Five Ways Senior Associates Can Use Litigation Funding for Profile Building and Client Service
October 20, 2017
Litigation funding is quickly emerging as an indispensable tool in every lawyer’s toolkit. Yet, as a former senior Bay Street associate, I know that many people you work with may still be unfamiliar with litigation funding. This can give you a first-mover advantage in thinking about this option creatively and proposing it to your clients and colleagues.
How can you use this growing resource to help the firm’s bottom line while growing your own profile within the firm and with clients? Here is your cheat-sheet on the benefits of using a litigation funder.
1. Land clients who can’t afford legal fees and disbursements
Interesting files cross your desk all the time that you or your partner know are meritorious, but, alas, the client can’t afford the legal fees and disbursements to bring a claim. Instead of turning the client away, think about calling a litigation funder first.
If the case meets the funder’s investment criteria, the funder will pay the legal bills and disbursements: a win-win scenario for your firm and the client.
- If the case loses, the client need not worry about repaying the funder or even paying an adverse costs award in favour of the other side, because the funder will pay that, too.
- If the case succeeds, which has been true in 91% of Bentham-funded cases, then it becomes a win-win-win scenario, with your firm generating fees, the client going home with the lion’s share of the award/settlement, and the funder getting a return on its investment.
2. Land clients who would rather use their capital elsewhere than pay legal fees and disbursements
Some cases come to you where the client can afford to pay your fees, but is hesitant to start a lawsuit. Perhaps it would rather use its capital to invest in its core business activities. Perhaps it doesn’t like the uncertainty of legal bills and the risk of an adverse costs award (which is a contingent liability that has to be accounted for).
Litigation funding can help here as well. The client can bring its case with no downside: the funder pays legal fees and disbursements, and takes the entire risk of an adverse costs award off the client’s books. If the case succeeds, then, as explained above, everyone profits.
3. Signal the strength of your client’s case to the other side of the litigation
Another benefit of using a seasoned and respected litigation funder is that they are known to have strict investment criteria: they fund only the best of the best cases. Thus, there is a reputational advantage to receiving litigation financing from a funder with a long history, like Bentham’s 16 years of experience, and a high rate of success. Specifically, it signals to the defendant that a selective third party has conducted due diligence and thinks the plaintiff’s case is strong enough to justify an investment. This can have a strong impact on how the case unfolds.
4. Increase firm profitability by pursuing creative arrangements with a funder
Maybe your firm has considered offering contingency fees to clients, but has some reservations. It’s true that there is a large potential upside to contingency work, but perhaps the firm’s partners or management committee are worried about the corresponding risks and/or delays in getting paid.
In this scenario, involving a litigation funder can offer a good middle ground:
- The firm and funder can team up to share legal fees, with the funder paying a portion of the fees on a monthly basis, while the firm carries a portion as work-in-progress (WIP).
- The funder can bear the cost of disbursements and the risk of an adverse costs award.
The firm’s downside is thus limited to only a portion of its WIP, but its upside is not similarly limited. If the case loses, the firm will have lost no hard dollars, but if the case succeeds, the firm gets paid its WIP, plus a share of the return on the funder’s investment. Bringing this option forward can help you show the sort of business-oriented thinking that makes a real impression with any firm’s partnership.
5. Increase firm realization rates and alleviate financial stress on the lawyer-client relationship
A collateral benefit of engaging a litigation funder is that your firm will know that its bills will be paid promptly. The firm’s accounts receivable department will never have follow up with clients on unpaid bills, which sometimes causes stress on the lawyer-client relationship. By having a funder involved, associates and partners can do what they do best—provide exceptional legal work and client service—without having to worry about the firm’s revenue stream.
To learn more about the benefits of litigation funding for you, your firm and your clients, please contact us today. At Bentham IMF, our investment managers and legal counsel are all seasoned litigators who bring to the table not only their legal expertise, but also a unique perspective from reviewing and analyzing hundreds of cases that were proposed for litigation funding.