What is Litigation Financing?
When you are in a lawsuit, you look forward to the results turning in your favor. When you talk of litigation funding , it is a practice where a third party that is not involved in a case provides funding to the plaintiff involved in the lawsuit. Gaining lawsuit financing depends only on the merit of the case that you are involved in , this is because the person financing the lawsuit needs to be guaranteed of getting back his money with the settlement.
Funding companies look into the cases themselves as the funding is not a loan. It is better to look at a lawsuit financing as an assignment of the portion of the client in an event that they win the case that is at hand. The hard fact is that if money is lost when the case is lost . When it comes to a case being financed, some may question on the ethical nature of a lawyer referring a client to a lawsuit financing party.
Yes it is ethical if a lawyer refers a client to a lawsuit financing company provided they have no interest in the financing company. To polish off on the ethical requirements, the lawyer should not in any way profit from the transaction that is going to happen. The lawsuit company should also not be involved in the lawsuit in anyway. When the lawyer refers the client to the financing company , there are benefits for all the parties involved , some too obvious. It’s definitely a welcome intervention if a client will secure funding especially if there was no way to raise the money before the lawsuit financing company. Its unfortunate that sometimes the client is not in a position to finance the settlement case and in such situations, the input of litigation financing will highly be appreciated. To have the pre settlement advance is a process but not complicated at all. One needs to fill an application which will help the company to evaluate the lawsuit.
The litigation funding company will weigh the merits of the case and if any questions arise, the attorney representing the company will be called upon to answer the questions. The clients waits for a day or two after submission of the case documents to receive a verdict on whether the company will support the case. If the case is taken , the company will forward a contract to the attorney representing the case, here they will outline transactions , rates and how they will receive the money from the company. Sometimes litigation financing will be a post settlement advance , this means that a case has already been settled. Post settlement financing is due to time sensitive reasons such as insurance companies dragging their feet, court order approval or distribution protocol.