Litigation Financial Industry Gaining a Foothold
The litigation financing industry has experienced significant growth in the United States over the last few years and is becoming a more common tool in the management of law firms. Litigation financing firms typically provide a nonrecourse advance for the legal costs of a plaintiff or their lawyers in exchange for a share in the potential settlement. This practice is not without its share of controversy and was one of the panel discussion topics at the Thomson Reuters 2nd Annual West Coast Legal Executive Forum held in San Francisco on March 25, 2015. EisnerAmper was one of the sponsors at this event and was represented by Dan Heller and Stephen Valentine.
The panel for the litigation financing discussion included representatives from Bentham IMF, Burford Capital, Gerchen Keller Capital, and Longford Capital Management, LP.
The panelists discussed how their litigation financing firms can add value to both law firms and the clients of law firms while providing a great return for their investors. They help law firms by taking on some of the risks and costs of litigation which may allow them to pursue new opportunities or riskier endeavors such as contingency fee cases. They help the clients of law firms in leveling the playing field by providing them with access to the justice system when the financial resources are otherwise unavailable.
Critics of litigation financing believe it will increase the overall volume of litigation and create a heightened potential for conflicts of interest due to the addition of a third party that has its own motive -- making a profit for its investors -- which may or may not be in line with common interest of the attorney or the injured client.
Whether or not you agree with the use of litigation financing, it is an area worth learning more about. I believe litigation financing will become more and more mainstream as law firms and plaintiffs gain awareness of the potential benefits.