In recent years, we have witnessed an increasing number of law firms taking on contingency cases. However, this choice does not come without its own set of challenges and risks. Delays in fees, the potential threat of loss, soaring out-of-pocket costs and the possibility of going years without revenue represent only a portion of these risks. Additionally, this practice can cause irregularities in the revenue flow of firms.
So, what drives these law firms to explore the terrain of contingency cases? The emerging trends suggest that law firms are resorting to litigation funding as a buffer to mitigate these risks. Examining the benefits and risks of litigation funding and undertaking a thorough investigation of successful models in cost and risk sharing may provide some comprehensive answers to this question.
As we delve deeper into these trends, it is also crucial to understand how funding functions as a tool in different types of law firms and compare their usage. For more details on this intricate scenario and its implications for law firms, jump to this article which provides a well-rounded perspective.
On the other hand, the field of law practice is experiencing a degree of turbulence, as AmLaw 200 firms endeavor to stay afloat amidst the pressures of maintaining profitability. The downtrend in the M&A and other transactional work that formed the backbone of firm revenues has resulted in a decrease in profits per partner. This has led to the dissolution or the merger-out-of-existence of many notable law firms.
As firms strive to increase their revenues, lateral partners with prospective clients are being actively pursued, creating an unprecedented lateral market. Coupled with the burgeoning public nature of the law firm and per-partner profitability, these factors have created a fiercely competitive environment. A firm’s ability to retain and attract the best legal talent is now highly contingent on their competence in displaying consistently robust numbers.