© 2017 The Texas Lawbook.
By Eric Chenoweth, Investment Manager and Legal Counsel, Bentham IMF
Law firms motivated to deliver increasing value to clients have a new solution in litigation finance. Long used by private parties in Texas as a financing vehicle for meritorious claims, funding of litigation claims has moved into the mainstream, with well-capitalized public companies focused on helping comercial litigants see their day in court.
Law firms often play a crucial role in steering litigants towards financiers who can provide non-recourse funding to cover attorneys fees, expert costs or other business expenses, collateralized by a commercial litigation claim.
The clients that stand to benefit most from funding are those who bring plaintiff cases or would bring them, if they had the resources to do so without significant cost to their companies. While this often means that funding is most appealing to small- to mid-sized companies and individual clients, it is useful to large companies as well.
Though they may not find themselves in David-vs.-Goliath battles, large companies hesitant to bring affirmative (plaintiff-side) cases because of the expenses and risks involved can instead turn to funding to assert their rights without stressing their legal department budgets. Even companies that could afford the high cost of plaintiff-side litigation use litigation funding because it offers benefits from a cash-flow perspective, with less negative impact on a company’s bottom line than traditional hourly billing arrangements.
Clients of all sizes are increasingly demanding alternative fee arrangements and are looking for outside counsel to be business partners in the risks and rewards of litigation. General counsel, who have budgets like everyone else and who must answer to senior executives for litigation spending, need firms to provide more predictability and value for less money. Litigation funding positions firms to be true solution providers to their clients by sharing risk while helping them litigate and win cases, compete more effectively in the marketplace, and even generate profits through litigation.
Litigation funding can also make a critical difference in a client’s decision about whether to bring an appeal when they are dissatisfied with a judgment. Suggesting the use of litigation funding to finance the appeal could help a client get the results they set out to achieve when they decided to bring the case in the first place.
When clients use litigation funding, they can access top-tier lawyers that they might not otherwise be able to afford. The lawyers, in turn, typically win the trust of the clients by demonstrating a true understanding of the risks and costs of litigation and a cost-effective plan for remedying the legal challenges their clients face.
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