Litigation finance is used by both individuals and companies who have been mistreated and want to take another party to court, but cannot afford the high legal fees often associated with litigation.
The litigation finance industry is currently valued at $5 billion dollars in the US, and is expected to reach $22 billion by 2027.
Currently used for shareholder disputes, class actions and claims against a director, a famous case hit the press in recent years when Hulk Hogan used litigation funding of $10 million to fight a misrepresentation claim, and eventually won $31 million in damages.
Dan Kramer of Kramer Sullivan explains: “Litigation finance is certainly on the rise. Historically, a lot of people gave up on claims because they were too expensive or inaccessible to the general public. Now, you can speak to specialist funders who will take a view and only operate on a no-win, no fee basis.”
“The biggest demand we have is for people with shareholder and director disputes, mostly when they are denied a huge sum or pay out. But the more evidence you have the better, whether it is documentation, contracts, recordings and emails. You don’t have to go fishing for information or try planting things, but if you have a legitimate case, these bits will help.”
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“Furthermore, you should adequately look at the costs you need for litigation, including how much your solicitor would charge, court fees, time off work and other expenses. This allows you to determine how much you need to borrow and it will help the lender too.”
The amount you can borrow through litigation funding is almost unlimited and having claims worth up to £1 billion are not uncommon. A prospective lender will look at the value of your potential claim, the risks and chances of being victorious, usually taking a success fee of up to 5% if you are paid out.
If you have obtained funding but eventually lose your claim, this is something that the financier would have budgeted for. You can also purchase supplementary litigation insurance to provide some form of financial backup. This will pay for any legal or solicitor fees on a damaged-based fee structure. It is common to include indemnity insurance in any litigation funding to cover any negligence by your legal team.
