Litigation Finance Changes the Law Firm Landscape

It used to be taken for granted that large firms did not take cases on a contingent fee basis.  If a plaintiff had a potentially valuable claim and wanted to pay a lawyer through a contingent fee, the only place to look was a boutique firm.  But litigation finance is changing all of that, and large firms are now being more aggressive about pursuing contingent fee cases.

The reasons are simple.  If a plaintiff really does have a valuable case, there are more and more opportunities for such a plaintiff to find a litigation funder that will invest in the claim.  This investment can be used to pay a portion of the attorneys’ fees up front.  This means that taking a case on a contingency basis involves much less risk to the firm when a litigation funder is involved.

The diminution of risk means that even risk-averse firms can begin to seriously consider contingency fee cases. In addition, small firms with relatively few financial reserves can also afford to take on high-stakes contingency cases.  Thus, there is more competition among lawyers to get big contingency cases.

“The pool of lawyers available to try a case expands because young lawyers who otherwise could not afford to take the case on contingency can now get funding,” said Alan Kluger, a founding member of Kluger, Kaplan, Silverman, Katzen & Levine. “That’s good. It gives clients a bigger pool of lawyers to choose from. The good lawyers are going to get a lot of work.”

This competition means that some boutique firms that specialized in contingent fee cases are getting less business.  Some of these firms are struggling to manage this new competitive challenge.  But overall, this development is good for clients and for the justice system as a whole.

Topics: litigation finance, legal reform, third-party funding, litigation costs, alternative litigation finance, boutique firms, contingency fees

 Works Cited:  Monica Gonzalez Mesa, Litigation Funding Changes Legal Landscape for Boutique and Small Firms,  Daily Business Review (Nov. 20, 2017) available at https://www.law.com/dailybusinessreview/sites/dailybusinessreview/2017/11/20/litigation-funding-changes-the-legal-landscape-for-boutique-and-small-firms/