How Third-Party Litigation Funding Can Help Attorneys and Clients Get Results

TownCenter Partners Litigation Finance

The time and expense involved in litigation has always made it difficult for litigants to persevere through the entire process.  This is especially true for litigants with few resources.  Long-standing common law doctrines such as champerty and maintenance have been applied to prohibit “intermeddling” by third parties who sought to help such litigants by offering financial assistance in return for a share of the recovery. The rationale for this prohibition was that financing by third parties encouraged unmeritorious litigation and could turn the legal process into an instrument for harassment.  But recent developments have shown that third-party litigation financing can provide substantial benefits to litigants and their counsel.  More importantly, it can promote justice by helping sustain meritorious cases that might otherwise never be pursued to their conclusion.

Benefits for Clients

Providing fair and equal access to justice has long been a goal of the American legal system.  But that goal has proved elusive, thus far.  Litigation is expensive and time-consuming, even when an attorney agrees to provide representation in return for a contingent fee.  When someone has been the victim of wrongdoing and injustice, he may deserve compensation for his injuries, but may not be able to afford the litigation costs that are necessary to gain such compensation.

Not surprisingly, many less affluent parties still struggle to gain access to justice.  According to one estimate, there are only five to six thousand lawyers available to serve the legal needs of more than 45 million low-income individuals, who might be eligible for some form of legal aid from a public interest organization.  Even as lawyers’ professional groups call upon all lawyers for a greater commitment to pro bono work, an enormous void remains.

This is where private, third-party litigation funding can come in.  In cases where there are significant financial remedies available to compensate for wrongdoing, the invisible hand of private markets can direct litigation funding to parties who need and deserve it.  Litigation funding can pay for discovery, experts, and all of the other substantial costs of pursuing a lawsuit from complaint to judgment.  In addition, the proceeds of a litigation financing agreement can go directly into the hands of a litigant to help pay for living expenses during the pendency of the case.

Litigation financing can be valuable even for commercial enterprises and litigants who have ample resources.  Consider a business that has a promising legal claim.  It might be able to afford the legal fees and litigation costs that pursuing the claim would entail; but it might conclude that it could better deploy those resources for its business objectives, especially because there is no guarantee that the claim will pay off.  If that business obtains litigation financing to cover its litigation costs, it can use the investor’s capital to cover the risk of pursuing the claim, preserve its own resources for business purposes, and still have an opportunity to realize a substantial gain if the claim pays off, even after sharing that recovery with the litigation financer.

Benefits for Attorneys

Litigation financing can have similar benefits for attorneys, providing them greater flexibility in the cases they take and in the way they provide representation.  For one thing, the availability of litigation financing can make it easier for firms to enter into contingent fee agreements with their clients. When third-party litigation financing covers all of the litigation costs, apart from attorneys’ fees themselves, a contingent fee case presents fewer risks to the law firm. In effect, the firm exports the risk associated with bearing litigation costs, but still retains the potential upside from a large contingent fee if the case ends with a large recovery.

Even in commercial cases where contingent fees are not a consideration, litigation financing can provide substantial benefits.  When a law firm helps its client understand that litigation finance can be a powerful tool for managing business risk, the client can see the firm as a responsive ally in achieving its business objectives, not simply as a service provider who collects fees.

Consequently, it makes sense for attorneys to become sophisticated about all forms of litigation financing available.  Attorneys can add value by actively helping their clients manage litigation risks.  Clients appreciate the lawyer who wins the case, but they will rely again and again on the lawyer who understands their objectives and derives solutions for achieving them.

Important Considerations When Dealing with Litigation Funding Companies

Because it involves a complicated transaction that implicates the attorney-client relationship, lawyers must be careful to make sure that the use of litigation financing does not interfere with their ability to represent their clients.  Understanding how to manage a litigation financing transaction is an essential aspect of using litigation financing for the benefit of the lawyer and client alike.

In general, lawyers should try to keep an arm’s-length relationship with the agreement between her client and the lender. Thus, a lawyer may suggest to a client where the client may try to obtain financial help for individual needs, but, in general, the lawyer should not become part of the loan process.

The lawyer should also be careful about providing a litigation finance company with information or opinions about the prospects of the client’s case.  If the litigation finance company seeks confidential information that could reflect on those prospects, such as medical or accident reports, the attorney can furnish that information, but only if the client gives informed consent after the lawyer discloses the benefits and detriments of such disclosure.

Conclusion

The tide is turning in favor of litigation financing.  Because it can help accomplish fair and just results for a variety of litigants, attorneys should become familiar with all of the different ways it can work to maximize its benefits for their clients and their firms.

 

TownCenter Partners, LLC, TCP, Our Mission Is Justice, Asset Manager is Mr. Roni A. Elias. TownCenter Partners LLC, a boutique litigation finance firm located in Northern Virginia with a Social Mission. Every year 5% of all profits are donated 2 charities, Hands Along the Nile & Orphans Africa. Roni worked & has been instrumental in litigation cases, reaching over $9 Billion Dollars in Recovery. Roni has been published in multiple law review journal including but not limited to NYU, Georgetown, DePaul Law, Thurgood Marshall Law, Tulsa Law, American Bankruptcy Institute(ABI) Law Review & much more. Roni is an elected officer of the Federal Bar Association, ADR Division & Federal Bar Association, Health Law Division. Roni is a member of the Association of Certified E-Discovery Specialists(ACEDS). Roni can be reached at roni@yourtcp.com or 703-570-5264.

 

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