Third Party Litigation Funding For Lawsuits
Get StartedExploring Third-Party Litigation Funding: What It Is and How It Works
Third-party litigation funding, also known as litigation financing, has become increasingly popular in recent years. It involves a third-party entity providing finances to a plaintiff to pursue a legal claim, in exchange for a portion of the eventual settlement or judgment. Here's a closer look at what third-party litigation funding is and how it works.
How does third-party litigation funding work?
Third-party litigation funding involves a third-party entity, such as a litigation finance firm, providing money to a party pursuing a legal claim. The third-party funder assesses the merits of the case and the likelihood of success before providing financing. If the case succeeds, the funders receive a portion of the eventual settlement or judgment. If the case is unsuccessful, the third-party funder absorbs the financial loss.
What are the benefits of third-party litigation funding?
Third-party litigation funding allows plaintiffs to pursue legal claims that they may not have been able to afford otherwise. It also provides an opportunity for plaintiffs to level the playing field against better-funded opponents. Additionally, third-party litigation funding can help to manage financial risk for plaintiffs, particularly in lengthy and complex cases.
Are there any downsides to third-party litigation funding?
Critics of third-party litigation funding argue that it can encourage litigation that would otherwise not be pursued, particularly in frivolous cases. Some also worry that third-party funders may interfere with the attorney-client relationship or unduly influence the case's management. Finally, there may be potential conflicts of interest between the plaintiff, attorney, and funder.
Litigation Financing FAQ
Answers to some of our most commonly asked questions.
Generally, third-party litigation funding is available to anyone pursuing a legal claim, including individuals, businesses, and organizations.
Third-party litigation funding is typically used for cases with strong merits, high stakes, and significant legal costs. These may include commercial disputes, intellectual property disputes, mass tort litigation, and international arbitration.
Third-party funders use a variety of criteria to evaluate the merits of a claim, including the strength of the legal arguments, the likelihood of success, the size of the potential settlement or judgment, and the legal costs involved.
Depending on the terms of the agreement, third-party funders typically receive a portion of the eventual settlement or judgment, usually ranging from 20 to 50 percent.
If the case is unsuccessful, the third-party funder absorbs the financial loss and receives nothing in return.
Yes, third-party litigation funding is legal in most jurisdictions. However, regulations governing such funding may differ from place to place.
No, third-party funders are not permitted to influence the outcome of a case, and the attorney-client relationship remains intact. However, funders may require certain conditions in the funding agreement, such as periodic updates on the case's progress.
Yes, there are potential ethical considerations with third-party litigation funding, particularly regarding conflicts of interest between the plaintiff, attorney, and funder. Some jurisdictions require transparency regarding third-party funding arrangements to address these concerns.
