As people often say that litigation finance is confusing and it is hard to understand what the terms are or should be, this post lays out some good questions to keep in mind when considering litigation finance for an upcoming case.
The best place to start is having an idea of what the case budget is and how much money are you asking for in an investment. Things to think about here include: what is the cost of bringing this case through trial? What about if there’s an appeal? There is no way to know exactly what a case will cost, even the best attorneys and litigation financiers cannot tell you that but this is a good time to seek advice from experienced professionals that you trust so you can have a realistic idea.
Are there due diligence fees included in the arrangement? Due diligence is a key component of any funder’s process to deciding to fund a deal but due diligence takes time and resources. So it’s important to know if the funder is seeking to recover any due diligence fees.
What if costs exceed the case budget? Who will be covering those costs? If its you as the plaintiff and you don’t have much capital to cover anything extra or any surprises that may arise you might want to factor in more buffer room in your original estimate of what the case will cost.
It’s also important to think about the realistic value of your case. By that I mean, will your case make you money? If the maximum amount of damages that you are likely to receive from a claim is only slightly higher or the same as what you’re estimating the case may cost, then it may not be a good fit for litigation finance.
Of course, arguably the most important question is what returns with the lawyers and funder receive? Ideally, you want to find a deal that would secure you a good return after the funder’s and lawyer’s interests are paid out. Again, this can be difficult sometimes to know exactly, particularly if the terms are contingent on how long the case takes but its good to have an estimate early on.
All of these questions are things to think about on your own but to also ask potential funders and your legal team to hopefully make the best decision for everyone.
Topics: litigation finance, alternative litigation finance, third party funding
Works Cited: Julia Gewolb, The Art of Litigation Funding Deal, Law360 (February 8, 2018).