ALF Increasingly Extends to Portfolio Financing
The emergence of “portfolio financing” is perhaps the defining recent trend in alternative litigation financing (“ALF”). Indeed, some litigation financing companies are now investing less than 15% of their litigation investment portfolios in single-case deals.
ALF historically was employed principally for class actions and individual personal injury cases. Today, commercial litigation is increasingly the focus of ALF. Portfolio financing is a critical element of this evolution.
Portfolio financing allows attorneys – both individuals and firms – to take on large commercial disputes without unacceptable risk, and can be especially helpful to firms which are in the early stages of formation. One observer notes that “[f]irms that engage in portfolio financing can attract clients with alternative fee arrangements which offer flexibility and efficiency, attractive terms, and lower pay-out prices.” “Portfolio Litigation Financing – What’s in it for the Lawyers”, Lexology, Canada, September 24, 2017; https://www.lexology.com/library/detail.aspx?g=769d8b64-2770-43fd-842e-7ae97f484963. Scholars have also documented the increasing role of ALF in allowing corporate defendants to manage their litigation risk. See, e.g., Jonathan T. Molot, “A Market in Litigation Risk”, 76 U. Chi. L. Rev. 367 (2009).
Portfolio financing offers many well documented advantages to funders as well, such as diversifying risk, promoting an even flow of profits and losses, and providing long-range stability with predictable returns. It not only provides the potential to expand the cases which get funded, but may simultaneously help clarify the role of litigation finance in furthering access to justice by bringing within an aggregate funding portfolio claims which might not otherwise qualify for funding standing alone. One commentator also noted that “if the litigation finance transaction is structured as portfolio financing, it may be possible to maintain the privilege if the lender only receives aggregate information about the portfolio of cases.” Nathan M. Crystal, “Ethics Watch: Litigation Finance: An Overview of Issues and Current Developments (Part I)”, 28 S. Carolina Lawyer 12, 14 (May 2017).
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.
