ANALYSIS: Financing Is Top Lawyer Concern for Litigation Funding

The financial terms of a funding agreement are the most critical factor for lawyers when deciding whether to obtain financing from a litigation funder, according to Bloomberg Law’s most recent State of Practice Survey.

Bloomberg Law surveyed over 450 attorneys on several topics, including their use of litigation finance. Of the 31 attorneys who answered a question regarding the importance of various factors in the selection of a funder, 26 reported that the financial terms offered are important.

For attorneys considering litigation finance for the first time, financial terms were also top of mind. “High financing costs"—along with maintaining control over the litigation— was the most selected concern about litigation funding, with 17 out of 33 respondents selecting these two categories.

The findings make sense in light of the high financial stakes in litigation matters that tend to draw the interest of funders. Although there are several strategic and regulatory concerns that may impact lawyers’ use of litigation financing, the agreement’s financial terms are most likely to be the deciding factor of whether litigants ultimately seek funding from a third party. And while a funder’s expertise and reputation matter, attorneys are more reliant on their own analysis of a case’s strengths and probability of success.

Considerations to keep in mind when examining the financial terms include whether to agree to portfolio or single-claim funding, as well as financing details like agreements to providing funding in tranches and the assignment of escalating percentages owed to the funder for each tranche upon a recovery from the suit.

Bloomberg Law subscribers can find related content on our In Focus: Litigation Finance page.

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