Since its beginnings in the US, litigation finance has mainly been associated with helping the “little guy” in David v. Goliath lawsuits. While helping to level the playing field is very important, especially to companies like TownCenter Partners who value justice for everyone. Supporting smaller organizations is not the only use for alternative litigation finance.
Litigation finance can be helpful to even the largest organizations to manage risk and use their resources more strategically. As larger organizations become involved in litigation financing not only is the market for it growing rapidly but it is also changing how funder’s run their business.
The traditional model was that litigation finance companies gave an advance to individual clients to cover attorney’s fees and legal costs. But now single-case investments are not the only part of funders’ business.
There is a growing trend toward larger portfolio investments that combine multiple cases and provide something like a credit facility that a client can draw on during its suit. Part of this is because as larger law firms are using litigation finance they are interested in having more flexibility to have alternative fee arrangements but don’t want to have to take on that risk all at once.
For growth, it is helpful for firms to take on multiple cases at once but even if you only pick strong cases there is still a likelihood of at least some loses. Therefore, a third-party funder can help a law firm to manage its risks as it grows more rapidly. Additionally, the use of litigation finance for companies and law firms helps to add predictability to their litigation spending from quarter to quarter.
With more and more jurisdictions approving of alternative litigation finance, including recently Hong Kong and Singapore, experts predict that the demand will only increase. As the market expands there will be continued discussion over regulations as we have already seen here in the United States, however, discussions about disclosures and other methods of regulation do not seem to be deterring the market.
Topics: litigation finance, alternative litigation finance, third-party funding, law firms, regulation
Works Cited: Nathan Hale, Litigation Funding Isn’t Just for the Little Guy Anymore, Law 360 (April 20, 2018).