In the past year, COVID has wreaked financial havoc, business interruption, and court delays. It has also led to spikes in specific types of litigation. With that in mind, Litigation Funding is enjoying a resurgence that appears to be here to stay. A legal firm that typically relies on fees from clients may find itself in dire financial straits. Even a firm that’s meeting its goals for billable hours may find that clients are less able to pay.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
In the past year, COVID has wrought financial havoc, business interruption, and court delays. It has also led to spikes in specific types of litigation. With that in mind, Litigation Funding is enjoying a resurgence that appears to be here to stay. A legal firm that typically relies on fees from clients may find itself in dire financial straits. Even a firm that’s meeting its goals for billable hours may find that clients are less able to pay.
Law.com explains that there are several common uses for Litigation Finance. The most well-known is funding plaintiff-side litigation in exchange for a share of any award stemming from winning judgments or settlements. This can apply to a single plaintiff or a class action. An increasingly common form of third-party legal funding is the funding of a firm’s portfolio. This diversifies the risks funders take, as legal funding is provided on a non-recourse basis.
As Litigation Finance has expanded in acceptance and scope, the legal world has affirmed that its use is a net gain. Early on, some feared that widespread litigation funding would lead to spurious lawsuits that clog dockets. In reality, funders vet cases carefully and have no interest in funding litigation that lacks merit. The New York City Bar Association Working Group affirms this, saying that lawyers and clients would benefit from fewer restrictions and disclosures related to funding.
Protecting confidentiality is sometimes seen as being at odds with funding-related disclosures. For example, details about cases shared with funders as they assess the prospect of funding claims. This can be addressed by invoking the work product doctrine to protect all parties before materials are shared.
Ultimately, litigation funding can provide innovative solutions to money woes, or the means to try a case in spite of financial barriers. We can expect more from the Litigation Finance industry long after COVID is behind us.
