Litigation Finance In The USA: A Comprehensive Guide
Litigation finance has emerged as a powerful tool in the legal industry, providing businesses and individuals with the financial support they need to pursue meritorious legal claims.
In the United States, the practice of litigation finance has gained traction, offering a level playing field for claimants and enabling access to justice. Read on to discover the intricacies of litigation finance in the USA and how reputable litigation finance companies can help.
What is Litigation Finance?
Litigation finance, also called litigation funding or dispute finance, involves a funding firm providing capital to claimants, law firms, or companies to finance their legal claims. This capital is collateralized solely by the future proceeds of the cases or legal claims. The purpose of litigation finance is to level the economic playing field by providing financial resources to claimants who may not have the means to pursue their claims otherwise.
Categories of Litigation Finance
In the USA, litigation finance can be categorized into two main categories: consumer litigation financing and commercial litigation financing.
Consumer Litigation Financing
Consumer litigation financing primarily focuses on non-recourse cash advances for individual consumer cases and personal injury plaintiffs. Typically, these cash advances are repaid along with litigation fees if the plaintiff recovers any proceeds from their legal claims. The dollar amounts involved in these transactions are relatively lower.
Commercial Litigation Financing
On the other hand, commercial litigation finance encompasses a broader range of cases and investments. It involves non-recourse investments in various types of large commercial disputes brought by companies or individuals. Litigation funders may also support the following:
- contract disputes
- international arbitration matters
- the monetization of trial awards on appeal
- the purchase of law firm receivables and judgment enforcement campaigns
Commercial litigation finance often involves sophisticated claimants who have prior experience with litigation or arbitration. Some may also require substantial investments in the multi-million-dollar range.
Types of Litigation Finance Arrangements
Litigation finance arrangements can take different forms depending on the circumstances of the claimants.
The most common types of litigation finance arrangements include:
Single-Case Financing
Single-case financing provides capital for litigation costs and working capital to support a single case or arbitration. It can cover attorney fees, expert witness fees, court reporter fees, and other case-related or litigation expenses.
Single-case litigation finance can also be used by defendants. The funder and claimant agree on an appropriate non-recourse return structure.
Portfolio Financing
Portfolio financing involves providing lawsuit financing for multiple cases of a law firm or company. In the case of a law firm portfolio, the funder's investment and return come from the legal fees collected from any of the portfolio cases.
For a corporate portfolio, the litigation finance firm is typically paid from any recoveries in the disputes or through pre-agreed arrangements. Portfolio funding can also be used to fund defense-side cases, with recoveries coming from plaintiff-side disputes.
Multi-Party Financing
Multi-party litigation funding, popularly known as lawsuit financing for group claims or class actions, is available in non-US jurisdictions. It typically involves providing finance for an action against a defendant on behalf of a group or representative(s) with similar claims.
Multi-party funding is suitable for a range of claims. These include securities/shareholder actions, environmental disputes, and product liability actions.
Reputable Litigation Finance Companies
When seeking litigation finance in the USA, it is crucial to work with reputable and trustworthy litigation finance companies. These companies undergo a rigorous due diligence process. They do not attempt to control or direct the litigation.
Reputable litigation finance firms implement comprehensive underwriting processes to assess the merits of the cases and ensure ethical practices. They also provide transparency and clear communication throughout the funding process. This offers valuable insights and guidance to claimants and their legal teams.
Omni Bridgeway, for instance, provides financial support to claimants, law firms, and companies involved in legal disputes. With extensive experience and expertise in the field, they offer tailored services to meet their client's unique needs.
Their services include litigation finance, arbitration financing, dispute funding, and bankruptcy support. The litigation funding firm conducts thorough due diligence to assess the merits of the cases and works closely with clients and their legal teams throughout the process. With a commitment to transparency, integrity, and ethical practices, they serve as a trusted partner in navigating the complexities of consumer and commercial litigation funding.
Final thoughts
Litigation finance has revolutionized the legal landscape in the USA. It provides a means for businesses and individuals to pursue a meritorious legal claim without burdensome financial risks. By offering non-recourse financing, access to legal expertise, and flexible funding options, litigation finance levels the economic playing field and promotes access to justice.
Reputable litigation finance companies like Omni Bridgeway play a crucial role in supporting claimants, law firms, and companies throughout the litigation process, ensuring fair and equitable outcomes.
If you are facing a financial litigation challenge, consider the benefits of litigation finance. Also, explore how litigation funding firms can help secure the financial support you need to pursue your legal claims.
