Third-party litigation funding and litigation financing are emerging in the United States after developing abroad in the last several years.
The current economic state has made it abundantly clear that resolving a corporate dispute or pursuing a “deep pocket” defendant is expensive, can be drawn out, and is simply not within a company’s or law firm’s financial budget. A budding market is giving life to corporate claims for companies unable to dedicate the substantial costs necessary to litigate disputes in court in exchange for a share of any recovery. This market treats claims as assets, yielding high returns from investment in lawsuits.
Litigation financing provides the capital necessary to prepare for a case, including witness expenses, travel costs, medical studies and presentation materials, which, depending on the type of case, can be upwards of several million dollars.
Firms providing the financing view this venture as a carefully selected investment. If a claimant or group succeeds in obtaining an award against a defendant, the funding firm recoups its initial investment plus whatever additional amount agreed to in the financing agreement. If the litigation is not successful, there is no payout to the funder.
HB will have a full article available in a couple of weeks. The full-length article will feature information on the Australian and European origins; the major players; arguments for monetizing claims; concerns over frivolous claims, champerty, attorney-client privilege; and what it means for the insurance industry.
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