The fifth installment in our 6-part Lawline Friday Funding video series examines a common issue facing counsel today – the rising cost of litigation. With pressure for lower fees and a high efficiency rate, coupled with steep competition in the market, firms are looking to incorporate litigation finance to meet client demands without compromising their bottom line.
Stevens & Lee P.C. attorneys Eric Robinson and Daniel Huyett discussed this very point in a recent Law 360 article, where they urged litigators to discuss litigation finance with their clients, describing it as “a subject that litigators ignore at the risk of a client relationship.” The Norton Rose 2017 litigation trends annual survey also reflects this sentiment. As the use of alternative fee arrangements was used by over 50% of survey respondents, can you afford not to include litigation funding in your legal toolbox?
(text adapted from video)
Jim Batson: Large out of pocket expenses - just the cost of litigation, putting aside the legal fees - is getting greater and greater. Expert fees are going up. We all know how e-discovery has burgeoned in the last five to ten years, such that the cost of just the electronic discovery part of the case can be exorbitant. Clients don't always want to pay that. But the law firms, many times even if they'll defer all or part of their hourly fees, aren't willing to spend the money for the out-of-pocket expenses and insist that the client pay that. It's an alternative financing.
More and more, we're seeing corporate clients who could afford the litigation using litigation funding as an accounting or corporate finance tool. For instance, if a legal budget is going to need to be increased two-fold or three-fold, if a company's going to take on an affirmative litigation, sue somebody that's wronged them, the board, the shareholders may say, "Woah, hold on. We don't want to double our litigation budget. We need that liquidity to work on our operations. We may think it's a great case, but our business isn't in evaluating litigation. Our business is in making cars or producing something or what have you, inventing things." More and more, Fortune 500 companies are saying to their lawyers, "We would like you to get a litigation funder for this."
That way, if the case is unsuccessful, it doesn't hit their bottom line. And the years that the case is progressing, they don't have to have this large expense item on their balance sheet. Of course, at the conclusion of the case, if it's successful, then their recovery is less, but that's well worth the risk management.