involvement in the legal process. A prohibited practice to-date, non-attorney equity in law firms gives third parties the ability to take financial stakes in the outcome of lawsuits. Jack analyzes the ethical and administrative implications this introduces for both litigation and company operations.
- A Texas district court bill proposing the required display of the ten commandments in public school classrooms has resumed a long-standing debate and potentially prompted new law regarding the separation of church and state. Danessa examines the bill and the resulting national conversation about First Amendment rights and religious freedom in public schools.
Join us as we discuss the complexities of critical topics and we encourage our listeners to stay informed about how these issues may affect their rights and responsibilities in litigation. Don't forget to subscribe to Litigation Nation for more updates on legal news and analysis!
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Transcript
Episode Transcript
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Jack Sanker (00:06):
Welcome to Litigation Nation. I'm your
host, Jack Sanker, along with mycohost, Danessa Watkins. This is
the show where we cover the mostimportant and interesting legal
news over the past couple ofweeks. Reminder, you can always
find us on Apple Podcasts,Spotify, YouTube, wherever you
get your podcasts. We publishevery other week with the
exception of our our summerhiatus that we're just coming
(00:27):
out of here.
Danessa, what do we have uptoday?
Danessa Watkins (00:31):
Hey, Jack. Good to be back. So I am going to
cover a recent opinion out of,Texas District Court, which is
probably gonna go up to theSupreme Court at some point, and
we may have new law on whetherthe 10 commandments can be
posted in public schools.
Jack Sanker (00:49):
And I'm gonna be talking about what I'll call the
PE-ification of law firms,private equity's attempts to
invest directly in the ownershipof law firms, something that has
been otherwise prohibited orillegal in in just about every
instance, since, you know, thelast hundred and fifty, two
(01:11):
hundred years, and the way inwhich those rules may be
changing and what to expect. Allof that and more, here's what
you need to know. So we're gonnabe talking about, during my
section, some news from thispast week, that was released by
an investment firm, which I cantalk about, and I may have
talked about in other episodescalled Burford Capital. Burford
(01:32):
Capital is a litigation thirdparty litigation finance firm.
They are the biggest, thatoperates in North America.
I think it's the biggest one inthe world, and they are one of
the few that are publiclytraded. Third party litigation
finance, we've talked about theshow quite a bit, but it is the
practice by which outsidefunders can take a financial
(01:54):
stake in the outcome of alawsuit typically in exchange
for upfront capital. So anexample of that would be someone
wants to sue or person a wantsto sue person b. It's usually by
the way, it's usually companieshere. But, person a wants to to
sue person b, but can't affordto to pay the hourly fees to a
lawyer, can't afford to pay forexperts, things like that.
(02:17):
The lawyers are prohibited fromlending money directly to their
own clients under every ethicalrule that I'm aware of. And so
in that situation, typically,the litigant who can't afford to
lit to hire an attorney is gonnabe out of luck. In steps, these
third party litigation fundersin exchange for lending them
money to pursue these cases,they will take a percentage of
(02:41):
the outcome of the lawsuit.Lawsuit. So they may lend
someone some money in exchangefor, you know, 10% or 15% or
whatever it is that's recoveredin the lawsuit.
Right? That's a a verysimplistic way of describing it,
but that is, gives everyone agood sense of, you know, what
these folks do. There are otherlending arrangements too.
There's, it gets as complicatedas you want it to get, but
(03:03):
that's by and large what youneed to know for purposes of
understanding who BurfordCapital is. Burford is, I think,
a market capitalization of abouta billion dollars.
They've been in the news forlots of other things. For
example, they, they areattempting to collect on, I
think, a $300,000,000 verdictagainst the State Bank of
(03:27):
Argentina, which is its ownthing. But Burford's been around
for ten or fifteen years.They're an established company,
and they're the biggest playerin this sandbox. This past week,
Burford announced that they arelooking to collaborate with law
firms, none of which were named,nor would you expect them to be,
(03:48):
but looking to collaborate toinvest directly into law firms.
Meaning, they want to take anownership stake of law firms
themselves in America. Rightaway, that is you know, at the
surface level, that's somethingthat's generally not prohibited,
and there's lot of reasons forthem to get into later. But by
and large, you can't have nonattorney equity of law firms in
(04:13):
the American system. You can'thave non attorney fee sharing in
the American system with fewexceptions as well. And there's
sort of public policy reasonsfor that, ethical reasons, and
so on.
But whatever justification youwanna assign to it, that has
been the case for as far back asI could find. In preparation for
(04:34):
the story, I I was kind oflooking into, some of the
really, really, really old,ethical treatises that were
published. And so I was able tofind back as far as 1820 where
they were discussing the theissues with having, non non
attorney equity and non attorneyfee sharing, in firms, things
(04:57):
like that. So most states, atleast with few exceptions in in,
I think, Virginia, Utah, mostrecently in Arizona. But in most
states, it's just this type ofthing is just not allowed.
You you can't do it. Firms haveto be owned by lawyers. Fees
generated from providing legalservices must be shared only
(05:18):
among lawyers. They can't beshared among anyone else, and
that includes, by the way,employees of the firm. So if you
they're increasingly, we seethings like, non attorney CEOs
or non attorney, executives atlaw firms.
Those folks can't have equity inthe law firm. They can be paid a
salary. They can have bonusstructures and things like that,
but they can't literally own apart of the, profit or the
(05:43):
revenue that comes into thefirm. Can't own equity stakes in
the firm. Burford wants to getinvolved.
Burford wants to, to buy intolaw firms. And in this sense,
Burford is is operating asessentially like a private
equity firm here. In theirannouncement from this week,
Perverb alludes to the factthat, you know, law firms may be
(06:05):
gun shy about working directlywith PE firms, so they're they
might be a little morecomfortable working with a
litigation funder, just becauseof the proximity to the practice
of law that litigation fundinghas as opposed to, you know, a a
normal private equity firm orsomething along those lines. But
they are effectively you know,if they do this, they will be
acting as a as a private equitycompany. So how are they gonna
(06:27):
do it?
Why well, actually, you knowwhat? I'll I'll back up from
that for a moment. It'sreasonable to ask, you know, if
you're listening to this, whyshould anyone outside of
investors or law firm owners,care who owns law firms in
America? You know, why is this?Why who cares about this?
Right? It seems at surfacelevel, just kind of
protectionist. It seems atsurface level, just a way for
(06:51):
lawyers to protect their ownmargins and to keep outside
investors out. And all that is,like, a fair critique and
probably at least a little bittrue. However, the there's a lot
of other reasons that are kindof below the surface.
For example, in some of thetreatises that I was looking
back to of, you know, from ahundred and, years ago or
(07:15):
whatever, they point out thenatural conflicts that would
arise in situations like thiswhere, outside investors who are
involved in with the firm,they're not bound by the ethical
canon. They're not bound by theethical rules that lawyers are.
Danessa Watkins (07:29):
That was the first thing that came to mind
for me.
Jack Sanker (07:30):
Yeah. Yeah. They're not they're not bound by those
things. So, you know, theycannot be punished by the state
ethics board. They cannot bedisciplined by your state
supreme court for violatingdifferent ethical issues that we
all have to constantly beworrying about.
It's kind of our,
Danessa Watkins (07:45):
you know, our like money coming in and what
what type of account can you putclient money in and you can't
commingle it and, like, justjust the most basic stuff.
Jack Sanker (07:56):
Yeah. It it's our, like, mental overhead for
practicing law is the theseethical compliance things, you
know, that make it morecomplicated to run a law firm
than it does than it is to runother types of businesses. And
and in certain instances, makesit less can make it less
profitable. Not that lawyersdon't make a lot of money. Don't
get me wrong here.
But, you know, if you're just anoutside investor who buys into
(08:18):
something, know, all you careabout is a return on your
investment. That's it. And ifyou have a a stake in the
company or maybe if you have acontrolling stake in the
company, right, you can leveragethat through the fact that you
own it to try to influencebusiness practices towards, you
know, getting greater returns,which can be in conflict with
these ethics rules. If you havea client that you know? And and,
(08:41):
again, not that law firms aren'tbusinesses.
And we if we have nonpayingclients, you know, we don't like
that. If we have you know, ifthere's a business aspect of
representing someone that is notgreat for us, we're we try to
get away from that type ofthing. You know, we're not
working for free for the mostpart outside of some pro bono
work. However, I I if I have aclient who I, for one reason or
(09:07):
another, is difficult to dealwith financially, I can't just
drop them. It's it's not thatsimple.
And any lawyer has been in thisposition, by the way, knows
exactly what I'm talking Youhave to, you kinda have to let
them go in such a way that won'tprejudice their rights as a
litigant or as a client, whichcan mean you stick in the case
for months while you try to
Danessa Watkins (09:29):
Yeah. If it's active litigation, you need
court approval.
Jack Sanker (09:32):
Yeah. If it's active litigation, you need
court approval. But even beyondthat, if it's if it's, which
means, by the way, folks, youhave to file a motion for, leave
to withdraw and ask a judge ifyou can terminate your
relationship with the client.And the judge can say no. And
I've had this happen to mebefore.
And I've had the judge say nobecause my client was indigent,
(09:54):
because my client could not pay,because that effectively, the
court's saying, well, if theycan't have you, then they're not
gonna hire another lawyer, andthey're gonna be screwed. And so
you're gonna have to figure thisout among yourselves. In the
meantime, you have to proceedwith the litigation. You have to
proceed with representing them,and you have to do so in
accordance with your ethicalrules, which means you have to
do a good job. So all thesethings, you know, you can
(10:16):
imagine would come into conflictwith someone who's just purely
interested in in return oninvestment.
Right? That's that's kind of aneasy one to point out.
Danessa Watkins (10:25):
Thinking too, and I don't know if you're gonna
get to this, but discovery. So,you know, how many times have
you had a case where, shoot, whydid you send that email client?
We have to turn that over. Like,I have zero basis to not turn
this over. It hurts our case,but we gotta deal with it.
I I could see that being anissue if, you're not bound by
(10:46):
those ethical obligations andyou just dollar interest in the
case outcome.
Jack Sanker (10:52):
Yeah. And, I mean, there's a million things you
could think about hypotheticallytoo. Like, if, say, if, you
know, if we open up our doors tooutside investors and we were
allowed to do so, and what if,you know, someone buys a
controlling stake in AmundsenDavis and then says, you know
what, guys? We actually own thisother company over here, and we
want you to sue all theircompetitors. You know?
We wanna weaponize yourabilities as attorneys to just
(11:14):
to just start, you know,increasing our market share in
other things that we're investedin.
Danessa Watkins (11:19):
You mean what the White House, Just id? Sorry.
I couldn't I was doing I'm gladI'm Sorry. Go. Get it.
Move on.
Jack Sanker (11:28):
Yes. But, you know, like, say Amazon buys a
controlling stake in RobinsonDavis, and they says, hey. You
know what, guys? We want you tojust start suing, I don't know,
Apple or whatever, all thosethings. And now they're
directing lawsuits that could befrivolous or not based on like,
you know, good faith claims orwhatever, just solely to deplete
the resources of their businesscompetitors.
(11:50):
Also creates conflicts. Yeah.Conflicts aspects as well. You
know, if PE firms are ofteninvested in multiple
enterprises, not just one at atime, you know, and you could
structure this however you want,I suppose. But now all of a
sudden, you can represent somepeople and not others based on
the ownership structure of thePE firm.
It just like, it's a Pandora'sbox of of ethical concerns. And
(12:16):
it also encourages some prettynasty behavior on behalf of the
individual attorneys who may beprioritizing the, you know,
shareholder return above theirethical obligations to the
clients and and all thosethings, which, again, let's not
be naive. I mean, there is anaspect of it's a for profit
business. There's an aspect of,you know, this where you do you
(12:36):
must make money to survive. Sothere's but it's it's strictly
confined within the each of yourstate's ethical rules.
