If you’re not familiar with how lawsuit finance works, you should fix that - fast. Lawsuits finance is growing significantly in popularity and importance, and each litigators and transactional attorneys need to understand it - and what it means for the legal industry.
Regardless of the boom in litigation finance in the past few years, many legal and financial professionals don’t comprehend it as well as these people should. So it made sense which last week’s (great) conference on litigation finance, hosted by IMN, included a panel called “Dispelling Myths and Misguided beliefs Surrounding Lawsuit Finance.”
The panelists covered numerous misunderstandings about lawsuit funding. Here are five that hit me as particularly important.
1. It’s merely for plaintiff-side work.
It’s certainly accurate, as Lee Drucker of Lake Whillans Litigation Finance mentioned in an earlier panel, which most commercial litigation-funding firms focus on support plaintiffs. However that’s changing, as several panelists mentioned.
According to Owen Cyrulnik of Curiam Money, litigation finance can provide defendants an advantage earlier enjoyed mostly by plaintiffs who hire contingency-fee firms: not paying a huge amount of money for a unsatisfactory result. As any litigator can tell you, the litigation process involves a lot of good fortune - and if you have bad luck as a defendant, you can take a significant hit. By working with a lawsuits funder, Jay Greenberg of LexShares explained, a defendant can offload or manage risk, at an early stage of the process. (You might bear in mind Greenberg from his appearance on Forbes’s Thirty Under 30 For Legislation and Policy list.)
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This type of straight up certainty about the cost of a case is a thing that CFOs greatly enjoy - as compared to a general counsel continuously returning to the CFO with damaging updates about a litigation and asks for for more money. As William Evans of Alexa Capital Consultants pointed out, lawsuit finance becomes more and more appealing as legal costs increase and in-house lawyers face better pressure from their co-workers about out-of-control expenditures on outdoors counsel.
2. The underwriting process is long, tortuous, and very invasive when it will come to confidential information.
The process of analyzing and funding a case can sometimes be accomplished in a matter of times - literally. According to Jay Greenberg, LexShares was able to underwrite one case in merely ten days, from incoming call to deployment of money.
To be sure, that’s the exclusion rather than the principle, and it’s more typical for underwriting to take days rather than nights. But litigation financiers want to move rapidly - which is why they use skilled litigators, both in-house and exterior counsel, to evaluate cases and reach quick decisions about their legal merits.
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As for discreet information, the interplay in between litigation finance and equally attorney-client privilege and attorney work item is a complex and changing issue – so it’s hard to make any guarantees, as noted by Joshua Meltzer of Woodsford Lawsuit Funding. But as a general issue, both litigation funders and fundees go to great lengths to protect attorney-client privilege and attorney work merchandise. For example, form contracts used in the underwriting process will generally state in which the litigation financier does not want, and shall not receive, accessibility to privileged information.
For more information please visit Trimark Legal Funding.