What is Litigation Finance?
The growth of litigation finance. Litigation finance (sometimes called litigation funding) is an investment in a lawsuit or pool of lawsuits by a third party with no interest in the case. In exchange, the investor receives a contingent share of proceeds from a settlement or judgment without any control of over the litigation strategy. What’s been happening is that good claims are often not being pursued because of the initial expense required to determine whether or not an action is eligible for litigation funding is cost prohibited. If a claim has merit, Verum has the resources to determine which of the litigation funders is the best to approach related to their own funding criteria and case interest.
Today, litigation financing is on the rise not only for the purposes of backing under-resourced plaintiffs, but also for large corporate clients seeking to utilize their capital for projects other than financing lawsuits and to better manage their balance sheets. Verum works with these clients, too. Law firms are beginning to value this fee structure as a new business tool to keep them competitive, and in-house attorneys see litigation finance as a risk management tool for the companies they advise. In fact, a legal-central global finance management firm, issued a report in 2018 revealing that there has been a 237% increase in litigation finance over the past six years.
Litigation finance is a three-billion-dollar industry that provides investment capital for lawsuits to increase access to legal services and improve the legal system. Lawsuits can be highly profitable assets. Venture capitalists financed class-action, medical-malpractice, personal injury lawsuits against wealthy big businesses and insurance companies to put justice within reach of medical malpractice clients. Venture capital can pay for the investigation of defective products, the cost of expert witnesses, and victim’s living expenses while awaiting trial. Citigroup reaped an $11 million profit on their $35 million investment in personal injury lawsuits for first responders on the scene of the September 11, 2001, terrorist attacks.
Class Action Lawsuits
Litigation funding paid for research which linked Monsanto Roundup, grass and weed killer, to lymphoma and other cancer. Class action suits for frequent users of Roundup, who developed cancer, began. The federal court consolidated the Roundup Monsanto class action suits in 2016. A San Francisco jury ordered Monsanto to pay $289 million to Johnson, a school groundskeeper who used Roundup for decades. Because Monsanto intentionally did not list the cancer-causing ingredient, glyphosate, on Roundup’s label, the jury ordered Johnson’s cancer treatments paid.
Verum Funding also publicized the Monsanto Roundup case, offered early advances on the roundup class action lawsuit payout, and opened the door to the possibility of compensation for life-time lost wages, pain and suffering, and the personal losses of the victims and their families. Similarly, our funds contributed to the Ethicon, Atrium, Johnson & Johnson, C.R. Bard defective abdominal mesh litigation, IVC filter lawsuits, Opiod lawsuits, and other class action suits. Employment class action suits for employees not paid overtime, denied breaks, or not compensated for employment related expenses may be financed.
If you’re a class member eligible for damages from Roundup Montsanto, manufacturers of defective hernia or vaginal mesh, IVC filter failure, unfair employment practices, or any other class action lawsuit, Verum Funding offers pre-trial cash advances for your medical bills, living expenses, and medical supplies. Verum also funds automobile accident victims, nursing home lawsuits, elder abuse cases, and intellectual property litigation.
A breach of contract or a large customer suddenly filing for bankruptcy can destroy a small business. Bankruptcy trustees see businesses, nearly destroyed, and destitute indigent individuals every day. They lack a few thousand dollars to solve their financial problems and prosper. Private individuals who invest as little as $100 or $1000 in civil litigation earn huge payoffs when they help lawyers defeat wealthy defendants.
If you get a notice that a business that leases your vehicles, machinery, or printers has filed for bankruptcy, you need to secure and recover your assets. If your customer filed a Chapter 11 bankruptcy to reorganize, he hopes to lower his payments by increasing the duration of his or her debt as a loan.
Verum Funding understands the value of your cash flow. Our financiers can pay for your bankruptcy litigation and advance you operating funds. Bankers don’t know the value of your lien portfolio. A legal financier with advanced understanding of the rules of the bankruptcy court can evaluate your debt in an initial consultation. The legal fund’s Super Lawyers can refer you to a debt collection attorney. Their debt collection attorney can locate assets, hidden or transferred, 90 days prior to filing for bankruptcy to recover your assets and collect your money with interest and attorney’s fees as a legitimate creditor.
Financing for Small Businesses
The New Yorker introduced a lawsuit funding startup for small businesses that uses equations to calculate the value of a lawsuit considering the number of cases before the judge and the judge’s past decisions. Using their deterministic model, the length of time before the case goes to trial and how much it is likely to pay determine your financing options. When a water pipe broke in her bakery, the dismayed owner had to sue her insurance company who delayed settling her claim. She couldn’t afford to settle for less than the full amount of the damages. Litigation funding enabled her to reopen her bakery and forced the insurance company to reimburse her for her losses.
