Solos and Small Firms Should Cautious When It Comes to Litigation Financing
Fellow solo and small firm lawyers: another litigation financing company wants to sell you a service, claiming that it’s just what you need. According to this recent press release, LegalFish Bridges the Funding Gap for Plaintiffs and Attorneys in Litigation.:
The purpose of the [Life Funding] program will provide access to non-recourse loans that can help plaintiffs in litigation meet ongoing expenses as they await their trial date, and allow their attorney time to work toward a larger settlement. The term “non-recourse” means that if a plaintiff loses his/her case, they there is no obligation to repay the advance[….]
“After working with many attorneys, it became apparent that small-to-midsized firms and solo practitioners often required additional funding to finance their litigation expenses on select cases. Our goal is to provide lawyers an advantage over traditional lending sources with a risk-free service.” added Shah. (emphasis added)
Sounds like a great program, right? Well, as a practical matter,
attorneys need to think long and hard about taking advantage of this
so-called risk-free services. As we’ve posted before, some jurisdictions have found the interest rates for litigation financing services usurious (at least for those services available to clients), while in other situations, terms of the financing may force an attorney to turn down a settlement and go to trial because the terms of the financing arrangement render the settlement uneconomic for the client.
There’s no such thing as risk free when it comes to litigation
financing. If the case is a dud to begin with, chances are your firm
won’t qualify for funding. And if the case looks like a winner and you
receive the loan, eventually you’ll need to repay it with interest
which raises ethical questions like whether the lawyer pays the
interest or the client. And as an attorney, will the fact that there’s
a loan outstanding on your client’s claim, will that compromise your
judgment and decison making in the case. What happens if you take a
case to trial (because it doesn’t cost you to do so) – and wind up with
less than what was offered in settlement? Might you face malpractice
liability?
There may be valid situations for litigation financing. But don’t rush
out and buy it because a company says it’s what you need. Instead,
educate yourself on the benefits and drawbacks before making a decision
that could impact your practice and legal career.
Isn’t it great how Biglaw partners always include “partner” in their e-mail signature block? They are too insecure to just sign their name over the firm name, in which case it would be implied they were a partner, not the other way around.
Isn’t it great how Biglaw partners always include “partner” in their e-mail signature block? They are too insecure to just sign their name over the firm name, in which case it would be implied they were a partner, not the other way around.
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