Business of Law

New focus of litigation funding is law firms' entire portfolios of cases

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Got a good book of business, but worried about cash flow? It isn’t simply a traditional bank to which a law firm might look for help in such a situation these days.

Once intended simply to provide up-front money needed to pursue individual contingency cases with a big potential payday, litigation funding today is refocusing on providing commercial financing for a portfolio of law firm cases or even purchasing a firm’s accounts receivable at the end of the year, reports the Wall Street Journal (sub. req.).

Publicly traded Burford Capital LLC reported earlier this year that it had loaned $100 million to an unidentified global law firm, based on its book of business.

And others with large sums of money to invest, such as pension funds, also are covering the cost of law firm operations with the idea that the venture may be profitable even if stocks and bonds aren’t doing so well, according to the newspaper.

Such loans are controversial: The U.S. Chamber of Commerce says they promote litigation that we would be better off without. Plus, some observers are concerned that commercial litigation funding could be an end run against legal ethics rules that preclude non-attorneys from owning law firms in most U.S. jurisdictions.

However, the loans can also provide needed help to get a law firm up and running, says Los Angeles trial lawyer Raymond Boucher, who is starting a new firm. The millions he is receiving from IMF Bentham Ltd. take the pressure off his nine-person firm and will only have to be repaid if he wins, Boucher tells the WSJ. He is best-known for a $660 million award for clergy-abuse victims in California.

“Litigation is difficult. It’s expensive. It’s time-consuming,” he said. “Generally speaking, it takes a new firm three-to-five years to become successful. The benefit of financing is that it gives you that lead-up time.”

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