Updated: January 3, 2024
Commercial litigation finance can be useful when a business has a legal claim against an entity that has wrongly injured the business, but the business either cannot or does not want to pay the high fees and costs of litigation. In return, the finance provider receives a portion of the proceeds from the lawsuit if it is successful.
Why would this be attractive to a business with a strong case? Litigation is expensive. Litigation is risky. The business may not have adequate funds to litigate against a much larger opponent, or it may prefer to use its surplus funds for operations or R&D rather than litigation.
Regardless of how strong the evidence is in a case or the quality of a legal team, every lawsuit brings with it significant costs and a real risk of loss. Companies focused on risk management may wish to hedge the risk of walking away empty-handed at the end of the case after spending millions of dollars on it. Sometimes the daunting risks and expense can be enough to prevent plaintiffs from bringing even the strongest claims to court. Litigation finance can help level the playing field and mitigate some of the risk associated with a lawsuit.
In short, litigation finance provides funding for the costs and fees associated with a lawsuit. Funding is often needed for the continuance of proceedings in many large cases. This allows a litigant to pursue a case through a final judgment or appeal and focus on the merits of the case. Litigation funding can be a key ingredient that enables cases to move forward without disruption.