An increasingly common talking point among litigation funders is that in-house counsels and CFOs are growing more open to using third-party funding when pursuing legal action. However, as LFJ recently reported, one of the biggest hurdles for funders to overcome when persuading corporates to consider outside financing is the difficulty in demonstrating what the tangible benefits are for these businesses beyond shifting legal costs off the balance books.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
An increasingly common talking point among litigation funders is that in-house counsels and CFOs are growing more open to using third-party funding when pursuing legal action. However, as LFJ recently reported, one of the biggest hurdles for funders to overcome when persuading corporates to consider outside financing is the difficulty in demonstrating what the tangible benefits are for these businesses beyond shifting legal costs off the balance books.
In an article for Reuters, Bob Koneck and Alex Lempiner of Woodsford, outline what they see as the key advantages for corporates utilising third-party funding. Firstly, the authors highlight the ability to lower the risk of pursuing costly litigation in a time of financial strain, referencing a survey from Burford Capital that showed nearly 50% of companies avoided pursuing legal judgments in 2022 as a result of cost.
Additionally, funders are often experienced in facilitating alternative fee arrangements with a company’s outside law firm, going beyond simply reducing flat costs as a reason for pursuing litigation. This reduction in costs is also beneficial as it frees up an in-house legal department’s budget to be spent on important operational modernisation, and in onboarding technological advancements.
Woodsford also raises the value of expertise a funder can bring when evaluating whether a claim is even worth bringing in the first place. Whilst litigation finance primarily assists by providing capital, this argument reinforces the idea that in order to demonstrate value to corporates, funders must move beyond their most direct value proposition.