And and then and then on top ofthat, whatever jurisdiction
you're practicing in, the thelocal courts regulate this
stuff. And then on top of that,state statutes, federal
(12:58):
statutes, and so on. So youdon't have a lot of leeway to
just do what you wanna do justto make a profit here, in the
way that you can and, you know,say finance or whatever. So
that's one of the reasons whyyou should care about this if
you're just a a normal personwho's listening to this. The
other thing I would say is, youknow and and stay with me on
(13:22):
this.
There are about 70,000,000lawsuits filed in America every
year of a country of, you know,320,000,000 people. And so
there's business disputes,payment disputes, landlord
tenant issues, car accidents,marriage, dissolutions, or
(13:43):
custody lawsuits for children,workplace safety, wage and
hours, school and education,race, gender, sexual
orientation, disability,privacy, intellectual property,
and so on. Right? And then I'mtalking about private lawsuits
that are filed in this country,70 something million of them
every year. In America everyyear, there's about 10,000,000
(14:07):
arrests that take place.
Like, 10,000,000 people getarrested every year for
violating crimes. And why doesthat matter, this conversation?
I would argue private lawsuits,private litigation is a is law
enforcement, and it is it isactually an extremely common and
(14:27):
much more common form of lawenforcement in a literal sense
of, like, enforcing the law.
Danessa Watkins (14:34):
You can keep all within the bounds.
Jack Sanker (14:37):
Yeah. Well, I mean, yeah, I mean, the there's most
laws are on the books and areleft up to private actors to
enforce is what I'm getting
Danessa Watkins (14:45):
at. Mhmm.
Jack Sanker (14:46):
Police enforce a a limited set of laws. Regulators
promulgate laws. They they draftthem, but, you know, regulators
don't arrest people or whatever.Quite a bit of law enforcement
is done by private actors,litigants who are enforcing
their rights, protecting theirrights, trying to get back
(15:10):
something they believe waswrongfully taken from them to do
one thing or another based onrights that are either granted
to them by state or federalstatute, the constitutions, or
our system of common law. So inthat context, 70,000,000 losses
versus ten ten million arrests.
And there's all sorts of othernot like, I understand, you
(15:31):
know, criminal law enforcementis not just arrests. I
understand. There's a lot moreto it than that. My point is is
that private lawsuits are a hugepart of enforcing the law in
this country and how your day today life is governed. If law
enforcement is a form ofgovernance, which it is, then so
(15:52):
is private lawsuits.
So if you're worried about thattype of thing and if you're
worried about who gets to decidehow and when laws are enforced,
in this country, I mean, youshould care a lot about, your
you local policing and how thatworks and rules around around
policing and criminal statutesand everything else. You should
(16:14):
also care about the statutesthat authorize these types of
lawsuits. You should care a lotabout the people that are
deciding and the motives of thepeople that are getting involved
in private litigation. So whichis why we have these ethical
rules to begin with when itcomes to attorneys because even
prosecuting, private lawsuits,you know, suing someone for
(16:34):
money or whatever, you as an youare considered an officer of the
court as a as an attorney. Andwith that comes all these
different responsibilities andeverything else.
And if you outsource that to anunaccountable, you know, for
profit, organization, now youhave much less control over that
system. And and I think thatthat is you know, I'm not saying
(17:01):
that I'm not being doomy andgloomy over this, but I I that's
enough. I hope I made the pointthat you have a stake in this,
and it should matter that, whoit is that's going to to decide
the ebbs and flows of of privatelawsuits in this country. It
does affect, you know, aneveryday person is kinda what
I'm getting at.
Danessa Watkins (17:21):
So So the the three I think you mentioned
three states where they do allowfor this in in some form. There
must obviously be some sort ofchecks and balances or
limitations on how that works.
Jack Sanker (17:37):
Well, not in Arizona. But Arizona's the Wild
West right now, and that's awhole another episode someday.
But Arizona in 2021 changed therules around this stuff, and and
they also changed the rulesaround fee sharing. So the one
thing you can do in Arizona, forexample, is if you wanna refer
(17:58):
someone to a law firm for, like,car accident. Right?
You can ask for a referral feefrom the lawyer. Very
interesting in Arizona that ifyou are a physician who is you
know, someone walks into yourclinic and it's like, just got
run over by a bus. You as aphysician can take a referral
fee on that. Yeah. So, like, youjust like, it's That's messy.
(18:23):
Oh, yeah.
Danessa Watkins (18:27):
Then that's the physician that's gonna be
testifying on your behalf aswell. Yeah. I see where that's
going.
Jack Sanker (18:34):
And the physician is gonna be in charge of, you
know, prescribing you whatevertreatment you need and jacking
up medical bills if any of thisworked in injury stuff, know,
jacking up the medical bills tothe point where, you know,
getting you a bunch of treatmentyou don't need because they have
a financial stake in it. It'sand so on. Like, it's you can
really entertain yourselfthinking about where this goes.
But I'll set those three Sorry.
Danessa Watkins (18:58):
Just now I'm, like, stuck on that. Like, did
we not learn from big pharma?Like, anyways, go.
Jack Sanker (19:04):
Yep. Yep. Yep. Now proponents of this type of
thing, I mean, they havearguments for it other than
just, you know, we wanna getprivate shareholders access to
this market. I mean, though,they correctly will argue that
this type of arrangement canallow for greater access, to
access to the attorneys.
It could by driving down cost.For example, if someone, it can,
(19:29):
you know, be funded by privateinvestors, then they can you
know, maybe they don't have tocharge so much from the
individual clients. It alsowould, at least according to the
to the proponents of this typeof thing, increase competition.
It's hard as an attorney tostart a law firm because you and
then what do you what do youneed to go to a bank? You know,
(19:49):
you can get you have options toget a small like, you you can
get a a line of credit or a loanfrom a bank, and that's about
it.
Whereas if you have anotherbusiness idea that's and you
wanna start a business orwhatever, you can go to friends
and family, business contacts,you know, institutionalize
investors and say, I wanna startthis business. I need operating
capital. If I give you 5%equity, would you give me some
(20:11):
startup money? Right? Everyoneelse can do that.
Lawyers can't. And so itarguably stifles competition.
Entrenched actors have a lotmore, power in local markets in
particular because of this. It'svery difficult to start from the
ground up. People do it all thetime, but it's it's, you know,
it's difficult to do so.
(20:31):
So those are kind of both sidesof the argument here as to, you
know, why this should orshouldn't be the case. But what
matters is it has not been thecase for as far back as I could
look in American history. And sowhat do how do investors such as
Burford Capital and and I youwould imagine PE firms that
(20:54):
wanna get involved, how how arethey planning to get around
this? Burford plans on doing soin what's called a management
service organization, MSO. Andthis is a model that's been
commonplace in the health careservices market, and it's kinda
where it's become kind of famousnow, where PE firms can acquire
(21:15):
health practices, which areregulated kinda similarly, but
not exactly, but similarrestrictions on, you know, where
money can go and who can ownwhat and everything else.
And what they'll do effectivelyis create an MSO, management
services organization, thatattaches itself to, like, the
law firm and can be paid asubscription fee or however you
(21:42):
wanna structure it, in in returnfor providing management
services. So, you know,accounting, finance, management,
document, etcetera, things likethat. At surface, it doesn't
sound any different than just,you know, outsourcing this stuff
to an accounting firm. Like, ifyou own a law firm, you can hire
an accounting firm to run yourbooks for you. There's nothing
wrong with that.
(22:03):
But what the way that these MSOsare different, at least in
health care, they take anownership stake in the health
care company. And in doing so,you know, they'll they they
basically stuff the equityholders of the health care firm
full money in exchange forselling some of their equity to
(22:23):
the MSO who then owns thepractice. And at that point,
they have an ownership stake inthe practice. However, it's
organized whether it's a boardor something else. They also get
to start making managementdecisions about how the company
gets run.
So you hear recorder storiesabout, you know, hospitals that
get acquired by PE firms, andthey cut the staff 30% and
(22:44):
service goes way down and allthis stuff because the investors
just want the return. Andthey're like, hey. If we can
squeeze the staff a little moreand, you know, prop the margins
up, that's more for us. So doesthis seem like it might be
legal? Well, there is this MSOthing that Burford wants to try
(23:05):
out.
There is a recent decision inTexas which discusses the
potential for an MSO law firmmodel and effectively says,
yeah. Why not? You know, it'sit's, you know, you the
attorneys are still gonna beregulated within these ethical
confines. They still, are gonnahave to be, you know
(23:30):
Accountable? Yeah.
Maintain privilege with theclient and confidentiality and
all those things. And you haveto structure it in such a way as
to make sure that the MSOs, youknow, aren't getting a peek
behind the curtain as to legaldecision making and so on. But
if your compensation, either asa partial owner of the MSO,
(23:51):
partial owner of the law firm,or as an attorney of the law
firm whose compensation is nowtied up in both of these
structures one way or the other,You're gonna be asking you
you're gonna be asking thesepeople to act sometimes in their
own in their own against theirown interests by, you know,
strictly adhering to the ethicalrules at the expense of, say,
(24:13):
profit or at the expense ofinvestor return or all those
things, which happens in lawfirms all the time because we
have to because of the ethicalrules already. But you're adding
the added pressure of peoplethat are not bound by the
ethical rules to thatconsideration. And, you know, in
my opinion, everyone is movableat some point or another.
(24:35):
And attorneys that, you know,maybe weren't likely to behave
unethically before could benudged towards that if they are
tied up in one of these, youknow, organizations.
Danessa Watkins (24:48):
Primarily for plaintiffs' firms, or is the
model applicable to defensefirms too?
Jack Sanker (24:55):
I think it's it's applicable to both. I mean Okay.
Litigation funding is morecommon on the plaintiff side of
thing because you can it's
Danessa Watkins (25:01):
just payout.
Jack Sanker (25:02):
Yeah. It's just a different it's just where it
kind of more shows up. Butthere's absolutely nothing
preventing it from, you know,from, attaching itself to a
billable hour defense firm andeffectively taking a chunk of
every hour that gets billed. K.You know, that's that's how it
will get set up.
(25:24):
And so Burford doesn't have apartner for this yet, but they
announced that they're lookingfor partners to do this with.
They announced that they're theywanna do this with firms. In
Arizona, where the rules havebeen much relaxed on this type
of thing, like I mentionedbefore, there have been
instances of PE firms basicallybuying into law firms and and
just saying we're owner we ownyou now. But now we're gonna pay
you, you know, your salary andeverything else, but we
(25:45):
literally own the firm. I thinkthat debate is still ongoing as
to, you know, whether it was amistake in Arizona to do this.
You know, I I think it's early.People are testing the waters on
that structure as I understandit now. I'm not aware of any,
like, huge glaring, you know,like really, really abusive
(26:10):
setup that has resulted inpeople getting screwed or
whatever. But it's like, it'sright there. You know, you could
do it.
You could see it. You couldenvision it happening. And if
this type of thing catches offin say Texas next, and if it
catches off elsewhere, I mean,it's going to be, I mean, the
(26:33):
floodgates will open, the moneywill pour in, The margins in law
practice are higher than theyare for other types of most
other types of businesses.Right? You you you can make a
higher profit margin in lawpractice than you can running a
supermarket, for example.
So the PE firms are gonna wantthat. And if you are, by the
(26:54):
way, if you're an owner of a lawfirm, partial owner of a law
firm or whatever, and you want,you know, an exit strategy for
your ownership stake, You'd loveto be able to sell to a PE firm,
you know, and and retire, youknow, or something like that.
Right? So if you get rid ofthese rules, if you just
tomorrow, we all we snap ourfingers in all these
(27:14):
prohibitions and all 50 stateswere gone, I think you would
just see firms getting gobbledup Right. Immediately.
And because everyone would wantin at that point. The money
wants in, and the money wouldhave been trying to get in for
the last hundred and fifty yearsand just has not been able to.
