Litigation Finance* – What is it?

Written by Laura Mann on .

Here we look in detail, and describe in very clear and simple terms, what Litigation Finance is.  Litigation Finance is a term that sounds complicated... it’s not.

By now we’ve all heard of at least one occasion (possibly more), where a person or company, were unable to fight their corner in a Court of Law; even though they were in the right. When it came down to it, it didn’t matter, they just didn’t have the money to make pursuing justice through the Courts a reality. Historically, lawsuits have been won by those who can afford to fight for an indeterminate length of time. What Litigation Finance does is level the playing field for the accuser and the accused. Litigation Finance releases the value of legal claims by providing funds to either the accuser, or the accused, before the cases are settled.

Let’s take a real-life example; a driver is injured in a rear-end collision. Her insurance company refuses to pay the claim or offers an amount that is far less than what she will need for long term care and other associated costs that will be incurred directly, and indirectly, as a result of the accident. If said driver can’t afford to pursue her claim, the insurance company could get away without paying anything at all or may pay much less than she would have received if she had the financial means and the staying power to fight via the Courts. By using a Litigation Finance Provider for pre-settlement financing, the driver can recoup the amount that she is entitled to, without risk of becoming bankrupt, in the pursuit of justice.

When insurers, in this example, know that the accuser is not in a situation where they simply must accept a reduced offer, they (the insurers) are often forced to settle cases for much higher amounts, enabling the accuser access to an appropriate amount of compensation.

The accuser will only be liable to pay the Litigation Finance Provider if she wins or settles her case. If she doesn’t win or settle the case, the Litigation Finance Provider receives nothing nor is owed anything. Please note, although some people refer to Litigation Finance as a ‘Lawsuit Loan’ it isn’t a loan; Litigation Finance is an advance payment made to an accuser (or accused) however, there is no obligation to repay anything at all, unless and until the plaintiff wins.

The main reason that Litigation Finance as an investment, has continued to rise since the 1990s, most noticeably in the US, UK and Australia, is because it is a low-correlated asset class with impressive yields. Investors looking for ways in which to reduce their exposure to the ups and downs and frustrations of the stock market are finding that Litigation Finance is an increasingly viable option that generates large returns.

Investors who have access to Litigation Finance opportunities are rewarded with huge returns and growth potential.

 

Greenpark Platinum provides opportunities for its Members to invest in Litigation Finance with huge potential for growth and significant returns

Greenpark Platinum provides investment opportunities for its Members to invest in litigation finance cases for individuals and law firms who need capital to win strong cases.

Greenpark Platinum offers its Members opportunities in the following areas of Litigation Finance:

  1. Pre-settlement funding
  2. Post-settlement funding

1. Pre-settlement funding

In simple terms, pre-settlement funding is a cash advance provided for the plaintiff, against the anticipated settlement of, for example, a personal injury lawsuit. The term ‘Lawsuit Loans’ is widely used; however, the advance is provided on a non-recourse basis; if the plaintiff loses the case, they do not have to repay the Litigation Finance provider. The Litigation Provider company accepts the risk that the case may not succeed. At Greenpark Platinum all funding requests are subjected to a Platinum Due Diligence process, which is carried out by our Global Litigation Specialist Partners. Only those cases that are expected to win will be provided with Pre-settlement funding.

In the United Kingdom, Australia and the United States, speciality Finance companies have been successfully providing non-recourse advances, secured by potential future proceeds of personal injury claims, since the early 1990s. This style of investment has got a proven track record. Speciality Finance companies often sell off portions of their pre-settlement advance portfolios to raise capital to grow their businesses.

At Greenpark Platinum, our Members can choose to invest in pre-settlement portfolios secured by these well-diversified and matured portfolios, or in pre-settlement advances for single cases.

2. Post-Settlement Financing

Post-Settlement Financing assist those plaintiffs that have settled their case but are waiting for settlement funds. Like pre-settlement finance, funds are distributed to the plaintiff to enable them to cover their costs of living, whilst waiting for the funds due to them from their settlement. Due to the nature of Post-Settlement Financing, there is a reduced risk, since the settlement has usually been finalised; the plaintiff is simply awaiting distribution of the funds. Investors of this type of financing will face uncertainty, with regards to the timing of when they will receive their repayment but can take comfort in the knowledge that the case has already been settled.

 

An example of how the Greenpark Platinum Litigation Finance works

  1. BBB Developers is a multi-million-pound real-estate partnership that repurposes disused warehouses into expensive residential conversations in the London docklands area. There are two business partners who have an agreement on file with the bank that any debits from the account require both signatures.
  2. Unfortunately, the bank has not always been consistent with the two-signatory rule and one of the partners has embezzled millions from the business.
  3. The honest partner appeals to the bank to take responsibility for their mistake, but the bank refuses; they are confident that the financial losses have left him too insolvent to sue for breaching the two-signatory mandate.
  4. The honest partner approaches Greenpark Platinum and its Global Partners for Litigation Finance. Based on the merit of the claim, and the rigorous Due Diligence process that they insist upon, the case is approved for funding.
  5. Armed with Litigation Financing, the honest partner is then able to sue the bank. Realising that it now faces a strong, well-capitalised plaintiff, the bank offers to settle and pay for its mistake.
  6. The honest partner has been able to restore the missing funds and save his business. It is now the bank’s responsibility to pursue the dishonest partner for embezzlement.
  7. The honest partner’s lawyers are paid. The Greenpark Platinum investors in this Litigation Finance deal receive a healthy return from their portion of the settlement.
  8. Historically, investments in carefully vetted litigation finance opportunities were not available to the general public. Instead, expert institutional funds have profited from this socially worthwhile and justice-promoting industry. 

 

* Litigation Finance also known as Litigation Funding, Lawsuit Funding and Litigation Loans.