It is common for a party or firm to refuse the pursuit of claim due to the lack of capital available for this purpose. This lack of resources does not always have to stop a claim in its tracks, as litigation finance is great potential solution. On a recent episode of our podcast we spoke with James Blick about this very topic. James is one of the principals and founders of Erso Capital. He is also involved with The Judge Global, a UK-based litigation financing company.
James explains their business model:
Litigation finance is essentially the business of providing capital primarily for the purpose of funding litigation. This type of activity is often described as non-recourse financing. We provide capital to fund the legal fees and costs involved in a potential lawsuit. If their lawsuit is successful, then we would be repaid the capital invested plus some return, usually from the damages or the settlement obtained in the lawsuit. If a lawsuit is unsuccessful, then we would lose our invested capital and would not be entitled to recourse.
Essentially, this funding can be used by the plaintiff company involved in the dispute or the company that is enabling it to pay lawyers. It enables both companies and firms, which otherwise would not be able to take on a case, with a valid claim or valid potential claim, and pursue it.
James says, “The funding could essentially sit behind the law firm, providing the law firm with working capital during the life of the dispute. Then the law firm would be responsible for paying a return to the funder from, or in the event, that it succeeds in recovering a contingent fee.”
James continues, “There are also cashflow management and risk aspects to it. A lot of the counterparties that we would get involved with are not necessarily financially distressed. Maybe they are large resource companies, but like all companies, particularly in the current climate, maybe have some budgetary constraints, or a cautious attitude to risk and investing their resources in litigation.”
Litigation finance makes it possible for these types of companies to eliminate litigation costs and move through a cash neutral process or positive. Businesses in this category know that litigation can take years and cost significant amounts of money. James expands, “It can be a useful financial tool for all types of business, those that are financially distressed and need funding, as well as those that do not necessarily need it but may find it a valuable alternative for paying legal disputes.”
If you’re an attorney and you are involved in litigation, this is a critical piece of the puzzle that you will want to know more about. We implore you to listen to our conversation with James Blick on our podcast, Discussions at the Round Table. We were honored to speak with him and hope that you find our conversation most informative.
For those that are unfamiliar with Round Table Group, for more than 25 years, we have helped litigators to locate, evaluate, and employ the best and most qualified expert witnesses. Round Table Group is a great complement to any litigator’s quest for an expert witness and our search is always free of charge. Visit roundtablegroup.com for more information.