So that's why it's a little, youknow, it's like tweaking the law
(27:35):
here and changing things there.There is like a pent up demand
for this type of investmentopportunity that is just gonna
be massive. And, you know, legalservices industry in The United
States is is billions andbillions of dollars.
People are gonna want to wettheir beak with that. So this
announcement by Burford thatthey're openly looking to do
(27:57):
this, and they're gonna test outthis MSO model as soon as they
get someone who was willing todo it, which someone will
because the reasons I mentioned,people are I'm sure there's a
lot of folks that are justlooking for a buyout. It it
could fundamentally change theway that the law is, you know,
enforced. I I will stick to thatthesis of, you know, private
(28:20):
lawsuits being law enforcement.And, you know, I'm not here to,
like, you know, to to be shrillabout private private private
equity firms ruin everything andso on.
You see those takes, you know,or whatever. But there's a lot
of horror stories about PE firmsacquiring companies and running
them into the ground. Know,like, that that happens, because
(28:41):
they extract whatever value theycan, and then they, you know,
they they toss it aside. I mean,I remember when I was a kid, I
remember it was a big deal inthe I wasn't, I wasn't a kid. I
was a young person, I suppose.
But do you remember, the twentytwelve election, Mitt Romney,
(29:01):
who worked for Bain Capital PEfirm and was famously you know,
Bain Capital was, I believe, thePE firm that, bought out, Toys R
Us and and, like, stripped itdown, loaded it up with debt,
and then basically paidthemselves management fees. And
(29:22):
if you're listening, BainCapital, I'm saying all this
hypothetical. I've not factchecked this. I'm, speculating.
This is all a joke.
But they, it eventually resultedin in Toys R Us going bankrupt
while Bank Capital made moneyoff their investment. So there's
(29:43):
lot of horror stories about PEinvestment in private industry.
Whether that would happen to lawfirms or not, it's hard to say.
But the point is is this werethis to catch on and it might
catch on would be a prettyseismic change in the way that
law firms are run and theincentive structures for
pursuing litigation and filingclaims and know, suing people or
(30:03):
not suing people based on, youknow, all these things. And it's
it's been very interesting tosee how the different states
react to this.
Think it's gonna be a state bystate thing and whether they can
resist the, you know, tsunami ofcash that will come pouring in
(30:24):
if if it gets cracked open.
Danessa Watkins (30:27):
Mhmm. Yeah. Super interesting. Yeah. And
there's definitely a lot oflayers to it.
I can't imagine it's gonna besomething that catches, like,
wildfire. I think, obviously,each state is gonna have
different concerns about it. Youknow? But I wonder so, of
course, this is me as a defenseattorney. I feel like it's too
(30:50):
easy to file a lawsuit and, youknow, we drag people through
litigation on on meritlessthings, and it's just a drain on
on
Jack Sanker (31:00):
70,000,000. You know? I'm sorry? 70,000,000
lawsuits.
Danessa Watkins (31:04):
Right. Right. But so, yeah, my what I'm
interested in is whether thiswould improve the quality of the
lawsuits that get filed and, youknow, cut out some of the BS
ones or if it would do theopposite and we'd have more
litigation filed because, youknow, people who couldn't
previously afford it orsomething. I don't know.
Jack Sanker (31:24):
I think you're gonna see it improve. I think
you're gonna see more. Yeah. Imean, this because the the you
know, the one of the reasons whyfrivolous lawsuits get you know,
truly frivolous lawsuits aren'tbrought is because the cost of
doing it. And it's not a lot ofmoney to file a complaint.
Filing a complaint is usually acouple $100. So anyone can do
(31:46):
that. Right? But, you know,everything else associated with
it, if you go far enough,discovery, etcetera, if you're
paying for a lawyer. If you'repro se, it's cheaper, but it,
it's your time that you're usingthere.
These bigger firms could talkthemselves into or these bigger
like, investment firms couldtalk themselves into, oh, let's
(32:07):
just make every complaint AIgenerated. Let's automate just
discovery. Let's just, like,ruthlessly enforce, like,
efficiency and KPI metrics andall those things and, like,
drive the cost down, whichpeople will say is good for
access. It allows people to getlawyers more cheaply. It also
means more litigation.
It means more lawsuits arefiled. So, you know, for every
(32:30):
71,000,000 of these lawsuits,some person is served with a,
you know, a process summons anda complaint and says you've been
named in a lawsuit for, andthat's, like, not a great
feeling, I would imagine. So,yeah, I mean, I I think you
would see, if anything, morelitigation.
Danessa Watkins (32:51):
Well, let's hope that maybe Arizona will be
the guinea pig, and Illinoiswill hold off for a while and
and see how that plays out.
Jack Sanker (32:58):
Yeah. Yeah. Like I said, that's a whole another can
of worms. Maybe we'll cover thatin the future, but that's you
know? Yeah.
Yeah. This will be interesting.We'll we'll circle back if if
Burford ever announces apartnership and find someone to
do this with, and we'll leteveryone know.
Danessa Watkins (33:20):
I think the separation of church and state
is one of those, you know, areasthat we've just known exists,
and it's it's a bedrockprinciple of our democracy, yada
yada yada. Well, that'spotentially about to be flipped
on its head. We now have a thirdstate in the last I think it's a
(33:45):
year, year and a half that hastried to pass or has actually
enacted bills that would notjust allow but require
publishing the 10 commandmentsin public schools. Now the
latest one has come out ofTexas. So on 06/20/2025, the
governor, Greg Abbott, signedsenate bill 10, which provides
(34:09):
that every public elementary andsecondary school in the state
shall display in a conspicuousplace in each classroom of the
school, a durable poster orframed copy of the 10
commandments.
Jack Sanker (34:23):
Shall display.
Very interesting.
Danessa Watkins (34:25):
Shall, Shall display
Jack Sanker (34:27):
Not is permitted to display.
Danessa Watkins (34:28):
No. Shall display. I mean, the nuances of
this bill are extensive, almostto the point of, like, why
wouldn't you dial back a littlebit, you know, and and maybe
give a chance for this to to gothrough? But no. It's it's
pretty extensive.
So they provide the size of theposter, has to be at least 16
(34:53):
inches by 20 inches in size, ina size and typeface that is
legible to a person with averagevision from anywhere in the
classroom have to be uppermanently all year round in
every single classroom toaccount for, for example, high
school students who may changerooms throughout the day. Boy.
(35:14):
And they specify the exactversion of the 10 commandments
that have to be published, whichI I guess, admittedly, I didn't
realize that there weredifferent iterations of it. So
that tells you all you need toknow about me. I
Jack Sanker (35:33):
I was a religious studies major in college among I
think I was a history major aswell. So there's, like, the
competing translations of
different parts of
the Old Testament is is, like, avery nerdy thing that I could
talk about, but I won't.
Danessa Watkins (35:46):
Well, it's I mean, it's laid out in in this
court case pretty detailed, soit's probably a refresher for
you. But yeah. So this was andand it's full from as early as
kindergarten all the way throughhigh school. So any public
school has to display this, andit was set to go into effect on
(36:10):
September 1. But within, let'ssee, about two weeks of the bill
being passed, there was alawsuit filed in federal
district court by a number ofparents on behalf of their
children suing various schooldistricts seeking declaratory
(36:32):
and injunctive relief.
Now their arguments here arethat, well, their claims
actually are brought under thefree exercise clause and the
First Amendment. So under theFirst Amendment, they're saying
that this is an obvious rulethat favors religious scripture.
(36:55):
It's adopting an officialposition on religious matters,
violating the establishmentclauses prohibition against the
government taking sides ontheological doctrine. Government
may not officially prefer onereligious denomination over
another. And then under theFirst Amendment violates the
(37:20):
provision that congress shallmake no law prohibiting the free
exercise of religion.
Jack Sanker (37:25):
I was gonna ask, is there any it's just the 10
commandments? There's no even,like, you know, and let's put
the Quran up, and let's put theit's just 10 commandments.
Danessa Watkins (37:34):
Just the 10 commandments and just this
specific version of them. So thethe plaintiffs in this case are
from all different religiousbackgrounds, including including
certain Jewish and Catholicsthat are saying this these are
not the 10 commandments that wethat we practice. So, obviously,
(37:58):
they brought some veryinteresting arguments in their
complaints. And the judge who'soverseeing this, let me give him
some credit here. This is out ofthe Western District Of Texas,
and it's judge Fred Beery, b I er y.
He wrote a 55 page legal poetryopinion in response to motions
(38:24):
to dismiss this case. And I saylegal poetry because, Jack, you
would appreciate this. Heliterally goes through, like,
the history of
Jack Sanker (38:33):
Oh, let's go. I gotta read this.
Danessa Watkins (38:35):
Great. Yeah. Of separating, you know, state and
religion. And on one page, Ijust marked a couple pages that
I was like, wow. On one page, hesays, government and religion
joining hands.
One picture from the modern eraspeaks silently and poignantly
(38:55):
of the danger of majoritariangovernment and religion joining
hands. Excuse me. And then it'sa picture of Adolf Hitler
greeting a bishop at one of therallies in 1934. Goes through
American history, specificallydating back as far as a speech
(39:17):
that Ulysses S. Grant gave in1875, where he says, leave the
matter of religion to the familyaltar, the church and the
private school supportedentirely by private
contribution, keep the churchand stay forever separate.
Then fast forward to 1963,Reverend Billy Graham gave this
(39:37):
quote, 80% of the Americanpeople want Bible readings and
prayer in the schools. Whyshould the majority be so
severely penalized by theprotests of a handful? And then
the judge puts in parenthesesunder it, with all due respect,
Reverend Graham, it's the 20%who are protected by the Bill of
Rights. Correct. Yep.
(39:59):
Yep. He goes into so the testfor the establishment clause in
particular, it's actually influx right now. So the former
test, which came down forty fiveyears ago when the Supreme Court
(40:22):
determined that this is Stone v.Graham, It was a five court
opinion and they adopted theLemon test where you look to
whether a statute has a secularpurpose, whether the statute
could or could not promote orrestrict religious beliefs or
practices, and then whether itfosters excessive church state
(40:45):
entanglement, which, you know,how complex of an inquiry is
that. But that lemon test justrecently was rejected by our
current Supreme Court.
And it now looks like we'regoing to start going back to
the, you know, what historicallyhas been, yeah I know,
Jack Sanker: We covered that, I think in detail in a prior episode, I will check (41:22):
undefined
with my producer and let you allknow at the end of this.
Danessa Watkins (41:25):
Yeah. So they're they're throwing out
these, like, balancinginterests, and now judges are
instructed to consider historyand the understanding of the
founding fathers when dealingwith the establishment clause.
So the now that that decisionwas not specific to a 10
(41:46):
commandments case. So there issome question as to whether the
the lower district courts,whether they need to follow
precedent from,
you know, however long ago,which says, clearly, the the 10
commandments cannot be publishedin a public school. But now
(42:07):
there's this question where andI think that's why these states
are now three of them havepassed these bills because
they're like, let's test thewaters. Yeah. You know? Maybe we
can show that historically, thefounding fathers didn't intend
for the establishment clause tobe read this way.
And maybe they wanted to leaveit up to the states to make
(42:28):
decisions. So that's why I thinkthis judge took the time to go
back through history andactually lay that foundation of,
you know, let's see how this hasbeen debated over the years.
Jack Sanker (42:43):
Separation for the supreme court
Danessa Watkins (42:44):
Yeah. For sure.
Jack Sanker (42:45):
Applying their nonsense history and tradition
test to the ruling.
Danessa Watkins (42:49):
Right. So the other two states that have
recently dealt with this issue,one of them was Louisiana, and
that one, it was almost asimilar similar statute to what
Texas tried to pass. But the theFederal District Court in
(43:10):
Louisiana said, you know, thisviolates the First Amendment.
That went up to the FederalAppellate Court there, which is
the Fifth Circuit, which isknown for being one of the more
conservative circuits. And theyactually they upheld the the
injunction on requiring schoolsto to post the 10 Commandments.
