As more funders enter the market, litigation finance deals are growing in complexity. In an article that was published in Law360
, Julia Gewolb, legal counsel at Bentham IMF, outlines key questions on the economics of single-case funding that all claimants should carefully consider when comparing funding terms.
One of the fundamental questions is how much funding is needed to see the case to conclusion, and how will it be divided among the funder, claimant and counsel. This is crucial because “all the economics of the deal will flow from how much each participant is contributing” says Gewolb.
Another key consideration is determining the realistic value of the case, and whether that value supports a healthy return. Gewolb explains that “if pursuing the litigation costs as much as the case is expected to yield in damages or settlement, it will not be a good candidate for litigation funding.” She points out, “even where the expected damages clearly exceed the funding required, a case may not be right for funding if the lawyers’ contingency fees and the funder’s return combined eat up the lion’s share of proceeds.”
In the article, Gewolb provides a useful set of specific questions to ask to determine funding viability, as well as an example of a basic funding model to use as a roadmap for evaluating funding proposals.
Read the full article here
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