In its early days (not so long ago), litigation finance entailed a straightforward proposition. A claimholder with a meritorious claim, but without the resources to litigate it, would seek funding from a litigation finance provider. The funder would conduct due diligence on the claim and negotiate investment terms. If the claim succeeded, the funder would recoup its principal, plus a return; if it failed, the claimholder would walk away with no liability. Funder and claimholder had no particular expectation of any longer-term partnership.
This type of one-off, single-case funding is still going strong today. But the field of litigation finance has expanded considerably, and funding now comes in a variety of flavors. A growing proportion of funding deals involve neither a single case nor a poorly-resourced claimholder. Today, entities seeking funding are often more concerned with managing risk than with acquiring sufficient resources to litigate.
This article will explore three growth areas in the current funding landscape: (1) deals involving funding for larger corporations, (2) law firm portfolio funding, and (3) acquisition of claims by litigation funders. Lake Whillans has extensive experience investing in each of these structures.
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