So this district judge in Texaskind of followed that lead and
(43:33):
said, actually, I think hepulled from one of the
historical experts that waspresented in that case, who
said, if we look back at whatwas going on in the founding,
there were not public schools.So, you know, so this whole
argument that, you know, thatthe founding fathers would have
(43:56):
allowed this, well, we can't saythat because there weren't even
public schools at the time. Andthen when finally we have a
public school and there was anattempt to to make this
requirement that the 10commandments be be posted, that
was North Dakota in 1927, andthe court, like, immediately
(44:16):
struck struck it down under theestablishment clause. So, you
know, it's it wasn't that likewhat less than a hundred years
ago was the first time that thisissue arose, and it was a no
questions asked. So then onepart that I found really
interesting about this decisionis we have to, and we've talked
(44:36):
about this before too, with theFirst Amendment, you have to
look at the cohort, right?
Like what age group are wetalking about? Because different
rules may apply to differentages, especially when it comes
to these issues of freedom ofspeech and freedom of religion.
And this judge looked at thecoercion tactics that can
(44:57):
happen, especially when you'retalking about like elementary
school kids and you're talkingabout peer pressure. And maybe
at home, parents are saying, youknow, we follow this religion or
we don't follow a religion andwe don't believe in religion.
And yet they come to school andthey're forced to, you know,
look at this poster every day.
(45:19):
Questions may come up duringclass. Well, what does that line
mean, teacher? And, you know,it's just you're these kids
Yeah. I mean, the kids aresponges at this age, and they're
more likely to be afraid to goagainst the norm. And and, I
mean, you're in school, but themajority of your day, you know,
(45:41):
versus in your home.
Jack Sanker (45:42):
So Yeah. I mean, there's and there's I'm sure
that the lawsuit in particularwas brought on. There's the free
exercise element of it, and thenthere's the establishment clause
element of it. So it's theindividual rights of American
citizens to have the right tofreely exercise their religion,
which may include not beinginstructed by another religion.
(46:05):
In fact, I think that's mostreligions.
That's kind of the whole deal.And so, you know, if you send
your, you know, Jewish or Muslimor Sikh child to school, they
should not be instructed on, Iwould guess, some type of weird
Protestantism, but yeah. Okay.
Anyways Yeah. And
(46:27):
then there's the establishmentclause, which, you know,
directly we think says thegovernment shall establish no
specific faith as, you know,official faith in
the United States
Danessa Watkins (46:40):
Right, yeah. So, I mean, that yeah. That's
and that's where the coercioncomes in. Right? So so the the
attorneys for these schooldistricts, they tried to say,
well, no.
Look. We're looking at thehistory. So, you know, Texas has
a history of I don't evenhonestly, I can't even repeat
(47:02):
their documents because it justdidn't stick in my head. But
Jack Sanker (47:06):
I hope the listeners feel me rolling my
eyes through the audio.
Danessa Watkins (47:10):
Well, so yeah. So they're they're trying to
say, look, this isn't about,yeah, this isn't about religion.
This isn't about coercion. We'rejust trying to appreciate the
traditions of our great state.And the judge then goes on for,
I think, two, three pagesquoting the the legislative
(47:35):
hearings on this where, youknow, you're introducing the
bill and discussing the bill.
So before it got passed, and hequotes, so in support of senate
bill 10, the lieutenant governorstated, quote, in every
classroom in Texas, students aregoing to see the 10
commandments, and they are gonnaknow about god, end quote. Then
in the next sentence, supervisorand author said, we want every
(47:59):
kid kindergarten through 12,every day in every classroom
they sit in to look on the walland read those words that God
says because we want them tounderstand how important those
statements of God, those rulesof God are, that they see them
in their classroom every day oftheir public education. I mean,
just like these thesestatements, it's like you're
literally talking about the onegod and that the students should
(48:23):
appreciate the one like, I just,it blows my mind that they even
tried to make that argumentknowing the legislative history
of this bill.
Jack Sanker (48:30):
Yeah. I I mean yeah. And, you know, the this
this argument's, like, as old asas you can as you wanna make it.
I mean, it's people have beenbickering about this for
forever. The founding fathers,you know, they were religious or
or at least, you know, the onesthat you wanna pick out were
religious.
Therefore, they obviouslyfounded this nation as a, you
(48:52):
know, religious nation in theirimage of their faith in
particular particular orwhatever. People have been
saying that for I mean, Iremember that we covered you
cover this like your first yearof law school, it's like, hey.
You can't do this. I I wouldnote that many of the founders
would be rolling in their gravesif they knew that Texas was
publishing the King Jamesversion of the 10 commandments,
(49:15):
which I did check. And if this
Danessa Watkins (49:17):
Oh, you got it? Okay. Yeah.
Jack Sanker (49:18):
Yeah. This this Anglican nonsense is being
forced on our young Americanchildren. Get out of here with
this.
Danessa Watkins (49:24):
Right. Right. So funny. Yeah. Then, yeah, he
just concludes with it's justsaying, like, most people want
their matters of faith.
They wanna be left alone when itcomes to what their religious
beliefs are. And he raises agood point. He says, even though
(49:46):
the 10 commandments would not beaffirmatively taught, the
captive audience of studentslikely would have questions
which teachers would feelcompelled to answer. That is
what they do. Teenage boys beingthe curious, hormonally driven
creatures they are might ask,missus Walker, I know about
lying and I love my parents, buthow do I do adultery?
Truly an awkward moment foroverworked and underpaid
(50:08):
educators who already have todeal with sex education issues.
And then he he says, you know,here's some here's some other
ways we can try to, like,publish, like, alternatives to,
you know, religious rancor,essentially, and then gives,
(50:29):
like, percepts of Buddhism,abstain from killing, stealing,
and engaging in sexualmisconduct, or do unto others as
you would have them do unto you.Be kind, be respectful. It's
just showing, like, there areways to, you know, teach kids
how to be good humans withoutcrossing the line into into
(50:49):
religious territory. So Ithought, I mean, if anyone's
interested in this stuff, thisopinion that came down
yesterday, so 08/20/2025 in theWestern District Of Texas is
truly legal poetry.
It's a history lesson. It's justa great work of art and that he
(51:10):
he knew this was gonna be, youknow, something that's talked
about and he the judge took thetime to to really put out there,
you know, what he thinksultimately the Supreme Court
should be considering when itdecides this this issue.
Jack Sanker (51:24):
Yeah. I mean, I'm willing to bet if you did a Venn
diagram of people who, you know,want this bill and want the 10
commandments in the classroom,one circle. Then the other
circle is people who are, youknow, scared to death of people
implementing Sharia law.
(51:46):
and you know, I think that'slike the the boogeyman in
politics or whatever. Sharila,if you the Venn diagram of those
two things are is just onecircle.
Danessa Watkins (51:55):
Yep. Yep. So not surprisingly, within 24
hours, this was appealed. Sowe'll see what the
Jack Sanker (52:06):
Fifth Circuit.
Danessa Watkins (52:07):
Oh, fifth. Oh, okay. So they had to follow the
the Fifth Circuit's decision inthe Louisiana case. Okay. That
makes sense why they relied onit so heavily.
So, yeah, I mean, at some point,this is gonna go up, I would
say. And there's a lot of, youknow, talk about, again, why
(52:33):
would why would these states bebe challenging? What's been such
a clear ruling for decades? Andand, you know, it's pretty
obvious. Look at the court wehave right now and the precedent
that's being overturned sessionafter session.
So if there was ever a time toto challenge what we've always
(52:53):
known and accepted, you know,this is, I guess, the time to do
it.
Jack Sanker (53:00):
So I guess it, you know, remains to be seen. It's
interesting. I mean, I you know,we're not, like, a court
watching show. We don't, like,do supreme court predictions.
That said, I don't expect thatthis would survive at this at
SCOTUS, even, you know, with itspolitical leanings and
(53:23):
everything else, because it doesseem I mean, it strikes me as
such a slam dunk.
That's why I asked at thebeginning if there were any
other religious things that werealso being included in this
because if I remember, one ofthe ways that, you know, if
you're gonna display the 10commandments, then you can, like
if you're also displaying,I don't know, some some equal
(53:46):
representation of worldreligions or something like
that, then at least you couldargue it's, like, being
neutrally presented withoutfavoritism towards one side or
the other. So you might get aruling that, like, relaxes those
standards. You might mean, thecourt thing the is even if the
court rules against this, itcould still say it could still
weaken the free exercisejurisprudence by applying its
(54:07):
history and tradition test.Right. Which I I honestly would
expect is the point of this typeof legislation, the folks that
are involved in this from Texasought to know that it's the the
that the the the statute itselfis gonna be unconstitutional.
However, they in that ruling,they could pry open the the
(54:34):
rules around other things thatthey would wanna do and which
would, you give them leeway todo something different just by
virtue of the Supreme Courtsaying, hey. We're gonna
overturn the the test that weapply to this type of thing.
We're gonna still rule that it'sunconstitutional, but for for
these other reasons. And thenTexas gets to do, you know,
(54:54):
whatever it wants to do based onthat.
Danessa Watkins (54:56):
Yeah. That's a good point. And I wouldn't be
completely surprised if it if itdid have something to do with
the the, like, the the location,you know, the the government
owned location of where religioncan be displayed, I guess.
(55:18):
Because I did find there was aconcurring opinion by justice
Breyer in a tenement was it 10Commandments public school case
that was up about ten years ago,and he did make mention that the
display of the 10 Commandmentsin public schools must clear a
higher legal bar giving theimpressionability of the young.
(55:42):
So that may be what, you know,they're trying to do.
Maybe, in fact, they're notlooking to looking or or they
knew, you know, that this wasgoing to be struck down, but
they're actually trying to havemore ability to push religious
ideology in other public spaces.This was just such an extreme
(56:04):
that it'll I think, like yousaid, like, maybe it'll cause
the judges to lessen the rulesof the establishment clause, I
guess, a little bit. Butapparently, it's it's, you know,
these sort of things arehappening across the country. So
I was just curious of what, ifanything, was happening in
Illinois. And I did find arecent situation in Jefferson
(56:25):
County, Illinois fromJuly of this year where a 10
commandments monument wasdisplayed on the lawn of the
county courthouse.
Jack Sanker (56:35):
They keep doing this crap, man. It's it's I'm
not, like, I'm not perspiringanyone who, like, wants to,
like, be, you know, like,religion or not, whatever. It's
just, that issue in particular,the the ten commandments on the
steps of the courthouse, how youlook into the ground in this
country. It's, like, many, many,many cases of this. And so,
like, if you're doing it, youeither just you were born
(56:56):
yesterday and didn't knowanything about it, or you're
deliberately trying to provoke aresponse.
And and that's, like, thefrustrating thing is, like, this
is settled law. Mhmm. You know?And and and, I guess until it's
not.
Danessa Watkins (57:10):
Right. Well, I mean yeah. And that one in
particular was a little bitsilly and seemed like a waste of
potentially taxpayer moniesbecause, of course, it was a
lawsuit immediately. And thenthe the county within, like,
days said, alright, we're gonnaremove it, and then they moved
it to like a church locationinstead. So, you know, but
(57:33):
again, I think this is just it'sone of those times where the
what we think are the bedrockprinciples and, you know, what
we think is the sound law of theconstitution and interpretation
of the constitution is justbeing challenged and, you know,
the needle is getting pushed.
So interesting slash scary time.But
Jack Sanker (58:01):
It it will be yeah. I I again, not to get I'm not in
the market of, like, predictionsfor this type of thing, but I
would suspect that SupremeCourt, if they take it and they
may not. I they might just sayyou know, I might deny cert and
just say, you know, we're gonnastick with the lower court's
ruling. But if they did, itwould be for the opportunity to
do away with some of the morestrenuous First Amendment
(58:24):
jurisprudence as it relates tothis type of thing while still
finding this underlying statuteis unconstitutional. That's how
I would expect it to go.
