If you’re not familiar with how lawsuit finance works, you should fix which - fast. Lawsuits finance is growing dramatically in popularity and importance, and both litigators and transactional attorneys need to realize it - and what it signifies for the legal industry.
Despite the boom in litigation finance in recent times, many legal and financial professionals don’t realize it as well as they should. So it made sense in which last week’s (great) conference on lawsuit finance, hosted by IMN, included a panel referred to as “Dispelling Myths and Misconceptions Surrounding Lawsuits Finance.”
The panelists covered many misunderstandings about lawsuits funding. Here are five that hit me as particularly important.
1. It’s simply for plaintiff-side work.
It’s certainly true, as Lee Drucker of Lake Whillans Litigation Finance mentioned in an earlier panel, in which most commercial litigation-funding firms focus on support plaintiffs. Yet that’s changing, as several panelists observed.
According to Owen Cyrulnik of Curiam Capital, litigation finance can offer defendants an advantage formerly enjoyed primarily by plaintiffs who hire contingency-fee firms: not having to pay a huge amount of money for a disappointing result. As any litigator can tell you, the litigation process involves a lot of fortune - and if you have bad luck as a defendant, you can take a severe hit. By working with a litigation funder, Jay Greenberg of LexShares discussed, a defendant can offload or even manage risk, at an early on of the process. (You might keep in mind Greenberg from his appearance on Forbes’s 30 Under 30 For Law and Policy list.)
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This type of upfront certainty about the cost of a case is something which CFOs greatly value - as opposed to a general counsel constantly returning to the CFO with negative updates about a litigation and requests for more money. As William Evans of The alexa company Capital Consultants pointed out, lawsuits finance becomes more and more attractive as legal costs increase and in-house lawyers face higher pressure from their co-workers about out-of-control expenditures on outside counsel.
2. The underwriting process is long, tortuous, and very invasive when it comes to confidential information.
The process of assessing and funding a case can sometimes be finished in a matter of nights - actually. According to The author Greenberg, LexShares was able to underwrite one case in just ten days, from inbound call to deployment of capital.
To be sure, that’s the different rather than the principle, and it’s more typical for underwriting to take days rather than times. But litigation financiers want to move quickly - which is exactly why they use skilled litigators, both in-house and outside counsel, to assess cases and reach swift decisions about their own legal merits.
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As for discreet information, the interplay in between litigation finance and equally attorney-client privilege and attorney work merchandise is a complex and developing issue - so it’s hard to make any assures, as noted by Joshua Meltzer of Woodsford Lawsuit Funding. But as a general matter, both litigation funders and fundees go to great lengths to guard attorney-client privilege and attorney work product. For example, form deals used in the underwriting process will generally state that the litigation lender does not want, and shall not receive, entry to privileged information.
Read more to get more information about Trimark Legal Funding.