Business of Law

Will litigation financing lead to 'reversal of epic proportions' in hard-hit legal market?

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Will a white knight ride in to save the downtrodden legal profession?

Brooklyn Law School tax law professor Bradley Borden sees a possible rescuer: third-party litigation financing. Writing at the Huffington Post, Borden says that the growth of the funding mechanism “may be the catalyst that ushers in a reversal of the legal market and an unprecedented resurgence of the legal profession.” TaxProf Blog notes the article.

Borden refers to such financing by the acronym TPLF and explains that the funding foots the bill for litigation in exchange for a share of the recovery. “The hundreds of millions (and perhaps billions) of dollars of TPLF undoubtedly will drive up the demand for litigation attorneys,” Borden says. But the ripple effect of additional litigation will also will also spur businesses to hire more transactional and regulatory lawyers, he says, in an effort to head off litigation with properly structured transactions.

Borden notes a decline in BigLaw hiring, a drop in law school applications and a reduction in law grads, creating “a relative dearth of attorneys.” But he sees a turnaround on the horizon. An improving economy, TPLF and a smaller supply of lawyers “portend a perfect storm that will hit the legal market,” he says.

“The demand for legal services will inevitably turn to favor attorneys,” Borden writes. “When that happens, the lack of attorneys in the pipeline will create a substantial shortage of qualified attorneys. For law firms to meet the new demand for legal services, they will have to aggressively recruit the top law graduates. To entice them to join their firms, law firms will have to raise starting salaries to unprecedented heights, creating a market reversal of epic proportions.”

Prior coverage: “New litigation funding company will advance money to corporate defendants” “Top Law Firms Turn to Litigation Finance Companies to Fund Suits”

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