Danessa Watkins (58:31):
Mhmm. Mhmm. Yep. Okay. Well, that is our
show.
Thank you for tuning in. You cancatch us hopefully every two
weeks now that we're gettingback into this. We'll get
running again here, butLitigation Nation is on Apple,
Spotify, YouTube, wherever youget your podcast. Thanks for
(58:54):
tuning in. We'll see you next
Jack Sanker (58:55):
time.
Welcome to Litigation Nation. I'm your
host, Jack Sanker, along with mycohost, Danessa Watkins. This is
the show where we cover the mostimportant and interesting legal
news over the past couple ofweeks. Reminder, you can always
find us on Apple Podcasts,Spotify, YouTube, wherever you
get your podcasts. We publishevery other week with the
exception of our our summerhiatus that we're just coming
(00:27):
out of here.
Danessa, what do we have uptoday?
Danessa Watkins (00:31):
Hey, Jack. Good to be back. So I am going to
cover a recent opinion out of,Texas District Court, which is
probably gonna go up to theSupreme Court at some point, and
we may have new law on whetherthe 10 commandments can be
posted in public schools.
Jack Sanker (00:49):
And I'm gonna be talking about what I'll call the
PE-ification of law firms,private equity's attempts to
invest directly in the ownershipof law firms, something that has
been otherwise prohibited orillegal in in just about every
instance, since, you know, thelast hundred and fifty, two
(01:11):
hundred years, and the way inwhich those rules may be
changing and what to expect. Allof that and more, here's what
you need to know. So we're gonnabe talking about, during my
section, some news from thispast week, that was released by
an investment firm, which I cantalk about, and I may have
talked about in other episodescalled Burford Capital. Burford
(01:32):
Capital is a litigation thirdparty litigation finance firm.
They are the biggest, thatoperates in North America.
I think it's the biggest one inthe world, and they are one of
the few that are publiclytraded. Third party litigation
finance, we've talked about theshow quite a bit, but it is the
practice by which outsidefunders can take a financial
(01:54):
stake in the outcome of alawsuit typically in exchange
for upfront capital. So anexample of that would be someone
wants to sue or person a wantsto sue person b. It's usually by
the way, it's usually companieshere. But, person a wants to to
sue person b, but can't affordto to pay the hourly fees to a
lawyer, can't afford to pay forexperts, things like that.
(02:17):
The lawyers are prohibited fromlending money directly to their
own clients under every ethicalrule that I'm aware of. And so
in that situation, typically,the litigant who can't afford to
lit to hire an attorney is gonnabe out of luck. In steps, these
third party litigation fundersin exchange for lending them
money to pursue these cases,they will take a percentage of
(02:41):
the outcome of the lawsuit.Lawsuit. So they may lend
someone some money in exchangefor, you know, 10% or 15% or
whatever it is that's recoveredin the lawsuit.
Right? That's a a verysimplistic way of describing it,
but that is, gives everyone agood sense of, you know, what
these folks do. There are otherlending arrangements too.
There's, it gets as complicatedas you want it to get, but
(03:03):
that's by and large what youneed to know for purposes of
understanding who BurfordCapital is. Burford is, I think,
a market capitalization of abouta billion dollars.
They've been in the news forlots of other things. For
example, they, they areattempting to collect on, I
think, a $300,000,000 verdictagainst the State Bank of
(03:27):
Argentina, which is its ownthing. But Burford's been around
for ten or fifteen years.They're an established company,
and they're the biggest playerin this sandbox. This past week,
Burford announced that they arelooking to collaborate with law
firms, none of which were named,nor would you expect them to be,
(03:48):
but looking to collaborate toinvest directly into law firms.
Meaning, they want to take anownership stake of law firms
themselves in America. Rightaway, that is you know, at the
surface level, that's somethingthat's generally not prohibited,
and there's lot of reasons forthem to get into later. But by
and large, you can't have nonattorney equity of law firms in
(04:13):
the American system. You can'thave non attorney fee sharing in
the American system with fewexceptions as well. And there's
sort of public policy reasonsfor that, ethical reasons, and
so on.
But whatever justification youwanna assign to it, that has
been the case for as far back asI could find. In preparation for
(04:34):
the story, I I was kind oflooking into, some of the
really, really, really old,ethical treatises that were
published. And so I was able tofind back as far as 1820 where
they were discussing the theissues with having, non non
attorney equity and non attorneyfee sharing, in firms, things
(04:57):
like that. So most states, atleast with few exceptions in in,
I think, Virginia, Utah, mostrecently in Arizona. But in most
states, it's just this type ofthing is just not allowed.
You you can't do it. Firms haveto be owned by lawyers. Fees
generated from providing legalservices must be shared only
(05:18):
among lawyers. They can't beshared among anyone else, and
that includes, by the way,employees of the firm. So if you
they're increasingly, we seethings like, non attorney CEOs
or non attorney, executives atlaw firms.
Those folks can't have equity inthe law firm. They can be paid a
salary. They can have bonusstructures and things like that,
but they can't literally own apart of the, profit or the
(05:43):
revenue that comes into thefirm. Can't own equity stakes in
the firm. Burford wants to getinvolved.
Burford wants to, to buy intolaw firms. And in this sense,
Burford is is operating asessentially like a private
equity firm here. In theirannouncement from this week,
Perverb alludes to the factthat, you know, law firms may be
(06:05):
gun shy about working directlywith PE firms, so they're they
might be a little morecomfortable working with a
litigation funder, just becauseof the proximity to the practice
of law that litigation fundinghas as opposed to, you know, a a
normal private equity firm orsomething along those lines. But
they are effectively you know,if they do this, they will be
acting as a as a private equitycompany. So how are they gonna
(06:27):
do it?
Why well, actually, you knowwhat? I'll I'll back up from
that for a moment. It'sreasonable to ask, you know, if
you're listening to this, whyshould anyone outside of
investors or law firm owners,care who owns law firms in
America? You know, why is this?Why who cares about this?
Right? It seems at surfacelevel, just kind of
protectionist. It seems atsurface level, just a way for
(06:51):
lawyers to protect their ownmargins and to keep outside
investors out. And all that is,like, a fair critique and
probably at least a little bittrue. However, the there's a lot
of other reasons that are kindof below the surface.
For example, in some of thetreatises that I was looking
back to of, you know, from ahundred and, years ago or
(07:15):
whatever, they point out thenatural conflicts that would
arise in situations like thiswhere, outside investors who are
involved in with the firm,they're not bound by the ethical
canon. They're not bound by theethical rules that lawyers are.
Danessa Watkins (07:29):
That was the first thing that came to mind
for me.
Jack Sanker (07:30):
Yeah. Yeah. They're not they're not bound by those
things. So, you know, theycannot be punished by the state
ethics board. They cannot bedisciplined by your state
supreme court for violatingdifferent ethical issues that we
all have to constantly beworrying about.
It's kind of our,
Danessa Watkins (07:45):
you know, our like money coming in and what
what type of account can you putclient money in and you can't
commingle it and, like, justjust the most basic stuff.
Jack Sanker (07:56):
Yeah. It it's our, like, mental overhead for
practicing law is the theseethical compliance things, you
know, that make it morecomplicated to run a law firm
than it does than it is to runother types of businesses. And
and in certain instances, makesit less can make it less
profitable. Not that lawyersdon't make a lot of money. Don't
get me wrong here.
But, you know, if you're just anoutside investor who buys into
(08:18):
something, know, all you careabout is a return on your
investment. That's it. And ifyou have a a stake in the
company or maybe if you have acontrolling stake in the
company, right, you can leveragethat through the fact that you
own it to try to influencebusiness practices towards, you
know, getting greater returns,which can be in conflict with
these ethics rules. If you havea client that you know? And and,
(08:41):
again, not that law firms aren'tbusinesses.
And we if we have nonpayingclients, you know, we don't like
that. If we have you know, ifthere's a business aspect of
representing someone that is notgreat for us, we're we try to
get away from that type ofthing. You know, we're not
working for free for the mostpart outside of some pro bono
work. However, I I if I have aclient who I, for one reason or
(09:07):
another, is difficult to dealwith financially, I can't just
drop them. It's it's not thatsimple.
And any lawyer has been in thisposition, by the way, knows
exactly what I'm talking Youhave to, you kinda have to let
them go in such a way that won'tprejudice their rights as a
litigant or as a client, whichcan mean you stick in the case
for months while you try to
Danessa Watkins (09:29):
Yeah. If it's active litigation, you need
court approval.
Jack Sanker (09:32):
Yeah. If it's active litigation, you need
court approval. But even beyondthat, if it's if it's, which
means, by the way, folks, youhave to file a motion for, leave
to withdraw and ask a judge ifyou can terminate your
relationship with the client.And the judge can say no. And
I've had this happen to mebefore.
And I've had the judge say nobecause my client was indigent,
(09:54):
because my client could not pay,because that effectively, the
court's saying, well, if theycan't have you, then they're not
gonna hire another lawyer, andthey're gonna be screwed. And so
you're gonna have to figure thisout among yourselves. In the
meantime, you have to proceedwith the litigation. You have to
proceed with representing them,and you have to do so in
accordance with your ethicalrules, which means you have to
do a good job. So all thesethings, you know, you can
(10:16):
imagine would come into conflictwith someone who's just purely
interested in in return oninvestment.
Right? That's that's kind of aneasy one to point out.
Danessa Watkins (10:25):
Thinking too, and I don't know if you're gonna
get to this, but discovery. So,you know, how many times have
you had a case where, shoot, whydid you send that email client?
We have to turn that over. Like,I have zero basis to not turn
this over. It hurts our case,but we gotta deal with it.
I I could see that being anissue if, you're not bound by
(10:46):
those ethical obligations andyou just dollar interest in the
case outcome.
Jack Sanker (10:52):
Yeah. And, I mean, there's a million things you
could think about hypotheticallytoo. Like, if, say, if, you
know, if we open up our doors tooutside investors and we were
allowed to do so, and what if,you know, someone buys a
controlling stake in AmundsenDavis and then says, you know
what, guys? We actually own thisother company over here, and we
want you to sue all theircompetitors. You know?
We wanna weaponize yourabilities as attorneys to just
(11:14):
to just start, you know,increasing our market share in
other things that we're investedin.
Danessa Watkins (11:19):
You mean what the White House, Just id? Sorry.
I couldn't I was doing I'm gladI'm Sorry. Go. Get it.
Move on.
Jack Sanker (11:28):
Yes. But, you know, like, say Amazon buys a
controlling stake in RobinsonDavis, and they says, hey. You
know what, guys? We want you tojust start suing, I don't know,
Apple or whatever, all thosethings. And now they're
directing lawsuits that could befrivolous or not based on like,
you know, good faith claims orwhatever, just solely to deplete
the resources of their businesscompetitors.
(11:50):
Also creates conflicts. Yeah.Conflicts aspects as well. You
know, if PE firms are ofteninvested in multiple
enterprises, not just one at atime, you know, and you could
structure this however you want,I suppose. But now all of a
sudden, you can represent somepeople and not others based on
the ownership structure of thePE firm.
It just like, it's a Pandora'sbox of of ethical concerns. And
(12:16):
it also encourages some prettynasty behavior on behalf of the
individual attorneys who may beprioritizing the, you know,
shareholder return above theirethical obligations to the
clients and and all thosethings, which, again, let's not
be naive. I mean, there is anaspect of it's a for profit
business. There's an aspect of,you know, this where you do you
(12:36):
must make money to survive. Sothere's but it's it's strictly
confined within the each of yourstate's ethical rules.
And and then and then on top ofthat, whatever jurisdiction
you're practicing in, the thelocal courts regulate this
stuff. And then on top of that,state statutes, federal
(12:58):
statutes, and so on. So youdon't have a lot of leeway to
just do what you wanna do justto make a profit here, in the
way that you can and, you know,say finance or whatever. So
that's one of the reasons whyyou should care about this if
you're just a a normal personwho's listening to this. The
other thing I would say is, youknow and and stay with me on
(13:22):
this.
