Litigation Basics from Longford Capital VP
More people than ever now understand the broad strokes of what Litigation Finance is and what it can offer. Investors fund cases through funding entities that are then owed a share of any recovery or award in the case. Litigation funding is non-recourse, so funders can take a higher percentage in exchange for the enhanced risk. Bloomberg details the litigation funding basics with input from Andrew Stulce, vice-president at Longford Capital. In a funded case, the client still maintains control over decision-making, while the duty of the lawyer remains to the client. Funders are passive investors, and while they do have a financial interest in the cases they fund—they are not permitted to make decisions that impact the outcome. In a traditional funding model, lawyers sometimes take a reduced fee so that lawyers and funders both receive a share of any recovery. In a monetization model, funders make payments to the claimant—to cover legal costs and other expenses while a case is adjudicated. Return structures can vary and will be spelled out in the funding agreement. When it comes to due diligence, funders will have very specific requirements that must be met in order to provide funding for a case. This includes having an experienced litigator go over the case to determine its suitability for funding. The strength of the case and the defendant’s ability to pay damages can all enter into the decision-making process for funders. Meanwhile, claimants are encouraged to select funders carefully—understanding their sources of capital, for example, and how the process can affect the timeline of their case. Rules regarding non-disclosure and confidentiality agreements can vary from one jurisdiction to another. But funders will often need privileged information that falls under the heading of confidentiality when deciding whether to fund a case.