Unequivocally, litigation funding is a crucial mainstay in securing equitable judicial procedures. It levels the playing field in litigation broadening access for individuals and smaller businesses against more formidable, monetarily advantaged adversaries. The counterproductive consequence of imposing heightened public disclosure regulation on these funding arrangements is an unwarranted disadvantage.
Legal representation is costly. The expense of enlisting a lawyer capable of contesting with large corporate lawyers, who sometimes incur charges upwards of $2,000 an hour, is unfathomable for ordinary citizens and resolute small businesses. The supporting pillar of litigation funding, therefore, is undeniably indispensable in providing this demographic a fighting chance.
In recent years, even Fortune 500 companies, academic institutions, and businesses of all scales, have reaped the benefits of litigation financing. This has been formally recognized by our court systems – a laudable instance being a finding by New York Supreme Court Justice Eileen Bransten. She asserted that litigation funding enables lawsuits to be adjudicated on their merits rather than on which party is more financially equipped or possesses a higher tolerance for prolonged litigation.
Funders confer the required liquidity for legal remuneration and critical litigation expenditures. Indeed, most concurred funding is non-recourse rather than a loan, where the invested principal is returned only when the litigation is successful. Therefore, funders typically vet only the most meritorious cases that are exceedingly likely to result in favorable outcomes.
Often regarded as an intricate, high-cost legal challenge, patent litigation exemplifies a case heavily dependent on litigation funding. Without this resource, only the supremely affluent would be capable to present their appeals before an impartial jury. Additionally, ain that litigation finance drastically ameliorates the quality of legal settlements.
Disclosure of all aspects of litigation funding, like the intricate details of the funding agreement, puts the funded parties at a disadvantage, handing over their litigation strategies to opposing parties. Since these funded cases generally have a robust underpinning, it would be impractical and unmerited to inflict the burden of disclosing every investor detail.
A worthwhile concern indeed, is to ensure that the funder cannot control the course of litigation or settlements, preventing the attorneys from having any conflict of interest. However, the task of constantly ensuring the independence of the attorney is one that can be managed more effectively by the courts.
The negative implications of rendering the litigation financing process cumbersome and disadvantageous through excessive disclosure requirements far outweigh the intended regulation. A lofty requirement such as this has the likelihood of severely limiting the average citizen’s and small company’s access to justice.
Note: The views and opinions expressed in this article do not necessarily represent the stance of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Written by Erick Robinson, partner and chair of the intellectual property and chair legal finance practices at Spencer Fane. The original article can be found here.