ALF in Commercial and International Disputes
Scholars have noted that there are “three primary kinds of [alternative litigation financing (“ALF”)] companies currently operating in the market: (1) companies that finance consumers with legal claims; (2) companies that finance larger plaintiff-side commercial claims (‘business-against-business’ lawsuits); and (3) companies that provide funding to plaintiffs’ law firms.” David Tyler Adams, “Laissez Fair: The Case for Alternative Litigation Funding and Assignment of Lawsuit Proceeds in Georgia”, 49 Ga. L. Rev. 1121, 1126 (Summer 2015), citing Steven Garber, Alternative Litigation Financing in the United States: Issues, Knowns, and Unknowns 1 (2010) available at http://www.rand.org/pubs/occasional_pape rs/OP306.html.
While ALF is generally viewed as funding plaintiffs involved in personal injury tort lawsuits, some ALF companies in the United States now focus their funding on large-scale commercial litigation and international disputes. Michelle Boardman, “Insurers Defend and Third Parties Fund: A Comparison of Litigation Participation”, 8 J.L. Econ. & Pol’y 673, 676-77 (2012). Observers have noted the significant role for ALF in these markets. According to one article, while “[t]he market for lawsuit investment is already quite large in Australia, the U.K., and the U.S., [] it is poised for growth worldwide.” Cassandra Burke Robertson, “The Impact of Third-Party Financing on Transnational Litigation”, 44 Case W. Res. J. Int’l L. 159 (2011).
In addition to providing funding, scholars have noted that companies providing ALF “also serve to provide [] [litigation] expertise” in developing venues, including arbitration. Id.
To finance this expanding market, ALF companies are in turn increasingly being funded by banks. While conventional banks do not loan funds to litigants whose only source of collateral consists of the potential proceeds from a lawsuit, some banks – including Citigroup, Commerce Bank of New Jersey, and Credit Suisse have all provided funding to LFCs — do finance ALF companies. Binyamin Appelbaum, “Investors Put Money on Lawsuits to Get Payouts”, N.Y. Times, Nov. 14, (2010) http://www.nytimes.com/2010/11/15/business/15lawsuit.html?pagew anted=all&_r=0.
For further information, please feel free to contact Roni A. Elias, who leads the litigation finance team at TownCenter Partners, LLC, a boutique litigation funding company that funds plaintiffs and plaintiffs’ law firms nationwide. TownCenter Partners, LLC is a litigation funder with a social mission and continues to level the playing field in litigation. Mr. Elias can be reached at roni@yourtcp.com or (703) 570-5264. © 2018 Roni A. Elias. All rights reserved.
Topics: Litigation finance, portfolio financing, portfolio funding, third-party funding, alternative litigation finance, commercial, banks, international.
