Litigation funding means a third-party investment company provides the capital to fund a case in exchange for a profit or share in the earnings. The steps in a litigation process are very specific in determining which cases could benefit the most from this type of financial funding. As the plaintiff, be familiar with this process because it could help when you need financial help.
Can the Case Benefit From Litigation Funding?
While litigation funding is not necessary for all cases, a prolonged case can have a lasting financial impact on the plaintiff. The first step in this process is determining if your particular case can benefit from this funding. In a scenario where you cannot find financing, the probability of defending a claim with limited capital is very low.
To decide if this type of funding is best for a case, ask yourself the following questions: Is there currently a budget for representation? Do the plaintiff’s chosen firm’s resources match the opposing counsel’s resources? Do litigation funding companies usually invest in this type of claim?
Submitting a Case & Signing a Non-Disclosure Agreement
When a case is ready for submission, ensure you provide as much information as possible. The finance company will have the complete picture of the case, which they can match against their company’s criteria to decide if your case is suitable to fund. Provide the following information in your submission:
- Case type
- Details on legal teams from both sides
- State of the litigation process
- Jurisdiction location
- Documents and materials
Once you reach the step in the litigation funding process after submitting a case, you are to sign a non-disclosure agreement (NDA) to maintain confidentiality. Signing this also strengthens the protection of communication between the attorney and finance company. An NDA helps prevent the opposing council from discovering these communications. Although it is possible they might, an NDA would help tremendously.
Start the Diligence Process
After a non-binding agreement is reached with the funder, they can start the diligence process by juxtaposing the case against assorted variables. Finance companies will look at these variables to see if their investments will provide a return. There are many myths within the litigation funding process—understand that these myths, such as funding prolonging a case, are not accurate to how the process works.
Negotiate an Agreement & Monitor Investments
Finally, once the funder accepts the case, you must sign and conduct a negotiation agreement to ensure the funder cannot gain control over the litigation strategy, secure fair pricing, decide on a recourse or non-recourse, and inhibit the funder from receiving a majority of the recovery.
After the case is funded, the attorney must monitor the investments and communicate with the finance company about any updates or developments.
Because each individual case is unique, litigation funding may or may not be the solution for financing your case. Now that you understand this process better, it will be easier to determine which cases will benefit from this type of funding. Do you believe your case could benefit from litigation funding?