Stevens & Lee P.C. attorneys Eric Robinson and Daniel Huyett urge litigators to discuss litigation finance in an article published by Law360 today
, describing it as “a subject that litigators ignore at the risk of a client relationship.” Sophisticated commercial litigants believe that litigation finance presents an additional option to the success fees, mixed and reverse contingent fees, fixed fees, and other alternatives, says Robinson and Huyett. They point to Bentham’s 87% increase in inquiries received directly from clients in its last fiscal year as evidence of this trend. Another recent survey cited in the article shows that 26% of in-house lawyers report their companies have used litigation finance, while 66% view it as increasingly important.
Robinson and Huyett highlight several reasons for the uptick in client interest in litigation finance – including the fact that it can free a litigant’s capital for core business purposes while allowing their balance sheet to “reflect more clearly the results from ordinary operations, including by removing spend in pursuit of a meritorious claim that usually will not increase income if realized.”
They reject the argument that some have asserted about litigation finance breeding frivolous litigation. “Reliable proof usually is not proffered with the argument,” they say. “The argument instead often reveals an unfamiliarity with litigation finance,” they continue, noting that developing such familiarity “does not require heavy lifting.”
The article also highlights the typical elements of a litigation finance transaction and considerations that litigators should bear in mind when counseling clients about funding. “Reputable commercial litigation funders,” they say, “enter into arrangements akin to an arm’s length financial transaction between sophisticated parties.” The non-recourse nature of the funders’ investments and ethical rules prohibiting funders from controlling the strategic or substantive decisions of litigants and law firms “allow more control than, as one example, in an ordinary relationship between an insurer and its insured,” says Robinson and Huyett.
Click to read Litigation Finance – A Useful and Important Option for Clients in Commercial Litigation