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What is litigation finance?

A brief primer for commercial plaintiffs


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Litigation finance: Definitions

Litigation finance is where a third party provides capital to a plaintiff involved in litigation in return for some financial recovery from the lawsuit. Also called litigation funding, litigation finance is non recourse, which means that repayment to the financier is contingent upon a successful outcome of the underlying legal case.

Pioneered in the United Kingdom and Australia and later adopted in the United States, litigation finance promotes access to justice and allows plaintiffs to access capital before their case is resolved. Clients ranging from Fortune 500 companies to small businesses have utilized litigation financing to manage their litigation risk and afford the counsel of their choice.

Why do companies seek litigation funding?

Short answer: to achieve better litigation outcomes

To mitigate expenses

Legal claims can be expensive, with costs ranging from attorney’s fees to expert witness costs. Many deep-pocketed defendants may also drag out the case in order to force cash-strapped plaintiffs to settle for lower amounts. What’s more, many commercial law firms do not take cases on contingency.

To reduce the risk

Litigation finance allows businesses to litigate meritorious cases without worrying about not being able to afford next month’s legal bills. Even for companies that can afford litigation out-of-pocket, litigation funding allows capital to be used for growing their business. We take on the risk so you don’t have to.

What kind of cases receive litigation financing?

Legalist provides litigation funding for business litigation. Common case types include breach of contract, business torts, anti-trust, and fraud. We do not fund personal injury cases or frivolous litigation. All cases must already be filed at the time of financing.

Businesses who apply for funding include local antique shops, venture-backed startups, and real estate brokerages. For businesses large and small, litigation financing allows plaintiffs to seek the justice they deserve without worrying about legal costs.

Case Study: Real Estate

Real Estate Broker v. Development Megacorporation

A real estate broker is purposely left out of a large deal in which he brought together the developer and the opportunity. Legalist covers expert witness fees, and the attorney is on full contingency. The plaintiff pays nothing.

Case Study: Ice Cream

Ice Cream Manufacture v. Public Food Company

A breach of contract lawsuit against a public food manufacturer who sold a small ice cream manufacturer a lower quality of goods than promised. Legalist provided legal fees and litigation expenses. The plaintiff pays nothing.

For attorneys:

Payment

Litigation finance allows attorneys to focus on litigation without concerns about the client’s ability to pay. Attorneys also serve as custodians of funds following the conclusion of the claim, helping to distribute proceeds.

Non-intereference

Litigation financiers have no control over litigation strategy or settlement decisions, nor do they interfere with attorney-client privilege. Recent legal cases have supported the doctrine that discussions with litigation financiers are protected by work-product doctrine, and may not be discoverable.

Additional resources:

Learn more about litigation finance.

Westfleet Advisors: Guide to Litigation Finance
American Bar Association Commission on Ethics: White Paper on Alternative Litigation Finance
Holland & Knight: The Ethical Do’s and Don’ts: Best Practices When Clients Finance Fiduciary Litigation
Kentucky Bar Association: Ethics Opinion KBA E-432
New York City Bar Association: Third Party Litigation Financing Ethics Opinion
Minnesota Law Review: Whose Claim is This Anyway? Third Party Litigation Funding

Start your application today

We offer plaintiffs and attorneys money to cover legal bills and working capital at the lowest rates in the industry. Litigation finance can help your case succeed against defendants in cases with deeper pockets. Find out the rates for your litigation funding today.



Learn more about litigation finance.

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