Lawsuit Financing Options
At least 25% of all the law firms in the United States finance at least some of their litigation. Third-party financing is purchasing assets: it’s an investment not a loan. Funds for litigation relieve the pressure of prolonged protracted discovery phases with frequent motions hearings and the need to settle for less as your court date is delayed or postponed. Funds may be paid:
- Directly to the plaintiff: Consumer funding to the plaintiff in the form of a cash advance is the most lucrative form of lawsuit financing for the investor.
- To fund a portion of the costs of your lawsuit: Financial intermediaries fund doctors who treat patients on medical liens. These funds may cover ongoing costs like the production of records, depositions, court reporters, and court costs.
- Through a line of credit to your law office: A creditworthy law office can get a line of credit with an annual interest rate as low as 3.5 percent. Multiple funding streams are available.
Lawsuits – Expenses
Civil litigation is expensive, and plaintiffs can’t afford to lose their legal disputes. Financing options are endless. A lawsuit financier can advance cash living expenses to a plaintiff to be repaid with interest from his or her settlement or judgment. This type of funding is least expensive for the plaintiff and high yield for the investor. A cash advance compounded monthly may bring $2,500 on a $5,000 investment in less than six months when the plaintiff wins.
If plaintiffs and third-party financiers are illegal in the state of jurisdiction, financiers can extend a line of credit to your attorney’s office on your behalf. Your contract can specify how the money is to be used, for example, on attorney’s fees and costs. The plaintiff agrees to repay these costs from his settlement or judgment. The legal advance may be a prioritized secured debt, and it’s not subject to usury laws. The fund can be a revolving line of credit to the law firm with monthly installment payments.
Balance Sheets – Debt Capacity
The case and the law firm’s balance sheets guarantee or secure the financier’s lien. Depending on how the contract is written, the law firm may repay the total amount financed regardless of individual lawsuits. Most law offices minimize funding. Legal funding originated in the late 90s. It revised champerty laws and created a new class of high dollar assets which aren’t subject to market fluctuations or tariffs.
Legal financiers increase public awareness of your lawsuit, which can cause your defendants to settle quickly. Defendants are notified when a case is financed that investors fully support the merit of the plaintiff’s case. The financiers online listing raises public awareness of your law firm and causes more clients to come forward.
In other cases, lawyers have argued that legal financing is protected from disclosure by the attorney-client privilege. Courts have upheld the confidentiality of litigation finance transactions as part of the work-product exception.
Ohio’s hospitals place medical liens on the residences of emergency room patients who don’t pay their bills. The hospitals can’t foreclose on the homes, but they can collect the unpaid balance plus interest when the home is sold. Most healthcare providers require health insurance or payment when services are rendered. Lawyers can use medical liens to ensure that doctors, therapists, and hospitals treat their personal injury patients. Clearly, these patients with liens on their homes need legal representation to preserve their rights. Third-party financing may be the only way they can access legal advocacy.
Doctors who treat patients on liens don’t usually cause accident victims’ further hardship by demanding payment if the patient doesn’t receive an adequate settlement. Doctors are aware of the disadvantages of treating patients on medical liens. They may never get paid for their emergency services.
It takes years to settle or win a judgment in a personal injury case. The doctor may eventually recover less than the full cost of the services rendered for the treatment they and their office staff provided. When doctors are paid out of personal injury settlements, they can bill at rates the attorney considers “customary.” The doctors aren’t forced to lower their rates to satisfy insurance companies.
Preferred Health Care Providers
Health care providers’ records disclose information about the patient’s past, present, and future health. Medical records disclose the costs of treatment but not the patient’s credit card or insurance information. Experienced health care providers include annotated photographs in their doctor’s notes written during treatment when they know their records might be used with testimony in court. Doctor’s diagnosis and treatment notes are impossible to refute. Experienced health care providers know exactly how to answer questions in court and what to say in deposition. They know how to answer questions during cross-examination. They command high fees when they testify as expert witnesses.
Even the most experienced lawyers will tell you: no one can predict the outcome of a jury trial. A jury trial will expose every flaw or inconsistency in your case. Your brain-damaged client, entitled to compensation at settlement, is either not very intelligent or very badly injured. The jury will decide. Juries consider evidence. If an insurance company declared a test or procedure not medically necessary, it might not be admissible as evidence in court. Just because defendants accept liability for accidental injuries does not mean they will willingly pay all your major medical expenses.
