Funders Make Litigation Finance More Widely Available
One of the most widely discussed recent developments in Litigation Finance was Peter Thiel’s successful investment in Hulk Hogan’s lawsuit against Gawker. Another, less-noticed recent development could have much more wide-ranging effects on the availability of investors to support litigation. The emergence of services that match funders and plaintiffs in smaller scale cases has the potential to revolutionize litigation funding, giving opportunities to plaintiffs who cannot get the attention of a billionaire like Peter Thiel.
Of course, there is nothing new about third-party investment in litigation. Entities with expansive resources, like investment banks, insurance companies, and hedge funds, have long provided funding for lawsuits with the promise of enormous judgments. Thiel’s investment in the Gawker litigation fits this profile. But in the past couple of years, a variety of new ventures have emerged to make it easier for plaintiffs to find funding when they aim for relatively small judgments or require relatively little in the way of litigation expenses.
Most of these services have developed proprietary algorithms to evaluate the merits of lawsuits and provider prospective funders with a way to evaluate cases as investment opportunities. When a case meets their requirements, they publish details about the case, such as the identities of plaintiffs, defendants, judges and lawyers, jurisdictions, and damages sought. Anyone can invest as a long as they meet the investor accreditation requirements laid down by the Securities and Exchange Commission: earning more than $200,000 annually for the past two years or having a net worth of $1 million.
The democratization of litigation funding offers important benefits to more ordinary plaintiffs who have a meritorious case that is not especially valuable.
Work Cited:
Davey Alba, You Too Can Invest in Lawsuits. But Not Quite Like Peter Thiel, Wired (Aug. 29, 2016), available at https://www.wired.com/2016/08/now-can-invest-lawsuits-just-like-peter-thiel/
