Schulte Roth & Zabel’s 27th Annual Private Investment Funds Seminar, held in January 2018 in New York City, covered a wide range of hot topics, including litigation finance, also known as litigation funding or third-party funding.
Litigation funding is democratic. It removes barriers to entry in litigation and levels the playing field. Consumers and companies, retail investors and institutional investors of all sizes and levels of financial resources — including those who cannot afford billable hours — and bankrupt entities can seek redress and financial compensation.
“The US has seen a tremendous rise in interest and activity in the litigation finance space. All transaction types have increased by leaps and bounds. They include patent infringement, breach of contract, mass torts, securities fraud and others. Loans to law firms are another important area as the huge, liquidity-starved, plaintiff’s bar in the United States provides tremendous demand,” says Boris Ziser, SRZ partner and co-head of the Structured Finance & Derivatives Group.
Most litigation funding supports plaintiffs. “On the plaintiff side, a win is a win with a clear monetary result to determine what success means and what you get. On the defendant side, it is trickier to figure out the economics and measure of success. A ‘win’ for the defence avoids the need to pay the claim but does not produce cash-flow, so some funding has to come out-of-pocket. Usually, a defendant is sued because they have deep pockets in the first place,” explains Ziser.