In today’s ever popular market of litigation funding, most of the funding companies offer pre-settlement funding for clients with pending lawsuits. Most of those companies offer pre-settlement funding on personal injury claims only. Recently, a few firms are offering pre-settlement funding on commercial cases. That has created a lot more opportunities for plaintiffs in complex litigation like intellectual property litigation to get the financing they need. Intellectual property lawsuits are very expensive to maintain. Why should a client consider a pre-settlement advance? Due to the legal process, it could take years for a case to settle and, in commercial cases, the costs involved with maintaining litigation are too high for most attorneys to cover. The New York City Bar Association recently released a new formal Opinion regarding third party litigation financing, a/k/a pre-settlement funding.

The Opinion states that it is not unethical for an attorney to represent a client that enters into an agreement with a third party lender. However, when clients enter into such agreements attorneys must be aware of the ethical issues that may arise as a result such as:

1) the legality of the agreement – an attorney should advise the client and refrain from entering into an unlawful transaction,

2) the attorney as an advisor – an attorney should advise the client to consider the costs and benefits of litigation funding, in addition to possible alternatives,

3) conflicts of interest – an attorney may refer a client to a litigation funding company but cannot accept a referral fee from the company if the fee compromises the attorneys ethical obligations,

4) privilege and confidentiality – an attorney cannot disclose confidential information to a funding company unless the attorney receives the client’s consent and should not disclose any more information that is necessary in their own judgment, and

5) the control over the legal proceeding – an attorney may not allow the funding company to influence their professional judgment in determining the course of litigation.

Litigation funding is on the rise and can be a valuable means for plaintiffs during the pendency of their case. Most litigation funding companies will initially require some basic case information in order to consider a client’s request for an advance. If anything beyond that information is required, the attorney is contacted. If the transaction is approved a contract will be sent to the attorneys office for review and signature. The terms of the transaction are outlined in the agreement and all fees are disclosed. The client can decide at that point whether or not they wish to proceed with the advance.

For more information on lawsuit funding, you can visit http://www.amasset.com. American Asset Finance, LLC is a full service litigation finance and funding company. Owned and operated by attorneys, they have been providing litigation financing and funding to attorneys and clients since 1997. Unlike most companies that solely provide either pre-settlement funding or attorney loans, American Asset Finance, LLC provides the wider spectrum of litigation funding, including pre-settlement funding, post-settlement funding, and inheritance funding to help provide cash advances and lawsuit funding and financing on which attorneys and clients can consistently rely.

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Litigation funding can be a confusing concept.  Plus, most people have never been exposed to the concept of litigation funding so the average person probably has many questions such as:  What is a litigation funding?  Do I need litigation funding?  How do I get funding for my lawsuit?  When I am approved for funding, do I have to pay back the money?  If I am denied funding does it mean that I do not have a good case?  These are all very good questions and are answered below.

What is litigation funding?

Litigation funding is not a “loan” at all but rather it is a cash advance based upon the merits of a lawsuit that provides a plaintiff with sufficient funding to reach the conclusion of the case when the plaintiff will receive his/her fair share of the settlement or verdict.  Litigation funding companies invest in the lawsuit itself as opposed to advancing money to the plaintiff in the form of a loan.  Litigation funding is not based on a plaintiff’s prior credit or bankruptcy status.  Other terms used for this type of funding include: lawsuit loan, litigation finance, litigation loan, lawsuit funding, lawsuit finance, lawsuit cash advance, case loan, case cash advance, plaintiff cash advance, litigant funding, pre-settlement loan, pre-settlement lending, pre-settlement cash advance, etc.

Do I need litigation funding?

Litigation funding should not be a substitute for your settlement but rather a raft that helps you stay afloat while your attorney fights for you.  Too many plaintiffs apply for litigation funding with the belief that litigation funding is simply a different way to get their settlement money.  Assuming you win your case, the amount owed to the lending company varies greatly depending upon the length of time between the date of the advance and the date when you receive the settlement/verdict money.  You should exhaust other means of funding first.  Also, a good guideline to use is that litigation funding companies generally advance up to 10% of the estimated settlement amount.  There are some good internet sites that give more background on litigation funding.  Some good sources of information are The Funding Exchange (www.TheFundingExchange.com) and Expert Law (www.expertlaw.com).

How do I get funding for my lawsuit?

Litigation funding companies have popped-up all over the country.  Some tout their “low interest rates” or how they are the most lenient when it comes to approving litigation funding.  Many litigation finance companies charge random penalties and fees.  These penalties and fees help to offset their “low interest rates” and many times end-up costing the plaintiff more of their settlement.  A good option is The Funding Exchange (www.TheFundingExchange.com).  The Funding Exchange is a network of the most respected litigation funding companies in the industry.  You complete one application on The Funding Exchange and your application is intelligently routed to the best litigation funding companies for your specific case.

When I am approved for funding, do I have to pay back the money?
Almost all litigation funding companies give non-recourse funding to plaintiffs thus requiring the plaintiff to pay back the advance and fees/interest only upon a favorable decision in the case.  If the case is lost then you can keep the cash advance with no obligation.  If you win your case then part of the settlement amount will go towards repaying the cash advance plus interest and fees.  The amount owed to a litigation funding company increases the longer that your case takes to settle so keep that in mind.

If I am denied funding does it mean that I do not have a good case?
The simple answer is “no.”  Being denied for funding does not mean that your case is not a good case or that you will actually win less money than you think.  There are many different reasons why funding is denied.  One reason is that the estimated settlement date is too soon.  Litigation finance companies make money by accruing interest on their investment in your case.  If your case is supposed to settle in 2 months then a litigation finance company will not make any money because the settlement date is too soon and therefore they may decline the funding request.  Other reasons for denying funding include: attorney will not provide documentation, attorney will not sign contract, plaintiff demands too much money, etc.

Conclusion

As a plaintiff, you should understand litigation funding and the process of securing funding before you apply.  If your expectations are set correctly and you proceed with litigation funding then you will find that it is a saving grace in the turbulent world of litigation.  If you apply for litigation funding without a true understanding then you may be disappointed.

About the author:
Tony Perkins is the founder and president of The Funding Exchange ( http://www.TheFundingExchange.com) which connects the top litigation funding companies in the country to people in need of a lawsuit loan.  The Funding Exchange is not a litigation funding company but rather it is an independent 3rd party company that routes a high volume of applications every day to its network of litigation finance companies.  Mr. Perkins has unbiased experience in helping secure litigation funding.

Copyright 2006     The Funding Exchange, LLC

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