There are about 70,000,000lawsuits filed in America every
year of a country of, you know,320,000,000 people. And so
there's business disputes,payment disputes, landlord
tenant issues, car accidents,marriage, dissolutions, or
(13:43):
custody lawsuits for children,workplace safety, wage and
hours, school and education,race, gender, sexual
orientation, disability,privacy, intellectual property,
and so on. Right? And then I'mtalking about private lawsuits
that are filed in this country,70 something million of them
every year. In America everyyear, there's about 10,000,000
(14:07):
arrests that take place.
Like, 10,000,000 people getarrested every year for
violating crimes. And why doesthat matter, this conversation?
I would argue private lawsuits,private litigation is a is law
enforcement, and it is it isactually an extremely common and
(14:27):
much more common form of lawenforcement in a literal sense
of, like, enforcing the law.
Danessa Watkins (14:34):
You can keep all within the bounds.
Jack Sanker (14:37):
Yeah. Well, I mean, yeah, I mean, the there's most
laws are on the books and areleft up to private actors to
enforce is what I'm getting
Danessa Watkins (14:45):
at. Mhmm.
Jack Sanker (14:46):
Police enforce a a limited set of laws. Regulators
promulgate laws. They they draftthem, but, you know, regulators
don't arrest people or whatever.Quite a bit of law enforcement
is done by private actors,litigants who are enforcing
their rights, protecting theirrights, trying to get back
(15:10):
something they believe waswrongfully taken from them to do
one thing or another based onrights that are either granted
to them by state or federalstatute, the constitutions, or
our system of common law. So inthat context, 70,000,000 losses
versus ten ten million arrests.
And there's all sorts of othernot like, I understand, you
(15:31):
know, criminal law enforcementis not just arrests. I
understand. There's a lot moreto it than that. My point is is
that private lawsuits are a hugepart of enforcing the law in
this country and how your day today life is governed. If law
enforcement is a form ofgovernance, which it is, then so
(15:52):
is private lawsuits.
So if you're worried about thattype of thing and if you're
worried about who gets to decidehow and when laws are enforced,
in this country, I mean, youshould care a lot about, your
you local policing and how thatworks and rules around around
policing and criminal statutesand everything else. You should
(16:14):
also care about the statutesthat authorize these types of
lawsuits. You should care a lotabout the people that are
deciding and the motives of thepeople that are getting involved
in private litigation. So whichis why we have these ethical
rules to begin with when itcomes to attorneys because even
prosecuting, private lawsuits,you know, suing someone for
(16:34):
money or whatever, you as an youare considered an officer of the
court as a as an attorney. Andwith that comes all these
different responsibilities andeverything else.
And if you outsource that to anunaccountable, you know, for
profit, organization, now youhave much less control over that
system. And and I think thatthat is you know, I'm not saying
(17:01):
that I'm not being doomy andgloomy over this, but I I that's
enough. I hope I made the pointthat you have a stake in this,
and it should matter that, whoit is that's going to to decide
the ebbs and flows of of privatelawsuits in this country. It
does affect, you know, aneveryday person is kinda what
I'm getting at.
Danessa Watkins (17:21):
So So the the three I think you mentioned
three states where they do allowfor this in in some form. There
must obviously be some sort ofchecks and balances or
limitations on how that works.
Jack Sanker (17:37):
Well, not in Arizona. But Arizona's the Wild
West right now, and that's awhole another episode someday.
But Arizona in 2021 changed therules around this stuff, and and
they also changed the rulesaround fee sharing. So the one
thing you can do in Arizona, forexample, is if you wanna refer
(17:58):
someone to a law firm for, like,car accident. Right?
You can ask for a referral feefrom the lawyer. Very
interesting in Arizona that ifyou are a physician who is you
know, someone walks into yourclinic and it's like, just got
run over by a bus. You as aphysician can take a referral
fee on that. Yeah. So, like, youjust like, it's That's messy.
(18:23):
Oh, yeah.
Danessa Watkins (18:27):
Then that's the physician that's gonna be
testifying on your behalf aswell. Yeah. I see where that's
going.
Jack Sanker (18:34):
And the physician is gonna be in charge of, you
know, prescribing you whatevertreatment you need and jacking
up medical bills if any of thisworked in injury stuff, know,
jacking up the medical bills tothe point where, you know,
getting you a bunch of treatmentyou don't need because they have
a financial stake in it. It'sand so on. Like, it's you can
really entertain yourselfthinking about where this goes.
But I'll set those three Sorry.
Danessa Watkins (18:58):
Just now I'm, like, stuck on that. Like, did
we not learn from big pharma?Like, anyways, go.
Jack Sanker (19:04):
Yep. Yep. Yep. Now proponents of this type of
thing, I mean, they havearguments for it other than
just, you know, we wanna getprivate shareholders access to
this market. I mean, though,they correctly will argue that
this type of arrangement canallow for greater access, to
access to the attorneys.
It could by driving down cost.For example, if someone, it can,
(19:29):
you know, be funded by privateinvestors, then they can you
know, maybe they don't have tocharge so much from the
individual clients. It alsowould, at least according to the
to the proponents of this typeof thing, increase competition.
It's hard as an attorney tostart a law firm because you and
then what do you what do youneed to go to a bank? You know,
(19:49):
you can get you have options toget a small like, you you can
get a a line of credit or a loanfrom a bank, and that's about
it.
Whereas if you have anotherbusiness idea that's and you
wanna start a business orwhatever, you can go to friends
and family, business contacts,you know, institutionalize
investors and say, I wanna startthis business. I need operating
capital. If I give you 5%equity, would you give me some
(20:11):
startup money? Right? Everyoneelse can do that.
Lawyers can't. And so itarguably stifles competition.
Entrenched actors have a lotmore, power in local markets in
particular because of this. It'svery difficult to start from the
ground up. People do it all thetime, but it's it's, you know,
it's difficult to do so.
(20:31):
So those are kind of both sidesof the argument here as to, you
know, why this should orshouldn't be the case. But what
matters is it has not been thecase for as far back as I could
look in American history. And sowhat do how do investors such as
Burford Capital and and I youwould imagine PE firms that
(20:54):
wanna get involved, how how arethey planning to get around
this? Burford plans on doing soin what's called a management
service organization, MSO. Andthis is a model that's been
commonplace in the health careservices market, and it's kinda
where it's become kind of famousnow, where PE firms can acquire
(21:15):
health practices, which areregulated kinda similarly, but
not exactly, but similarrestrictions on, you know, where
money can go and who can ownwhat and everything else.
And what they'll do effectivelyis create an MSO, management
services organization, thatattaches itself to, like, the
law firm and can be paid asubscription fee or however you
(21:42):
wanna structure it, in in returnfor providing management
services. So, you know,accounting, finance, management,
document, etcetera, things likethat. At surface, it doesn't
sound any different than just,you know, outsourcing this stuff
to an accounting firm. Like, ifyou own a law firm, you can hire
an accounting firm to run yourbooks for you. There's nothing
wrong with that.
(22:03):
But what the way that these MSOsare different, at least in
health care, they take anownership stake in the health
care company. And in doing so,you know, they'll they they
basically stuff the equityholders of the health care firm
full money in exchange forselling some of their equity to
(22:23):
the MSO who then owns thepractice. And at that point,
they have an ownership stake inthe practice. However, it's
organized whether it's a boardor something else. They also get
to start making managementdecisions about how the company
gets run.
So you hear recorder storiesabout, you know, hospitals that
get acquired by PE firms, andthey cut the staff 30% and
(22:44):
service goes way down and allthis stuff because the investors
just want the return. Andthey're like, hey. If we can
squeeze the staff a little moreand, you know, prop the margins
up, that's more for us. So doesthis seem like it might be
legal? Well, there is this MSOthing that Burford wants to try
(23:05):
out.
There is a recent decision inTexas which discusses the
potential for an MSO law firmmodel and effectively says,
yeah. Why not? You know, it'sit's, you know, you the
attorneys are still gonna beregulated within these ethical
confines. They still, are gonnahave to be, you know
(23:30):
Accountable? Yeah.
Maintain privilege with theclient and confidentiality and
all those things. And you haveto structure it in such a way as
to make sure that the MSOs, youknow, aren't getting a peek
behind the curtain as to legaldecision making and so on. But
if your compensation, either asa partial owner of the MSO,
(23:51):
partial owner of the law firm,or as an attorney of the law
firm whose compensation is nowtied up in both of these
structures one way or the other,You're gonna be asking you
you're gonna be asking thesepeople to act sometimes in their
own in their own against theirown interests by, you know,
strictly adhering to the ethicalrules at the expense of, say,
(24:13):
profit or at the expense ofinvestor return or all those
things, which happens in lawfirms all the time because we
have to because of the ethicalrules already. But you're adding
the added pressure of peoplethat are not bound by the
ethical rules to thatconsideration. And, you know, in
my opinion, everyone is movableat some point or another.
(24:35):
And attorneys that, you know,maybe weren't likely to behave
unethically before could benudged towards that if they are
tied up in one of these, youknow, organizations.
Danessa Watkins (24:48):
Primarily for plaintiffs' firms, or is the
model applicable to defensefirms too?
Jack Sanker (24:55):
I think it's it's applicable to both. I mean Okay.
Litigation funding is morecommon on the plaintiff side of
thing because you can it's
Danessa Watkins (25:01):
just payout.
Jack Sanker (25:02):
Yeah. It's just a different it's just where it
kind of more shows up. Butthere's absolutely nothing
preventing it from, you know,from, attaching itself to a
billable hour defense firm andeffectively taking a chunk of
every hour that gets billed. K.You know, that's that's how it
will get set up.
(25:24):
And so Burford doesn't have apartner for this yet, but they
announced that they're lookingfor partners to do this with.
They announced that they're theywanna do this with firms. In
Arizona, where the rules havebeen much relaxed on this type
of thing, like I mentionedbefore, there have been
instances of PE firms basicallybuying into law firms and and
just saying we're owner we ownyou now. But now we're gonna pay
you, you know, your salary andeverything else, but we
(25:45):
literally own the firm. I thinkthat debate is still ongoing as
to, you know, whether it was amistake in Arizona to do this.
You know, I I think it's early.People are testing the waters on
that structure as I understandit now. I'm not aware of any,
like, huge glaring, you know,like really, really abusive
(26:10):
setup that has resulted inpeople getting screwed or
whatever. But it's like, it'sright there. You know, you could
do it.
You could see it. You couldenvision it happening. And if
this type of thing catches offin say Texas next, and if it
catches off elsewhere, I mean,it's going to be, I mean, the
(26:33):
floodgates will open, the moneywill pour in, The margins in law
practice are higher than theyare for other types of most
other types of businesses.Right? You you you can make a
higher profit margin in lawpractice than you can running a
supermarket, for example.
So the PE firms are gonna wantthat. And if you are, by the
(26:54):
way, if you're an owner of a lawfirm, partial owner of a law
firm or whatever, and you want,you know, an exit strategy for
your ownership stake, You'd loveto be able to sell to a PE firm,
you know, and and retire, youknow, or something like that.
Right? So if you get rid ofthese rules, if you just
tomorrow, we all we snap ourfingers in all these
(27:14):
prohibitions and all 50 stateswere gone, I think you would
just see firms getting gobbledup Right. Immediately.
And because everyone would wantin at that point. The money
wants in, and the money wouldhave been trying to get in for
the last hundred and fifty yearsand just has not been able to.
So that's why it's a little, youknow, it's like tweaking the law
(27:35):
here and changing things there.There is like a pent up demand
for this type of investmentopportunity that is just gonna
be massive. And, you know, legalservices industry in The United
States is is billions andbillions of dollars.
