Solo Practitioners and Small Firms: The Benefits of Litigation Finance
Attorneys that practice law by themselves or those that practice in small firms are especially well-suited to reap the benefits that litigation financing has to offer. More often than not, litigation financing is used in accordance with contingency fee arrangements made by these kinds of attorneys. Contingency fee arrangements are more likely to be made with these kinds of attorneys because of their smaller number of resources. In any case, with contingency fee arrangements attorneys risk being rewarded with more upside of any success they may have with a greater risk of loss if the case proves unsuccessful. With litigation financing, these attorneys are allowed to take on more cases than they normally would have also mitigating their risk at the same time.
While there is an array of financing structures available to any arrangement, all have a one thing in common, the financing is nonrecourse. This means, that the law firm taking the financing owes the litigation financer nothing, unless they win the case or some settlement.
Additionally, there are usually two types of financing. The first type of financing available to these kinds of attorneys are single-case financing for certain claims. The second type of financing available to these kinds of attorneys are portfolio financing.
In a single-case financing scenario, the financing model is typically a blended or hybrid fee arrangement with a reasonable budget. Here, the attorney will bill the client at half of their normal rate, and then put the other half of their fee on a contingency basis. The financer will then provide financing to the client to pay the attorney’s monthly fees, up to an agreed-upon limit. Then, the client only pays what the arrangement does not cover.
On the other hand, a portfolio financing scenario is where the litigation financer invests a set dollar amount into a law firm. In turn, the litigation financer’s return is then secured by a portfolio of cases that are being handled by the law firm rather than just one case.
In conclusion, partnering with a litigation financer will allow a small law firm or solo practitioner to increase their revenues, and grow their profits all while minimizing their risk. Further, clients who partner with litigation financers are able to pursue claims they otherwise might not have been able to originally afford.
Keywords: litigation financing, solo practitioners, small firms, client, portfolio financing, single-case financing
Work Cited: David Gallagher, Litigation Funding: What are the Benefits for Solo Practitioners and Small Firms?, American Bar Association (January 25, 2017)
