Let’s say you find yourself in a legal battle. You’ve got a solid case, but the expenses keep piling up that they overwhelm you. Does that mean you should agree to a settlement or simply bleed dry and get under a mountain of debt until you win?
That does not have to be the case when you’ve got litigation funding.
In this article, we’ll explore litigation financing and what you can expect once you apply for one.
Litigation Funding: A Definition
First things first – let’s demystify litigation funding.
Also known as litigation finance, litigation funding provides financial resources to a business or individual facing a lawsuit to cover litigation costs. In exchange, the funder gets a piece of the recovery benefits of the suit when they win the case.
Think of litigation funding as having a financial sidekick in your legal battles. And the best part is, you only pay them back if you win.
So, even if you don’t have deep pockets to pay for attorney fees and other legal fees, you get a fighting chance to seek justice against big companies without worrying about money, thanks to litigation finance company sponsorship. It levels the playing field for regular folks and small businesses.
6 Things to Expect When Seeking Litigation Funding
If you are planning to secure litigation funding, then you have to know what it entails and what you’re going to need, such as the following:
Litigation funders always start by asking the parties to sign a non-disclosure agreement (NDA). Think of the NDA as the foundation of building trust between the claimant, funder, and lawyers.
A confidentiality pact ensures everything remains under wraps, allowing everyone involved to share information freely and be on the same page. With this NDA in place, the funder can thoroughly evaluate the case’s strengths and decide if they want to back it up.
Initial Case or Portfolio Analysis
Once the litigation funding firm gets all the initial info and documents from the claimant or lawyers, they start looking into the case.
It’s like a first check to see if the case meets their funding requirements. But it’s not just that – they also quickly examine the case’s potential strengths.
The whole process differs depending on the funder, how tricky the case is, how much money they will invest, and what everyone thinks about sharing the risk. It’s a mix of detective work and decision-making, all to figure out if they will jump in and back the case.
Once everyone is on board to move forward, the litigation funding company might devise a term sheet outlining their potential financial investment if they decide to fund the case.
Term sheets vary depending on which financing firm you’re dealing with and where you are. Some may not be set in stone, while others might have specific rules like termination fees and exclusivity clauses.
Due Diligence on Law Firms
Reputable funders dig deep into the investment opportunity. They get into the nitty-gritty of the case – the strengths of the legal claim, how much money could be on the table, the chances of settling things, and how much cash is needed to handle everything.
Plus, they look into the background of the person bringing the case and their financial situation. They also check the law firm and lawyers handling the case to see if they have a history of handling similar cases.
Every litigation funding firm has a different process for due diligence. Some have in-house expert legal teams, while others bring in outside advisors to give a second opinion.
Funding Decision and Commercial Litigation Finance Agreement
The time it takes for a litigation finance firm to perform due diligence depends on what kind of investment they’re looking at. It usually takes weeks, as it involves forming an investment committee or other decision-making body that will listen to what the team pitching the investment has to say.
If the case looks promising and everything lines up, the team will likely give you a thumbs-up and hand over an agreement that sets things in stone and acts as an investment roadmap. If not, they’ll let you know, and you’ll be free to look for other funders elsewhere.
Post-investment monitoring differs from company to company, but they usually go for a laid-back approach. After all, they can’t boss around the lawyers or tell them what to do.
But they prefer to be kept in the loop on significant developments, like settlements or major changes in the case. They’ll check in now and then with the lawyers and the person bringing the lawsuit. Sometimes, they might ask for written updates when something important happens.
Since litigation funding firms know the ins and outs of the case, the lawyers and the person bringing the case might ask for some advice along the way, especially if the funding company has legal experience. They might also appear during mediations or hearings to give pointers or share how the funding agreement works in different situations.
Litigation funding can be the game-changer you need to put the odds in your favor in a skewed legal system. By partnering with a litigation finance company like Omni Bridgeway, you get a solid support system backed by experts knowledgeable about legal battles and the financing it entails.