An article published on AbovetheLaw.com titled “The 6 Virtues of Litigation Finance” discusses David Lat’s attendance and feelings towards a symposium held at NYU School of Law back in November 2015. This article would appear just days prior to a New Jersey based legal funding company making national headlines for alleged legal funding scams. So how do you know if legal funding is right for you?
David Lat tries to answer that exact question after attending the conference, Litigation Funding: The Basics and Beyond, which consisted of four panels featuring a mix of litigation financiers, lawyers and legal academics. Lat concluded that there were 6 Virtues of the lawsuit funding industry:
1) Litigation finance promotes access to justice for all
Lat would mention that litigation is expensive and litigation funding per Alan L. Zimmerman of Law Finance Group is a way “to provide access to our civil justice system to people who cannot afford it, which is the vast majority of people.” According to Lat, Zimmerman said this while holding big stacks of crisp bills that he waved around, saying “you need this” to access our justice system.
In summary, litigation financing provides the monetary means necessary to correctly pursue a lawsuit.
2) Litigation finance and risk management
In terms of risk management, litigation finance can enable the redistribution of risk to those that are most apt to manage it. Lat would provide the following example:
Imagine you’re a small company holding a promising but far from guaranteed legal claim. Say there’s a 70 percent chance of a $30 million judgment, giving you an expected return of $21 million. But to litigate that case, it would cost you millions of dollars in litigation costs, the proceedings would drag out over three or more years, and there’s a 30 percent chance of you getting nothing in the end.
What should you do in this situation? Connect with a litigation finance company, which is better equipped to manage the downside risk than your individual company. Why? Because of diversification: the risk of holding an entire portfolio of litigation claims is lower than the risk of holding a single claim, just like the risk of holding a portfolio of stocks is lower than the risk of holding a single stock.
In summary, a litigation funding company spreads the risk of one claim over all claims included in their portfolio. A law firm may not be able to handle multiple expensive, high risk cases but a third-party funding company can mitigate the risk of one case by diversifying in multiple cases.
3) Litigation finance lets companies focus on their core businesses
Commercial claims are similarly impacted positively by legal funding companies. Lat would write that during the symposium Lee Drucker, founder of Lake Whillans, a litigation finance and distressed venture capital firm, identified that litigation financing allows “companies focus on what they do best, namely, their core businesses.” He would add the following example: Say you’re a startup company in the technology space and you also happen to hold a potentially valuable claim of patent infringement. Litigating that claim would cost you millions of dollars and distract you from your core business. By connecting with a litigation finance company, you can monetize your legal claim while freeing up your money and time for what you do best (and what will be reflected in your company’s valuation): developing your tech product, not filing lawsuits.
In summary, a litigation funding company can allow a business to focus on the company itself, not current and/or eventual legal proceedings.
4) Litigation finance can help ordinary Americans obtain justice
Per Joshua Schwadron, CEO and co-founder of Mighty, a legal technology company that provides software to legal funding companies, 70% of Americans live paycheck to paycheck and are ill-equipped to fight insurance companies in court. According to Lat, Schwadron believes litigation financing ensures that justice works the way it was intended.
In summary, a litigation funding company provides the monetary means for a plaintiff to see the claim through to the end, thus maximizing his or her outcome.
5) Litigation finance could reduce the time and cost of litigation
Panelist Joshua Schwadron would also argue that when a defendant discovers that a litigation financing company is involved, they may be more inclined to settle simply because they know the plaintiff now has the means to see the case through to the end. A war of attrition will no longer work with a 3rd party involved.
In summary, a litigation financing company can reduce the time and cost of litigation simply by being tied to the case. It is not difficult to understand that an insurance company had the money and time to stall proceedings with years of motion practice and discovery. Litigation financing provides the monetary means for both the plaintiff and lawyer to counter these measures.
6) Litigation finance and new applications
I will not go into too much depth here, as it most likely does not apply to your personal or commercial case, but the thought process here is the idea that local governments can use third-party funding for public litigation to try cases more efficiently and effectively. Outside funding could allow a local government to hire the best attorneys for their case, not the attorneys they can best afford without third-party assistance.
So there you have it, 6 virtues of the legal funding industry. If you have a lawsuit and can benefit from the advantages of legal funding make sure you determine if legal funding is right for you. Make sure to perform due diligence and partner with the funding company that best fits your needs.
The Thrivest Difference
At Thrivest, we provide flexible financial options to help businesses and individuals meet their cash flow needs. Our friendly staff of funding experts guides each client from beginning to solution. We adhere to the principles of Quality, Honesty, Community, and Creativity. If you think our pre-settlement legal funding solutions could be the right fit for you, please call one of our lawsuit funding specialists at 888-697-7352. Or to apply online, simply CLICK HERE and fill out our quick form application.