The prospectus looks like any common, run-of-the-mill stock offering. But the investment offer is one of the most unusual ever filed with the Securities and Exchange Commission: a chance to buy shares in a multi-million-dollar lawsuit.
It is designed to raise money to cover the high cost of the suit, such as getting expert witnesses, paying for transcripts of pretrial statments and hiring assistants to the lawyer.
As such, it is a unique effort to solve one of the major problems facing middle income Americans who want to take a case, especially one involving a major corporation, to court - the high cost of going to trial.
These costs can mount into the thousands of dollars, even when the lawyer takes a case on a contingency fee basis, which means he gets paid a percentage only if he wins. Transcripts by court reporters, for example, can cost as much as 90 cents a page.
"We want to open up access to the courts," said Carl E. Person, the New York lawyer who came up with the idea of selling stock to finace the suit his client, Brooklyn inventor Christian Thee, has filed against Parker Brothers Inc. charging the company stole his idea for a game.
"There has to be ways made so the average person has recourse to the courts," added Thee. He is a 43-year-old self-employed painter, designer and Part-time developer of games, whose income would not allow him to pursue an expensive lawsuit without help.
He is seeking $32 million in damages.
While Person said he cannot estimate the cost of the lawsuit, the detailed submission to the SEC indicated it could run to between $20,000 and $30,000 a year - not including his legal fees. This figure includes $13,000 for a paralegal aide; $3,000 a year for computer services, and secretarial and proofreading expenses that would be charged at the average rate of major law firm in New York City. There would be a first year expense of close of $10,000 to cover the cost of selling stock in the lawsuit.
The stock offering appears perfectly legal. It was registered with the SEC's New York office two years ago, but an official here said, "I've never heard of anything like it."
It has received limited approval from the ethics committee of the Bar Association of the City of New York. "We didn't find anything inherently unethical. There is nothing in the concept itself that is an inherent conflict with the Code of Professional Responsibility," said Meredith Brown, chairman of the city bar's professional ethics committee.
But the stock offering failing to win investor approval. Person said the only people willing to invest wanted just one or two shares-probably for their curiosity value-while the stock offering said shares are sold only in lots of 100.
Nonetheless, the lack of public response didn't daunt Person and Thee. "It was quite a stroke of genius on Carl's part," said Thee, "I do believe it is a step forward in making it possible for the average consumer to have some sort of leverage in the courts."
Person, al 962 Harvard Law School graduate and former attorney with a major Wall Steeet law firm, now spends his life trying to make it easier for small businesses to take cases to court. He especially likes the notion of selling stock in lawsuits because, he said, "I'm using capitalism to check the excesses of capitalism."
He favors small business and capitalism, and although many of his proposals appear consumer-oriented he wrinkles up his nose at the mention of Ralph Nader. While he does have a law practice, he earns most of his money training people for the growing field of assisting lawyers asparalegals.
Person wanted to sell $500,000 worth of stock in the lawsuit - 100,000 shares at $5 each. The investors would get 25 percent a year on their money if he wins the suit. He said the investor would be paid before he gets his legal fees - 35 percent of any award - or Thee gets his money.
If he loses, he said, they will most likely get their original investment back, but they would not have earned any interest.
His plan, as described in an interview in his lower Manhattan office and in the offering circular filed with the SEC, calls for his investing the money gained from the stock sale in government bonds. He would use the interest from those bonds - estimated at about $30,000 a year if the entire 100,000 shares were sold - to finance the law suit.
"Do you know what $30,000 can do in paying of the out-of-pocket expenses of litigation?" he said. "If I can get that covered, I don't mind the expense of my time.
"If every suit could have $10,000 a year in expenses covered, we'd be off and running,"he continued.
In this suit, Thee charges that Parker Brothers - a major marketer of games, including the perennial best seller, Monopoial best seller, Monopo ly, which is now owned by General Mills-stole his idea for a game involving the buying and selling of art by players who move pieces around a board. Thee called his game Articrat and Artifax, and tried to sell to Parkers Brothers up until 1969.
One year after Thee submitted his idea to Parker Brothers for the last time, he charges the ocompany came out with a similar game called Masterpiece, which it said was developed by a Chicago company called Marvin glass & Associates.
There are now two suits pending, one in U.S. District Court in Brooklyn against Parker Brothers and General Mills and the other in U.S. Districk Court in Chicago against Marvin Glass & Assoicates.
Person said one reason Thee hired him is that one of his legal specialities is in the field of theft of ideas.