March 01, 2016

The Case for Litigation Financing

Its popularity is growing, and the author believes that not understanding litigation financing is no longer an option.

Christopher P. Bogart

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Quick: Name three things you know about litigation finance. Although not typically a betting man, I’ll hazard that what you know about litigation finance may be wrong—or at least due for an update.

Let me say that in a friendlier way: When I talk to commercial litigators, too often I hear old chestnuts of conventional wisdom that betray a continuing misunderstanding of what litigation finance is for, who should use it, and how the legal industry as a whole feels about it. This matters because litigators who remain misinformed miss out in ways that hurt their practices and their firms—as well as the clients they represent.

I’d like to correct three areas of misunderstanding that I think are especially damaging. First, a disclaimer: Having litigated at a large law firm and then served as general counsel for a Fortune 100 company, I’m now the chief executive officer of Burford, a firm that provides litigation finance, judgment enforcement, and other services to law firms and companies. Naturally, I’m a big proponent of litigation finance, and this article explains why in a way I hope will be useful for litigators.

Before addressing misunderstandings, it might help to start with a simple definition: Litigation finance generally refers to using the asset value of a litigation claim as the basis for a financing transaction. As I explain below, one very consistent thing about litigation finance is precisely its variety of models and approaches. One common feature is that most transactions occur on a non-recourse basis, either to clients or law firms. That means the financier loses its investment if the underlying claim or case is lost.

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