Analysing the Litigation Finance Marketplace
The contentious debate over future regulation of the litigation finance market tends to primarily focus on the impact of outside funding on the legal system or on individual cases, a new academic paper looks at the issue through a broader lens, arguing that ‘litigation finance generally promotes marketplace efficiency and should be encouraged.’
In a forthcoming paper for the Southern California Law Review, Suneal Bedi and William Marra provide a new outlook on the debate over the regulation of third-party litigation funding. Bedi and Marra explain that their article ‘reframes the debate about litigation finance’, broadening the conversation from the effects of outside capital of the legal system, to an examination of ‘how litigation finance affects competition not only in the courtroom but also in the marketplace’.
The authors centre their analysis around the business concept of “non-market strategies”, looking at how funding is used by companies outside of the courthouse to ‘access the capital markets and gain an advantage in the marketplace’. Bedi and Marra emphasises that whilst their non-market strategy analysis is focused on litigation finance within this paper, ‘it holds the promise to reframe the debate around legal issues far beyond the realm of litigation funding.’
Through this analysis, Bedi and Marra argue that proposed regulation of third-party funding will go beyond the courthouse and affect the capital markets as well, ‘with significant but unexplored implications for contemporary debates about funding.’ They go further and argue that regulating the litigation finance market ‘is especially likely to harm small and medium-sized enterprises’, as these are the companies relying on third-party funding for capital raises.
The full article can be read here.
Suneal Bedi is an associate professor at Indiana University’s Kelley School of Business. William Marra is a director at Certum Group and lectures at the University of Pennsylvania Carey Law School.
