Litigation investing, also known as litigation funding, refers to providing financing to a party involved in a lawsuit in exchange for an agreed return if the case succeeds. It has become an increasingly popular option for plaintiffs and law firms to manage litigation costs and risks. However, with many litigation funding companies available, it can be challenging to identify the best litigation investing partner. This article will provide key guidance on how to effectively evaluate and select the top litigation funding services.
Assess litigation funders’ experience, expertise and case success rate in your practice area
When evaluating litigation funding companies, it is critical to assess their experience and track record with cases similar to yours. Look for funders who possess deep expertise in your specific practice area, such as intellectual property, personal injury, commercial disputes etc. Examine their case portfolio to determine their success rate in delivering favorable litigation outcomes. Opt for established players who have funded a large number of cases over many years and consistently achieved high success rates.
Evaluate the litigation funder’s financial strength and ability to fully finance your case
You need a litigation funding partner who has ample capital reserves to provide financing through the entire duration of your case. Review the funder’s financial statements to assess their capital base, reserves and ability to meet funding commitments. Also assess their portfolio diversity to ensure your case does not represent an oversized exposure for them. Strong finances and portfolio diversification are key indicators that the litigation funder can fully support your case without financial constraints.
Understand the funder’s investment evaluation process and alignment of interests
It is critical to understand a litigation funder’s case evaluation and approval process to assess the fit. Opt for funders who undertake rigorous financial and legal analysis of cases before funding. This ensures your interests are aligned in pursuing claims with strong merit. Beware of funders who provide easy money without diligent analysis. Ensure the funder’s return metrics are tied to the case outcome to guarantee incentives are fully aligned.
Examine the litigation funding contract terms and fee structures
Carefully scrutinize the proposed funding contract terms and fee structures before committing. Review the repayment amount, payment schedule, contract duration and exit clauses in case of settlement or other outcomes. Ensure the proposed fees and profit splits entitle the funder to fair compensation based on capital invested and risks taken without extracting egregious returns. Transparent and fair contracts demonstrate the funder’s integrity and commitment to mutually beneficial partnerships.
Choosing the best litigation investing partner requires thorough due diligence on experience, expertise, financial strength, investment processes, and proposed contract terms. Aligning with an established funder with proven case success demonstrates strong judgment. It enables pursuing meritorious claims without compromising on finances or outcomes.