Post-Pandemic Predictions Include Extended Case Durations
Law firms that rely on contingency fee structures will soon feel the impact of the pandemic, if they haven’t already. Many contingency fee law firms experienced an immediate slowdown in cases once stay-at-home orders and mass business closures went into effect. While many firms used settlement income from previous years, those funds are likely nearly depleted by this time. Above the Law explains that personal injury cases and workers comp cases have dramatically slowed, impacting law firms' bottom lines. Meanwhile, court closures and excessive delays led to an increase in case durations—delaying payouts for law firms as well as third-party litigation funders. This can leave funders with a dearth of working capital, and could increase the chances of an adverse occurrence like bankruptcy, or the case going over its allotted budget. Even worse, some opportunists took advantage of slow courts and a long wait for jury trials by pushing through low-ball settlements for litigants already suffering from the pandemic. In nearly every state, trial delays, shutdowns, or extensions abounded, and delays continue even as venues are cautiously reopening. It’s predicted that consolidation is on the horizon for many contingency fee firms. Firms that aren’t already on track with sustainable growth initiatives are likely looking at consolidation or being acquired by a larger firm. The question then becomes: Buy or be bought? Firms that have financed cases instead of bearing the full cost may now be in a position to acquire. The continued effect of the pandemic on law firms can lead to an inability to secure competitive interest rates—owing to cases staying on balance sheets for longer than anticipated. This is good news for litigation funders though, as it means more firms in need of funding.