People are gonna want to wettheir beak with that. So this
announcement by Burford thatthey're openly looking to do
(27:57):
this, and they're gonna test outthis MSO model as soon as they
get someone who was willing todo it, which someone will
because the reasons I mentioned,people are I'm sure there's a
lot of folks that are justlooking for a buyout. It it
could fundamentally change theway that the law is, you know,
enforced. I I will stick to thatthesis of, you know, private
(28:20):
lawsuits being law enforcement.And, you know, I'm not here to,
like, you know, to to be shrillabout private private private
equity firms ruin everything andso on.
You see those takes, you know,or whatever. But there's a lot
of horror stories about PE firmsacquiring companies and running
them into the ground. Know,like, that that happens, because
(28:41):
they extract whatever value theycan, and then they, you know,
they they toss it aside. I mean,I remember when I was a kid, I
remember it was a big deal inthe I wasn't, I wasn't a kid. I
was a young person, I suppose.
But do you remember, the twentytwelve election, Mitt Romney,
(29:01):
who worked for Bain Capital PEfirm and was famously you know,
Bain Capital was, I believe, thePE firm that, bought out, Toys R
Us and and, like, stripped itdown, loaded it up with debt,
and then basically paidthemselves management fees. And
(29:22):
if you're listening, BainCapital, I'm saying all this
hypothetical. I've not factchecked this. I'm, speculating.
This is all a joke.
But they, it eventually resultedin in Toys R Us going bankrupt
while Bank Capital made moneyoff their investment. So there's
(29:43):
lot of horror stories about PEinvestment in private industry.
Whether that would happen to lawfirms or not, it's hard to say.
But the point is is this werethis to catch on and it might
catch on would be a prettyseismic change in the way that
law firms are run and theincentive structures for
pursuing litigation and filingclaims and know, suing people or
(30:03):
not suing people based on, youknow, all these things. And it's
it's been very interesting tosee how the different states
react to this.
Think it's gonna be a state bystate thing and whether they can
resist the, you know, tsunami ofcash that will come pouring in
(30:24):
if if it gets cracked open.
Danessa Watkins (30:27):
Mhmm. Yeah. Super interesting. Yeah. And
there's definitely a lot oflayers to it.
I can't imagine it's gonna besomething that catches, like,
wildfire. I think, obviously,each state is gonna have
different concerns about it. Youknow? But I wonder so, of
course, this is me as a defenseattorney. I feel like it's too
(30:50):
easy to file a lawsuit and, youknow, we drag people through
litigation on on meritlessthings, and it's just a drain on
on
Jack Sanker (31:00):
70,000,000. You know? I'm sorry? 70,000,000
lawsuits.
Danessa Watkins (31:04):
Right. Right. But so, yeah, my what I'm
interested in is whether thiswould improve the quality of the
lawsuits that get filed and, youknow, cut out some of the BS
ones or if it would do theopposite and we'd have more
litigation filed because, youknow, people who couldn't
previously afford it orsomething. I don't know.
Jack Sanker (31:24):
I think you're gonna see it improve. I think
you're gonna see more. Yeah. Imean, this because the the you
know, the one of the reasons whyfrivolous lawsuits get you know,
truly frivolous lawsuits aren'tbrought is because the cost of
doing it. And it's not a lot ofmoney to file a complaint.
Filing a complaint is usually acouple $100. So anyone can do
(31:46):
that. Right? But, you know,everything else associated with
it, if you go far enough,discovery, etcetera, if you're
paying for a lawyer. If you'repro se, it's cheaper, but it,
it's your time that you're usingthere.
These bigger firms could talkthemselves into or these bigger
like, investment firms couldtalk themselves into, oh, let's
(32:07):
just make every complaint AIgenerated. Let's automate just
discovery. Let's just, like,ruthlessly enforce, like,
efficiency and KPI metrics andall those things and, like,
drive the cost down, whichpeople will say is good for
access. It allows people to getlawyers more cheaply. It also
means more litigation.
It means more lawsuits arefiled. So, you know, for every
(32:30):
71,000,000 of these lawsuits,some person is served with a,
you know, a process summons anda complaint and says you've been
named in a lawsuit for, andthat's, like, not a great
feeling, I would imagine. So,yeah, I mean, I I think you
would see, if anything, morelitigation.
Danessa Watkins (32:51):
Well, let's hope that maybe Arizona will be
the guinea pig, and Illinoiswill hold off for a while and
and see how that plays out.
Jack Sanker (32:58):
Yeah. Yeah. Like I said, that's a whole another can
of worms. Maybe we'll cover thatin the future, but that's you
know? Yeah.
Yeah. This will be interesting.We'll we'll circle back if if
Burford ever announces apartnership and find someone to
do this with, and we'll leteveryone know.
Danessa Watkins (33:20):
I think the separation of church and state
is one of those, you know, areasthat we've just known exists,
and it's it's a bedrockprinciple of our democracy, yada
yada yada. Well, that'spotentially about to be flipped
on its head. We now have a thirdstate in the last I think it's a
(33:45):
year, year and a half that hastried to pass or has actually
enacted bills that would notjust allow but require
publishing the 10 commandmentsin public schools. Now the
latest one has come out ofTexas. So on 06/20/2025, the
governor, Greg Abbott, signedsenate bill 10, which provides
(34:09):
that every public elementary andsecondary school in the state
shall display in a conspicuousplace in each classroom of the
school, a durable poster orframed copy of the 10
commandments.
Jack Sanker (34:23):
Shall display.
Very interesting.
Danessa Watkins (34:25):
Shall, Shall display
Jack Sanker (34:27):
Not is permitted to display.
Danessa Watkins (34:28):
No. Shall display. I mean, the nuances of
this bill are extensive, almostto the point of, like, why
wouldn't you dial back a littlebit, you know, and and maybe
give a chance for this to to gothrough? But no. It's it's
pretty extensive.
So they provide the size of theposter, has to be at least 16
(34:53):
inches by 20 inches in size, ina size and typeface that is
legible to a person with averagevision from anywhere in the
classroom have to be uppermanently all year round in
every single classroom toaccount for, for example, high
school students who may changerooms throughout the day. Boy.
(35:14):
And they specify the exactversion of the 10 commandments
that have to be published, whichI I guess, admittedly, I didn't
realize that there weredifferent iterations of it. So
that tells you all you need toknow about me. I
Jack Sanker (35:33):
I was a religious studies major in college among I
think I was a history major aswell. So there's, like, the
competing translations of
different parts of
the Old Testament is is, like, avery nerdy thing that I could
talk about, but I won't.
Danessa Watkins (35:46):
Well, it's I mean, it's laid out in in this
court case pretty detailed, soit's probably a refresher for
you. But yeah. So this was andand it's full from as early as
kindergarten all the way throughhigh school. So any public
school has to display this, andit was set to go into effect on
(36:10):
September 1. But within, let'ssee, about two weeks of the bill
being passed, there was alawsuit filed in federal
district court by a number ofparents on behalf of their
children suing various schooldistricts seeking declaratory
(36:32):
and injunctive relief.
Now their arguments here arethat, well, their claims
actually are brought under thefree exercise clause and the
First Amendment. So under theFirst Amendment, they're saying
that this is an obvious rulethat favors religious scripture.
(36:55):
It's adopting an officialposition on religious matters,
violating the establishmentclauses prohibition against the
government taking sides ontheological doctrine. Government
may not officially prefer onereligious denomination over
another. And then under theFirst Amendment violates the
(37:20):
provision that congress shallmake no law prohibiting the free
exercise of religion.
Jack Sanker (37:25):
I was gonna ask, is there any it's just the 10
commandments? There's no even,like, you know, and let's put
the Quran up, and let's put theit's just 10 commandments.
Danessa Watkins (37:34):
Just the 10 commandments and just this
specific version of them. So thethe plaintiffs in this case are
from all different religiousbackgrounds, including including
certain Jewish and Catholicsthat are saying this these are
not the 10 commandments that wethat we practice. So, obviously,
(37:58):
they brought some veryinteresting arguments in their
complaints. And the judge who'soverseeing this, let me give him
some credit here. This is out ofthe Western District Of Texas,
and it's judge Fred Beery, b I er y.
He wrote a 55 page legal poetryopinion in response to motions
(38:24):
to dismiss this case. And I saylegal poetry because, Jack, you
would appreciate this. Heliterally goes through, like,
the history of
Jack Sanker (38:33):
Oh, let's go. I gotta read this.
Danessa Watkins (38:35):
Great. Yeah. Of separating, you know, state and
religion. And on one page, Ijust marked a couple pages that
I was like, wow. On one page, hesays, government and religion
joining hands.
One picture from the modern eraspeaks silently and poignantly
(38:55):
of the danger of majoritariangovernment and religion joining
hands. Excuse me. And then it'sa picture of Adolf Hitler
greeting a bishop at one of therallies in 1934. Goes through
American history, specificallydating back as far as a speech
(39:17):
that Ulysses S. Grant gave in1875, where he says, leave the
matter of religion to the familyaltar, the church and the
private school supportedentirely by private
contribution, keep the churchand stay forever separate.
Then fast forward to 1963,Reverend Billy Graham gave this
(39:37):
quote, 80% of the Americanpeople want Bible readings and
prayer in the schools. Whyshould the majority be so
severely penalized by theprotests of a handful? And then
the judge puts in parenthesesunder it, with all due respect,
Reverend Graham, it's the 20%who are protected by the Bill of
Rights. Correct. Yep.
(39:59):
Yep. He goes into so the testfor the establishment clause in
particular, it's actually influx right now. So the former
test, which came down forty fiveyears ago when the Supreme Court
(40:22):
determined that this is Stone v.Graham, It was a five court
opinion and they adopted theLemon test where you look to
whether a statute has a secularpurpose, whether the statute
could or could not promote orrestrict religious beliefs or
practices, and then whether itfosters excessive church state
(40:45):
entanglement, which, you know,how complex of an inquiry is
that. But that lemon test justrecently was rejected by our
current Supreme Court.
And it now looks like we'regoing to start going back to
the, you know, what historicallyhas been, yeah I know,
Jack Sanker: We covered that, I think in detail in a prior episode, I will check (41:22):
undefined
with my producer and let you allknow at the end of this.
Danessa Watkins (41:25):
Yeah. So they're they're throwing out
these, like, balancinginterests, and now judges are
instructed to consider historyand the understanding of the
founding fathers when dealingwith the establishment clause.
So the now that that decisionwas not specific to a 10
(41:46):
commandments case. So there issome question as to whether the
the lower district courts,whether they need to follow
precedent from,
you know, however long ago,which says, clearly, the the 10
commandments cannot be publishedin a public school. But now
(42:07):
there's this question where andI think that's why these states
are now three of them havepassed these bills because
they're like, let's test thewaters. Yeah. You know? Maybe we
can show that historically, thefounding fathers didn't intend
for the establishment clause tobe read this way.
And maybe they wanted to leaveit up to the states to make
(42:28):
decisions. So that's why I thinkthis judge took the time to go
back through history andactually lay that foundation of,
you know, let's see how this hasbeen debated over the years.
Jack Sanker (42:43):
Separation for the supreme court
Danessa Watkins (42:44):
Yeah. For sure.
Jack Sanker (42:45):
Applying their nonsense history and tradition
test to the ruling.
Danessa Watkins (42:49):
Right. So the other two states that have
recently dealt with this issue,one of them was Louisiana, and
that one, it was almost asimilar similar statute to what
Texas tried to pass. But the theFederal District Court in
(43:10):
Louisiana said, you know, thisviolates the First Amendment.
That went up to the FederalAppellate Court there, which is
the Fifth Circuit, which isknown for being one of the more
conservative circuits. And theyactually they upheld the the
injunction on requiring schoolsto to post the 10 Commandments.
