The financial world has many different sectors and divisions that at times can be hard to keep up with. Litigation finance has been around for a little bit over 20 years and has been growing in size more recently.
Since its creation in the 1990’s the litigation field has grown to the point that close to 90% of U.S. corporations are involved in litigation services, whether that be within their own company or by using a third party. But what is litigation finance?
The basic gist of litigation finance is that litigation firms will provide capital to companies to help them cover the costs of paying attorneys’ fees and other expenses that incur during the litigation process. In return the litigation finance firms will be given a return on their investment once the case has settled. Usually they will receive a percent of the settlement received from the lawsuit.
Litigation finance has been beneficial to many throughout the years for a number of reasons. One of the biggest reasons, is that it is helping the little guy. When a person or a small business is going up against a large corporation in the justice system, many times they won’t have the money or capital needed to fully fund their case against the bigger player. Litigation firms and companies will help finance the smaller player so that the playing field becomes equal among the two parties involved.
These firms don’t just help the plaintiffs though; they are actually beneficial to the attorneys and law firms as well.
Attorneys and law firms benefit from the services as they are able to increase their caseload from new clients. The fees that go into a case can sometimes be out of a person’s price range depending on how big or expensive the attorney or law firm is. The litigation firms can help cover those fees which will give the opportunity for smaller players to have access to larger law firms or attorneys. This also helps the plaintiff as they are then able to work with better and more expensive law firms for a better chance at winning their case.
The field is continuously growing. In a survey done by Burford Capital in 2016, 28% of private practice lawyers say that their firms have used litigation finance directly, which is a significant increase since 2013.
Litigation finance firms and the practice itself will continue to grow as the need is met and continues to be needed.