Litigation Financing’s Bright Future
There are a great number of appeals to using litigation finance to fund or defend against a claim. However, the main appeal for using litigation finance to fund a claim is that clients are given the ability to use more money than their usual funding allows for because they have to spend a significantly less amount of resources on their legal department. Thus, an opportunity is given to clients to expand their business operations and advance otherwise expensive lawsuits.
A common example of litigation finance helping a plaintiff who was a small business was best explained by Lee Drucker. The example that Mr. Drucker gave was a software company wanted to pursue a breach of contract claim. However, the software company could not fund their growing business and pay their legal fees. As a result, they contacted Mr. Drucker hoping to receive litigation finance to help further their claim. Mr. Drucker agreed to finance this claim and the software company was able to sue the defendant successfully. Both parties (Mr. Drucker and the software company) were able to see a return on their investment following the lawsuit
On the flip side, defense-side funding is fairly limited at the current time. However, this sector of litigation finance is expected to grow rapidly. Presently, defendants are continuing to implore the help of third-party financing to help with risk management and corporate financing while being involved as a defendant in a lawsuit. If able to find a litigation financer to help fund their defense, the defendant may not have to pay much, if anything, if the defense proves successful and they are awarded cost of legal fees. Thus, allowing expenses to be funneled elsewhere.
However, litigation finance is not without risk to the financer. Litigation financers must do their due diligence before agreeing to finance a case. To minimize this risk, litigation financers generally employ a team to analyze several merits. The merits that are usually analyzed are: the law, deal economics, and collection risk. Out of these merits, the two most important are the law and collection risk. Overall, if these merits all weigh favorably, the litigation financer will generally accept and finance the case.
Lastly, the litigation finance industry, as a whole, is booming. Within the next few years, more and more individuals are expected to make use of litigation financing to assist with both defending and bringing lawsuits. Litigation finance carries the potential to be both lucrative for the client and the financer.
Keywords: litigation finance, opportunity, risk, defense, merits, booming
Work Cited: David Lat, Litigation Finance: Its Past, Present, and (Very Bright) Future, Above the Law (June 1, 2018), available at https://abovethelaw.com/2018/06/litigation-finance-its-past-present-and-very-bright-future/?rf=1.
