The economics of litigation is changing. In view of the rising cost of heading to trial, the increasing length of time between complaint and final resolution, and the modernizing attitude of the bar, Third-Party Litigation Funding (TPLF) is gaining traction. TPLF companies advance funds using anticipated recoveries from commercial lawsuits as collateral. This funding takes the form of non-recourse investments. That is, the financing is repaid by a litigant borrower only in the event there is a favorable resolution upon completion of the litigation. As compensation, the TPLF companies receive specified fees, often calculated as a percentage of any settlement or judgment. When provided to plaintiffs, TPLF promotes access to justice by enabling plaintiffs with good cases but insufficient funds to bring lawsuits they otherwise may be unable to afford or would rather not self-fund, and to avoid premature settlements at a discount due to an exhaustion of their funds. When provided to defendants, TPLF allows corporations who can afford to litigate, but who may not want the expense, to hedge the costs. TPLF allows both parties to shift the risks of litigation.
Background
The rise of industrialization in the United States in the 1930s brought an increasing number of claims requiring legal representation, and with that, attorney contingency fee arrangements became more prevalent. TPLF differs from attorney funding because the TPLF companies are not providing a service for a fee, but rather are investing in an asset. The TPLF companies call this "monetizing commercial legal claims."
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
