What Types of Litigation Finance Are Available? | Steno

The rise of litigation financing is inspiring more plaintiff’s attorneys to investigate the benefits of seeking outside investment to build a strong case for their clients. However, it can be intimidating to decode exactly what litigation financing options exist and what circumstances must be met for attorneys to access them.

In this article, you will learn what types of litigation finance are available for attorneys and their firms’ case funding needs.

Commercial Litigation Finance: The Industry Standard

Commercial financing is typically a non-recourse investment in commercial disputes where the claimant is a company or an individual. Generally, the claimant agrees to pay a portion of the recovery to the funding organization.

Commercial litigation funders typically provide capital for high-value, complex cases, including:

  • Antitrust
  • Breach of Contract or fiduciary duty
  • Intellectual property
  • Insurance

Parties are typically business entities with sophisticated counseling. On average, commercial litigation financing is in the $ 1 million range.

What Are the Most Common Types of Commercial Litigation Finance?

There are many types of commercial financing, but single-case and portfolio financing are most common in the United States.

1. Single-Case Financing

This type provides capital for legal finance and expenses to support a single case, with a non-recourse return structure.

Single-case financing can cover fees incurred by the claimant’s lawyers and cover costs related to e-disclosure, expert witnesses, and court fees.

2. Portfolio Financing

A legal finance portfolio usually consists of four or more cases litigated by a law firm or company on a full or partial contingency basis. There is no limit to how many cases comprise a portfolio.

For firms, investment recovery occurs when one or more of the cases in the portfolio closes. For corporations, the investment is repaid from future recoveries or according to the terms of the original agreement.

Portfolio funding agreements can be used to fund cases for a plaintiff, defense, or a mix of both. The portfolio is constructed by evaluating the risk and return on a group of cases.

Prominent commercial financing companies include LexShares, Burford Capital, and Pravati Capital.

Innovative Litigation Financing: The Modern Alternative

The traditional financing options discussed do not address the needs of firms representing plaintiffs in personal injury, employment, and other cases with lower expected outcomes. Plaintiff’s firms looking for a micro-investment are left with few favorable financing options.

Court reporting and litigation support services represent a considerable portion of a firm’s investment in any case.

To address this need, innovative legal tech companies are starting to provide deferred payment court reporting and litigation support services.

Do Any Regulations Exist for Innovative Litigation Financing?

In states where regulations allow it, innovative litigation financing services are non-recourse; no payment is due if the case doesn’t resolve in favor of the plaintiff. This map denotes states that have regulations permitting or prohibiting non-recourse financing for court reporting and litigation support services.

Innovative Litigation Financing on the Rise

Innovative litigation financing is growing in popularity due to it offering greater flexibility and funding opportunities for firms of all sizes.

On average commercial litigation, funders invest $ 1 million in a case or portfolio. Consequently, these litigation investors are more likely to partner with larger, more established firms with a proven expansive case history.

Innovative financial litigation tends to offer investments under $ 10,000 per case. Since their investment expectations are lower, smaller law firms and private practices have a greater chance of receiving funding through this litigation option.

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