Litigation Funding 101
Litigation finance (also called litigation funding) is the practice where a third party unrelated to the lawsuit provides capital to a plaintiff involved in litigation in return for a portion of any financial recovery from the lawsuit.
Litigation finance unlocks the value of legal claims by providing capital to plaintiffs before their cases are resolved. This type of financing has existed for more than 20 years and is increasingly becoming a mainstream funding solution that helps equalize access to the legal system. Fortune 500 companies, major universities and businesses of all sizes have benefited from commercial litigation funding.
The capital provided by monetizing a legal claim may directly pay for some of the costs of litigation, including attorneys’ fees, expert witness fees and court expenses. Litigation finance may be used to fund working capital for companies involved in litigation or even help business owners pay for personal expenses.
Unequal access to the legal system
In much of the world, access to justice requires abundant capital because litigation is expensive. Many factors contribute to the cost of commercial litigation: attorney fees, research, depositions, interrogatories, motions, conferences, witness preparation, trials, subpoenas, appeals, as well as expenses associated with court fees, consultants, and investigations.
All too often litigants who seek justice are unable to pursue their claims due to the high costs associated with lawsuits. Many plaintiffs who have a compelling case will choose to defer or ultimately abandon legal recourse. A great imbalance of resources exists between average and wealthy litigants, creating impediments to judicial access and a distortion of legal outcomes for the undercapitalized.
Litigation finance helps to resolve these problems