How Litigation Finance Can Help Lawyers and Law Firms

Discussions of the benefits of litigation finance usually focus on why funding from third parties can help clients, but there are significant benefits to lawyers and law firms as well.  At first glance, a lawyer may feel reluctant to work with a third-party funder, even if the client is eager for help in financing the case.  But a closer look at litigation funding reveals that it offers several significant advantages for building a better law practice.

Litigation Funding Increases Demand for Legal Services
It stands to reason that all lawyers will have more business if there are more parties pursuing legal claims.  Of course, this is true for both plaintiff and defense lawyers.  To the extent that litigation funding makes it possible for more claimants to think about going to court to assert their rights, all lawyers will benefit.

Litigation Funding Improves Case Selection
When a client initially contacts a lawyer about her case, the lawyer must consider both the legal and economic prospects for the representation.  In many respects, the question whether a case has economic value can be even more important than the question whether the case is on sound legal footing.  After all, if the case is unlikely to generate a meaningful return for the client, it won’t make sense for either the client or the lawyer to pursue the case.

Even the most experienced lawyers may sometimes feel uncertain in making an economic valuation.  But that is where a third-party litigation funder can help.  Because it is their business to assess the economic value of a legal claim, third-party funders have very extensive experience of their own and, perhaps even more importantly, most of them draw on sophisticated data analysis of legal claims across the nation and around the world.  If a litigation funder thinks a case is worth something, a lawyer can feel more confident in her judgment that the case has value for everyone with an interest in it.

Litigation Funding Arrests Downward Pressure on Legal Fees
The increasing competition among lawyers for clients, and clients’ increasing aggressiveness in negotiating fee concessions has created a market dynamic that pushes legal fees down.  Litigation funding actually can serve as a counterforce to this downward pressure.  If a client can obtain third-party funding to pay for litigation costs, the client’s urgency to save money on fees is diminished.  Moreover, as long as funders are receiving their desired return from the case, they don’t have a vested interest in making a reduced hourly rate a condition of the litigation financing agreement.  In short, by removing the time pressure from paying for litigation costs, third-party funding removes much of the incentive for clients to demand fee discounts from their attorneys.

Topics:  litigation finance, legal reform, third-party funding, litigation costs, legal costs, law practice development, economics of law practice

Works Cited:

Chris Smith, Litigation Funding: A Driver for Law Firm Growth? Global Legal Post (July 17, 2014) available at http://www.globallegalpost.com/blogs/management-speak/litigation-funding-a-driver-for-law-firm-growth-92561975/

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