Frequently Asked Questions

Litigation finance (or known as litigation funding) is where a third party unrelated to the lawsuit provides capital to a plaintiff involved in litigation in return for a portion of any financial recovery from the lawsuit. The capital provided by monetizing a legal claim may directly pay for some of the costs of litigation, including attorneys’ fees, expert witness fees and court expenses. Litigation finance may be used to fund working capital for companies involved in litigation or even help business owners pay for personal expenses.

There are many reasons that a company, law firm or plaintiff may choose to seek litigation financing:

• A company or plaintiff has a strong claim, but lacks the financial resources to pursue it.,
• The expense and uncertainty of litigation
• Law Firm or company has a portfolio of claims, but does not have the budget to pursue them,
• A company wishes to hedge the risk by offloading some or all of the expense of litigation, or
• A company prefers to monetize commercial claims to use its capital for other projects

Commercial litigation finance enables a company and plaintiffs to better manage and finance legal claims. High-value commercial litigations and arbitrations can be very expensive and without capital and a party with a meritorious claim might have to forego a legal claim entirely due to cost. Parties with deeper pockets often use the disparity in resources to their advantage. We can help provide you the capital and resources to pursue your claim.

We welcome inquiries for litigation funding from both lawyers and clients, particularly in the case of corporate clients seeking funding for a portfolio of claims or for individual clients who form part of a potential group action or claim.

Once we have the initial information, we will indicate whether we are interested in progressing the case and then request documents and information so we can conduct the due diligence that we need for submission to our Investment Committee and prepare the funding documentation. The length of time this takes depends on the complexity of the case, and how well prepared the information is, but cases can be prepared within 2 to 6 weeks depending on how fast the responses are.

We do not have a minimum case size but, on individual cases, we would be looking for a 10 to 1 ratio on the value of the claim to the costs.

The answer is yes, but we also will need your help in ensuring that we are able to quickly process through the due diligence.

No, while we will follow the progress of the case we do not control how the case is managed or proceeds.

Litigo Financial is active in a wide variety of jurisdictions across the world. Litigo Financial is able to fund in any jurisdiction where funding is legally permissible.

No. Litigo Financial has no influence on the cases, and in particular, does not control settlement.

Litigation finance can be used for a variety of purposes beyond the fees and expenses associated with a litigation or arbitration. Funder’s capital can be used for debt service, operational needs, hedging risk or other non-litigation needs the claimholder may have.

We embrace a flexible approach and do not follow a one size fits all model to investment terms. In some situations we ask for return of capital plus a percentage return of net proceeds, where the percentage will vary depending on the size of the investment, the damages to investment size ratio, and time to return. In other cases, a percentage return does not make sense for us or the claimholder and we ask for return of capital plus a fixed dollar amount. In some cases, we invest directly in the company.

• Initial discussions: An initial discussion about the general parameters of the claim is the first step in the funding process. If the claim fits within our target investment profile, we review relevant documents and develop an investment proposal. We routinely enter into nondisclosure agreements related to these discussions to ensure confidentiality for the claimholder. This typically takes 1-7 days.
• Due diligence: Once we have agreed on the economic terms, there is a due diligence phase to verify support of the claim. At the outset of this process, we provide a due diligence outline that identifies the areas of focus, informs the claimholder and counsel of what needs be covered in the due diligence process, and serves as a checklist to see how we are progressing. This phase typically takes 20-45 days depending on the complexity and stage of the claim as well as the responsiveness of the claimholder and counsel. We make this determination as early as possible to avoid unnecessary burden on both claimholder and counsel.
• Investment documentation: Finally, we circulate transaction documents for the claimholder and counsel to finalize, and execute.
• Release of funds: Once the transaction is closed, the funds become available for distribution, including any initial distributions for previously incurred litigation costs or non-litigation cash outs. Going forward, the costs and expenses of the litigation will be paid as they become due. Litigo Financial reserves 100% of the facility at closing, so there will be no unexpected shortfalls for the claimholder.

We fund both litigation and arbitration domestically and internationally. The diligence process is largely the same for both types of investments. We look at each case on their individual merits and risk profile.

• We generally evaluate four aspects of the claim:
  • Likely duration of the litigation process: The shorter the likely duration, the more valuable the litigation asset. We will invest in claims at all stages.
  • Damages to investment ratio: Generally, the greater the likely damages, the more valuable the claim and the smaller the percentage of proceeds that will be needed in consideration of the investment. We need to have a damages to costs ratio of 10 to 1.
  • Probability of success on the merits: Litigation is inherently uncertain. We finance only claims that, in our estimation, have a high probability of success. The more information available to establish liability and damages, the more valuable the claim and the better pricing a claim holder can expect to receive.
  • Collectability: Other variables including ones that affect ability to collect damages from the defendant.

• Factors that increase the likelihood of success include
  • Documentary evidence supporting the case narrative and damages;
  • Strong witnesses, and
  • Favorable discovery
  • Favorable Venue
  • Strong and experienced legal team

We receive an agreed upon portion of the proceeds of the claim. If a claim is unsuccessful, we are owed nothing. We accept the risk that some claims will fail and rely on a robust underwriting process to ensure that we win significantly more than we lose.