What is a Litigation Fund?
Litigation funding is when individuals or companies use money acquired from a third-party finance provider to cover their costs of litigation.
The covered expenses can include attorney fees, court-related expenses, and more. It’s common for the company to offer the funding party a share of the settlement if they win their case.
Read the rest of this article to explore litigation funds and how they work, what’s included in a litigation funding agreement, and how a lawyer can help you through the process of acquiring litigation funding to protect your rights.
What are the Benefits of a Litigation Fund?
There are various benefits of making use of a litigation fund. These include the following:
- Increased chance of favorable legal outcomes. If the company doesn’t have access to capital to dispute a well-funded defendant, it can result in losses. A funder can help them level the playing field.
- Financial risk reduction. Companies don’t have to take on the financial risks of going to litigation, especially since they don’t have to pay the funder if they don’t have a successful outcome.
- Financial relief. Litigation can be expensive, with many additional costs. The company can have various costs related to the lawsuit covered, such as their attorney fees.
- Improved settlements. By having more capital at their disposal, companies can potentially improve their negotiating power and reach a better settlement.
What are the Potential Risks of a Litigation Fund?
A litigation fund can pose certain risks, such as the following:
- Insufficient costs. A common litigation funding risk is that while the funder’s capital can be a significant amount, it might not be enough for the claimant.
- Request for funder control. Some funders might want a say in the company’s litigation strategy because they have invested in it. This can lead to disputes.
- Regulatory concerns. Regulations for litigation funds can vary in different jurisdictions, so it’s important to stay informed of all the various rules.
How Does a Litigation Fund Work?
Using litigation funding is a straightforward process that involves the following steps:
1. Case evaluation. The litigation funding company will consider the benefits of the case.
2. Drafting an agreement. The claimant (the company involved in the dispute) and the funder (the party providing funding) will write up an agreement, called a Litigation Funding Agreement (LFA). This agreement specifies the terms both parties agree to, such as how much funding will be provided.
3. Payment of funds. When the claim is successful or has been settled, funds will be paid to the third party according to the agreement terms. If the court case isn’t successful, it’s common for the money provided by the funder to not be returned.
What are Key Terms in a Litigation Funding Agreement?
There are some important terms that are usually included in a litigation funding agreement, such as:
- Funding amount. The agreement defines how much money the funder will provide.
- Non-recourse. This states that the funder will provide capital but won’t receive anything if the lawsuit isn’t successful.
- Return on investment. When there’s a successful legal outcome, the funder will receive a percentage of the proceeds. How and when they will be paid needs to be specified.
- Confidentiality. This term protects any sensitive information about the case. It should specify how the information should be handled, shared, and stored.
- Waterfall priority. This term refers to the structure of payments. It’s common for the funder to be paid first, followed by case lawyers, and others.
- Termination. This specifies the conditions in which either party can end the agreement. A common reason could be if the company’s legal risks or requirements change.
How Can a Lawyer Help You with a Litigation Fund?
A lawyer can help you in various ways with your litigation fund. They’ll conduct various activities to ensure a smoother process, such as:
- Assessing if your claim is valid for litigation funding as this will make it more appealing to a funder.
- Calculating the value of your claim, such as in terms of legal expenses.
- Explaining the entire process of litigation funding so you understand everything involved.
- Drafting a litigation funding agreement so that all terms are clear while protecting your interests.
- Helping you search for reputable litigation funders who are a good match for your dispute.
- Preparing all the necessary legal documents and evidence you need during your case.
- Responding to your funder’s questions and queries to ensure transparency and avoid misunderstandings.
- Helping you through disputes with funders should these arise, such as by representing you during arbitration.
- Negotiating the funding agreement if any terms are unfair or vague.
- Ensuring you maintain all decision-making rights.
- Defining your rights and duties if the case is unsuccessful.
- Keeping the contract and fund compliant with all relevant laws and rules.
Where to Find a Lawyer for a Litigation Fund
If you need to find a lawyer to help you with a litigation fund, you can find a reputable lawyer on ContractsCounsel, an online legal marketplace where clients connect with vetted lawyers who have the skills to assist them through the process of securing litigation funding.
You can also find a lawyer on the ContractsCounsel platform who will draft or review any funding documents you require, such as the litigation funding agreement. This will give you peace of mind that all terms governing the agreement are clear, reasonable, and legal.
Here’s how to request a drafting or review of your litigation fund agreement.
1. Go to the ContractsCounsel marketplace, where you can post your project for free.
2. You’ll receive multiple bids from lawyers directly on the platform who can assist you.
3. Review the lawyers' profiles. There’s lots of info on the platform to help you choose the best lawyer, such as their location, client ratings, years of experience, and field of expertise.
4. Connect with a lawyer you think is best suited to your requirements and hire them.