Catastrophically Injured Patients
Experienced personal injury lawyers send their catastrophically injured patients to doctors they trust. Attorneys help patients gain access to necessary treatment. Physicians medical records are used to prove liability for accidents, but they are much more than that. Doctor’s records determine what services and benefits catastrophically injured patients need. Experienced doctors are best able to assembles the medical proof that the patient is permanently disabled and prior medical records are needed to prove that the patient functioned on a much higher level before the accident. Expensive specialists can be paid from lawsuit funds in hopes of helping your disabled loved one to a better quality of life. If no insurance company is involved, the doctor does not need authorization to proceed with treatment. The lawyer can send a demand for compensation based on the doctor’s diagnosis and medical bills.
Financial intermediaries finance medical liens in wrongful death cases or when clients are catastrophically injured. The intermediaries look for high limit insurance policies to cover litigation costs, and they invest in experienced attorneys who win personal injury cases. Health care providers and medical facilities understandably have a debt capacity, but their medical liens are assets. Financial intermediaries may pay doctors, hospitals, and other medical facilities from $50K to $500K in these cases. The financier helps health care providers:
- Improve their cash flow
- Eliminate risk
- Serve more patients
- Purchase medical equipment and supplies
The financial intermediary, then, holds the medical liens in the personal injury case. The doctor and hospital bills are paid. The financial institution gains interest on their investment as the lawsuit progresses. The financial intermediary may expect 66% of the settlement or a lump sum from the proceeds of the personal injury judgment. The intermediary, or medical receivables firm can:
- Reduce providers’ administrative costs
- Underwrite an entire portfolio personal injury cases
- Refer medical lien personal injury cases to the health care providers
- Refer medical lien personal injury cases to experienced attorneys
Intellectual Property Litigation
We specialize in patent litigation funding. You must have a clear-cut cause of action and pass our due diligence check to obtain funds. You must:
- Provide your patents, trademarks, or copyrights in dispute
- Name the defendants
- Request an amount of money
- List expert witnesses and their hourly rates
- Succinctly state the dispute
Financing Commercial Litigation
As lawyers strive to improve laws and the legal system, prominent legal scholars refine the business, legal, and ethical aspects of the legal funding industry. Lawyers financially support organizations which provide legal services to victims and others with limited means. Though investors have subsidized lawsuits for many years, the third-party financing of civil litigation is an under-regulated or a self-regulated industry. Lawsuit funding has increased the number of lawsuits filed annually in the United States. Lawyers as officers of the legal system are responsible for ensuring that commercial litigation funding is ethically administered and improves the quality of justice.
Taxation — Dispute Resolution
Legal funds can save taxpayers embroiled in disputes. Legal funds can mean the difference between criminal charges and restructuring and recovering assets. Tax problems can tear families apart. Accountants and tax attorneys can help develop a strategy to approach the dreaded IRS tax audit. Legal financing brings peace of mind and assurance that a skilled attorney cares and can help them achieve financial security suddenly threatened by the IRS.
Breach of Fiduciary Duties
On the personal or business level breaches of fiduciary duties, formation of trusts, and assuming responsibility for loved ones when another suddenly enters a nursing home or is unable to care for him or herself is an expensive endeavor incurred during times of grief. Our financial services can help you decide where to turn and give you the extra money you need to act in the best interest of your loved one or while your loved one’s estate is in probate court. Our underwriters can meet all your estate needs.
If you are in the throes of a sudden legal problem, our experienced staff of highly respected lawyers knows how to help you with our financing services. Verum Funding takes the complexity out of litigation finance. Clients aren’t expected to understand the complexity of all legal problems. Our staff can help you strategize solutions to your legal and financial problems.
Verum Funding can finance law firms and diverse businesses involved in complex commercial civil litigation from intellectual property and trade secret cases to complex business disputes with international arbitration. Our third-party funding may be the only way a legitimate plaintiff can get legal representation.
In criminal cases, our funds can be used for pre-trial investigations, locating additional witnesses, and promoting public safety while preserving the defendant’s rights. Even simple criminal cases effect multiple aspects of the defendant’s life. An attorney capable of analyzing all parts of the equation is possible with legal funding.
Commercial litigation is often more expensive than it appeared at the onset. Financing commercial litigation can help with unforeseen complexities, additional costs, and delays. Verum non-recourse financing adds value to your business enterprise or law firm. You can use Verum venture capital to expand your business or acquire more working capital. Our underwriters finance state and federal litigation and appeals on all levels.