So this district judge in Texaskind of followed that lead and
(43:33):
said, actually, I think hepulled from one of the
historical experts that waspresented in that case, who
said, if we look back at whatwas going on in the founding,
there were not public schools.So, you know, so this whole
argument that, you know, thatthe founding fathers would have
(43:56):
allowed this, well, we can't saythat because there weren't even
public schools at the time. Andthen when finally we have a
public school and there was anattempt to to make this
requirement that the 10commandments be be posted, that
was North Dakota in 1927, andthe court, like, immediately
(44:16):
struck struck it down under theestablishment clause. So, you
know, it's it wasn't that likewhat less than a hundred years
ago was the first time that thisissue arose, and it was a no
questions asked. So then onepart that I found really
interesting about this decisionis we have to, and we've talked
(44:36):
about this before too, with theFirst Amendment, you have to
look at the cohort, right?
Like what age group are wetalking about? Because different
rules may apply to differentages, especially when it comes
to these issues of freedom ofspeech and freedom of religion.
And this judge looked at thecoercion tactics that can
(44:57):
happen, especially when you'retalking about like elementary
school kids and you're talkingabout peer pressure. And maybe
at home, parents are saying, youknow, we follow this religion or
we don't follow a religion andwe don't believe in religion.
And yet they come to school andthey're forced to, you know,
look at this poster every day.
(45:19):
Questions may come up duringclass. Well, what does that line
mean, teacher? And, you know,it's just you're these kids
Yeah. I mean, the kids aresponges at this age, and they're
more likely to be afraid to goagainst the norm. And and, I
mean, you're in school, but themajority of your day, you know,
(45:41):
versus in your home.
Jack Sanker (45:42):
So Yeah. I mean, there's and there's I'm sure
that the lawsuit in particularwas brought on. There's the free
exercise element of it, and thenthere's the establishment clause
element of it. So it's theindividual rights of American
citizens to have the right tofreely exercise their religion,
which may include not beinginstructed by another religion.
(46:05):
In fact, I think that's mostreligions.
That's kind of the whole deal.And so, you know, if you send
your, you know, Jewish or Muslimor Sikh child to school, they
should not be instructed on, Iwould guess, some type of weird
Protestantism, but yeah. Okay.
Anyways Yeah. And
(46:27):
then there's the establishmentclause, which, you know,
directly we think says thegovernment shall establish no
specific faith as, you know,official faith in
the United States
Danessa Watkins (46:40):
Right, yeah. So, I mean, that yeah. That's
and that's where the coercioncomes in. Right? So so the the
attorneys for these schooldistricts, they tried to say,
well, no.
Look. We're looking at thehistory. So, you know, Texas has
a history of I don't evenhonestly, I can't even repeat
(47:02):
their documents because it justdidn't stick in my head. But
Jack Sanker (47:06):
I hope the listeners feel me rolling my
eyes through the audio.
Danessa Watkins (47:10):
Well, so yeah. So they're they're trying to
say, look, this isn't about,yeah, this isn't about religion.
This isn't about coercion. We'rejust trying to appreciate the
traditions of our great state.And the judge then goes on for,
I think, two, three pagesquoting the the legislative
(47:35):
hearings on this where, youknow, you're introducing the
bill and discussing the bill.
So before it got passed, and hequotes, so in support of senate
bill 10, the lieutenant governorstated, quote, in every
classroom in Texas, students aregoing to see the 10
commandments, and they are gonnaknow about god, end quote. Then
in the next sentence, supervisorand author said, we want every
(47:59):
kid kindergarten through 12,every day in every classroom
they sit in to look on the walland read those words that God
says because we want them tounderstand how important those
statements of God, those rulesof God are, that they see them
in their classroom every day oftheir public education. I mean,
just like these thesestatements, it's like you're
literally talking about the onegod and that the students should
(48:23):
appreciate the one like, I just,it blows my mind that they even
tried to make that argumentknowing the legislative history
of this bill.
Jack Sanker (48:30):
Yeah. I I mean yeah. And, you know, the this
this argument's, like, as old asas you can as you wanna make it.
I mean, it's people have beenbickering about this for
forever. The founding fathers,you know, they were religious or
or at least, you know, the onesthat you wanna pick out were
religious.
Therefore, they obviouslyfounded this nation as a, you
(48:52):
know, religious nation in theirimage of their faith in
particular particular orwhatever. People have been
saying that for I mean, Iremember that we covered you
cover this like your first yearof law school, it's like, hey.
You can't do this. I I wouldnote that many of the founders
would be rolling in their gravesif they knew that Texas was
publishing the King Jamesversion of the 10 commandments,
(49:15):
which I did check. And if this
Danessa Watkins (49:17):
Oh, you got it? Okay. Yeah.
Jack Sanker (49:18):
Yeah. This this Anglican nonsense is being
forced on our young Americanchildren. Get out of here with
this.
Danessa Watkins (49:24):
Right. Right. So funny. Yeah. Then, yeah, he
just concludes with it's justsaying, like, most people want
their matters of faith.
They wanna be left alone when itcomes to what their religious
beliefs are. And he raises agood point. He says, even though
(49:46):
the 10 commandments would not beaffirmatively taught, the
captive audience of studentslikely would have questions
which teachers would feelcompelled to answer. That is
what they do. Teenage boys beingthe curious, hormonally driven
creatures they are might ask,missus Walker, I know about
lying and I love my parents, buthow do I do adultery?
Truly an awkward moment foroverworked and underpaid
(50:08):
educators who already have todeal with sex education issues.
And then he he says, you know,here's some here's some other
ways we can try to, like,publish, like, alternatives to,
you know, religious rancor,essentially, and then gives,
(50:29):
like, percepts of Buddhism,abstain from killing, stealing,
and engaging in sexualmisconduct, or do unto others as
you would have them do unto you.Be kind, be respectful. It's
just showing, like, there areways to, you know, teach kids
how to be good humans withoutcrossing the line into into
(50:49):
religious territory. So Ithought, I mean, if anyone's
interested in this stuff, thisopinion that came down
yesterday, so 08/20/2025 in theWestern District Of Texas is
truly legal poetry.
It's a history lesson. It's justa great work of art and that he
(51:10):
he knew this was gonna be, youknow, something that's talked
about and he the judge took thetime to to really put out there,
you know, what he thinksultimately the Supreme Court
should be considering when itdecides this this issue.
Jack Sanker (51:24):
Yeah. I mean, I'm willing to bet if you did a Venn
diagram of people who, you know,want this bill and want the 10
commandments in the classroom,one circle. Then the other
circle is people who are, youknow, scared to death of people
implementing Sharia law.
(51:46):
and you know, I think that'slike the the boogeyman in
politics or whatever. Sharila,if you the Venn diagram of those
two things are is just onecircle.
Danessa Watkins (51:55):
Yep. Yep. So not surprisingly, within 24
hours, this was appealed. Sowe'll see what the
Jack Sanker (52:06):
Fifth Circuit.
Danessa Watkins (52:07):
Oh, fifth. Oh, okay. So they had to follow the
the Fifth Circuit's decision inthe Louisiana case. Okay. That
makes sense why they relied onit so heavily.
So, yeah, I mean, at some point,this is gonna go up, I would
say. And there's a lot of, youknow, talk about, again, why
(52:33):
would why would these states bebe challenging? What's been such
a clear ruling for decades? Andand, you know, it's pretty
obvious. Look at the court wehave right now and the precedent
that's being overturned sessionafter session.
So if there was ever a time toto challenge what we've always
(52:53):
known and accepted, you know,this is, I guess, the time to do
it.
Jack Sanker (53:00):
So I guess it, you know, remains to be seen. It's
interesting. I mean, I you know,we're not, like, a court
watching show. We don't, like,do supreme court predictions.
That said, I don't expect thatthis would survive at this at
SCOTUS, even, you know, with itspolitical leanings and
(53:23):
everything else, because it doesseem I mean, it strikes me as
such a slam dunk.
That's why I asked at thebeginning if there were any
other religious things that werealso being included in this
because if I remember, one ofthe ways that, you know, if
you're gonna display the 10commandments, then you can, like
if you're also displaying,I don't know, some some equal
(53:46):
representation of worldreligions or something like
that, then at least you couldargue it's, like, being
neutrally presented withoutfavoritism towards one side or
the other. So you might get aruling that, like, relaxes those
standards. You might mean, thecourt thing the is even if the
court rules against this, itcould still say it could still
weaken the free exercisejurisprudence by applying its
(54:07):
history and tradition test.Right. Which I I honestly would
expect is the point of this typeof legislation, the folks that
are involved in this from Texasought to know that it's the the
that the the the statute itselfis gonna be unconstitutional.
However, they in that ruling,they could pry open the the
(54:34):
rules around other things thatthey would wanna do and which
would, you give them leeway todo something different just by
virtue of the Supreme Courtsaying, hey. We're gonna
overturn the the test that weapply to this type of thing.
We're gonna still rule that it'sunconstitutional, but for for
these other reasons. And thenTexas gets to do, you know,
(54:54):
whatever it wants to do based onthat.
Danessa Watkins (54:56):
Yeah. That's a good point. And I wouldn't be
completely surprised if it if itdid have something to do with
the the, like, the the location,you know, the the government
owned location of where religioncan be displayed, I guess.
(55:18):
Because I did find there was aconcurring opinion by justice
Breyer in a tenement was it 10Commandments public school case
that was up about ten years ago,and he did make mention that the
display of the 10 Commandmentsin public schools must clear a
higher legal bar giving theimpressionability of the young.
(55:42):
So that may be what, you know,they're trying to do.
Maybe, in fact, they're notlooking to looking or or they
knew, you know, that this wasgoing to be struck down, but
they're actually trying to havemore ability to push religious
ideology in other public spaces.This was just such an extreme
(56:04):
that it'll I think, like yousaid, like, maybe it'll cause
the judges to lessen the rulesof the establishment clause, I
guess, a little bit. Butapparently, it's it's, you know,
these sort of things arehappening across the country. So
I was just curious of what, ifanything, was happening in
Illinois. And I did find arecent situation in Jefferson
(56:25):
County, Illinois fromJuly of this year where a 10
commandments monument wasdisplayed on the lawn of the
county courthouse.
Jack Sanker (56:35):
They keep doing this crap, man. It's it's I'm
not, like, I'm not perspiringanyone who, like, wants to,
like, be, you know, like,religion or not, whatever. It's
just, that issue in particular,the the ten commandments on the
steps of the courthouse, how youlook into the ground in this
country. It's, like, many, many,many cases of this. And so,
like, if you're doing it, youeither just you were born
(56:56):
yesterday and didn't knowanything about it, or you're
deliberately trying to provoke aresponse.
And and that's, like, thefrustrating thing is, like, this
is settled law. Mhmm. You know?And and and, I guess until it's
not.
Danessa Watkins (57:10):
Right. Well, I mean yeah. And that one in
particular was a little bitsilly and seemed like a waste of
potentially taxpayer moniesbecause, of course, it was a
lawsuit immediately. And thenthe the county within, like,
days said, alright, we're gonnaremove it, and then they moved
it to like a church locationinstead. So, you know, but
(57:33):
again, I think this is just it'sone of those times where the
what we think are the bedrockprinciples and, you know, what
we think is the sound law of theconstitution and interpretation
of the constitution is justbeing challenged and, you know,
the needle is getting pushed.
So interesting slash scary time.But
Jack Sanker (58:01):
It it will be yeah. I I again, not to get I'm not in
the market of, like, predictionsfor this type of thing, but I
would suspect that SupremeCourt, if they take it and they
may not. I they might just sayyou know, I might deny cert and
just say, you know, we're gonnastick with the lower court's
ruling. But if they did, itwould be for the opportunity to
do away with some of the morestrenuous First Amendment
(58:24):
jurisprudence as it relates tothis type of thing while still
finding this underlying statuteis unconstitutional. That's how
I would expect it to go.
Danessa Watkins (58:31):
Mhmm. Mhmm. Yep. Okay. Well, that is our
show.
Thank you for tuning in. You cancatch us hopefully every two
weeks now that we're gettingback into this. We'll get
running again here, butLitigation Nation is on Apple,
Spotify, YouTube, wherever youget your podcast. Thanks for
(58:54):
tuning in. We'll see you next
Jack Sanker (58:55):
time.
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