Third Party Litigation Funding For Lawsuits

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.