Litigation finance is experiencing dramatic growth. The fledgling industry is extremely attractive to many people. It allows corporations and law firms to minimize their risk when pursuing expensive litigation.
The concept was originally designed to help plaintiffs entangled in lawsuits with wealthy benefits. Since then, new regulations have been put into to place that are favorable to people in the industry.
The surging popularity of litigation finance is like the gold rush. The impressive returns posted by law firms are drawing in new people.
Corporations can enter the litigation finance industry by connecting with the right investor or law firm.
Keep reading to learn more about corporations and litigation finance.
Who Benefits from Litigation Finance
Litigation finance, in its simplest form, means that a third party unconnected to the lawsuit fronts the expenses of the plaintiff. If the lawsuit is successful, they recover their costs as well as a fee.
A business owner might be interested because they need a constant supply of capital. If your business is in the midst of a growth spurt, you need funds to meet customer demands. You can’t afford to divert money toward a lawsuit.
Once you’re in that situation, you only have a few options. You can neglect to file the suit and allow the defendant to get away with it. You could potentially lose a lot of money with this strategy.
Or you can pay for the lawsuit yourself and let your business suffer.
The third option might be the best. You can have an outside company fund the lawsuit so you’re not pressed into paying for anything until your settlement arrives.
Law Firms
Law firms benefit from litigation finance as well. It’s a way for them to make on a lawsuit in advance. The firm can then use the funds for a variety of purposes.
A financial firm won’t agree to take on the risk unless certain requirements are met. A risky, uncertain lawsuit isn’t a good choice for litigation finance. The investor needs to feel confident that they’ll be able to collect on their investment.
Most deals involve companies and investors working together on single lawsuits. However, some financial firms are beginning to create portfolios of multiple cases that they’re funding.
Investors
Financial firms can make a lot of money financing lawsuits. The key is to work with strong companies that have a legitimate grievance. There are many lawsuits where experienced legal minds can predict what’s going to happen.
Settlements decisions are often not a surprise. This allows investors to make smart decisions about which lawsuits to support.
How to Get Involved
If you’re interested in litigation financing options for your company, you need to get a clear understanding of the situation. Is your potential lawsuit one that would look attractive to investors? Can you afford the debt whether you win or lose the case?
Everyone who wants to learn more about litigation finance should attend the General Counsel Forum on Litigation Finance. You can register for the event here.