I became fascinated with commercial litigation finance for one reason: I love a good underdog story. But the more I learned about this burgeoning industry, where law and finance intersect, the more I discovered that litigation finance firms do a whole lot more than just help plaintiffs punch above their weight in commercial bouts.<\/p>\n
Commercial litigation favors heavyweights: big corporate defendants that can go the distance thanks to ample resources and the best law firms money can buy. That\u2019s because, of course, commercial litigation is expensive; the costs rapidly soar into the millions, and an undercapitalized plaintiff squaring off against a well-capitalized defendant can be forced to throw in the towel early and drop its claims or accept a lackluster settlement.<\/p>\n
Enter litigation finance firms. They provide capital that empowers these underdog plaintiffs not only to fund discovery and experts, but to usher top law firms into their corners. In exchange, although the terms of the deals vary widely, these firms often receive either a percentage of the damages or a multiple of their capital invested, or some combination of the two. And their investment is non-recourse, or, in litigation speak, contingent, meaning they get paid only if their plaintiffs are successful.<\/p>\n
Take the case of Miller UK, a small, family-owned British equipment manufacturer that recently realized the equalizing power of litigation finance. For years, Miller made and sold a custom product to Caterpillar, a Fortune 500 behemoth. In 2008, though, Caterpillar told Miller that it no longer needed the product because it had created its own. This loss devastated Miller\u2019s business, and the company was driven into debt and laid off over half of its employees. Miller then sued Caterpillar for misappropriation of trade secrets, but quickly ended up on the ropes because it lacked the capital necessary to reach its day in court. But into its corner stepped Juris Capital and Arena Consulting to fund the lawsuit and Kirkland & Ellis to serve as its counsel. Cue the Rocky theme song. Following an eight-week trial in Chicago, a federal jury slapped Caterpillar with a $74 million verdict.<\/p>\n
Although this case is a paradigmatic example of the impact of commercial litigation finance, firms in this industry fund cases pursued by large, well-capitalized companies, too. By doing so, they allow these companies not only to eliminate legal expenses but also to generate revenue, a rare feat for corporate legal departments.<\/p>\n
These firms are also now investing their capital in less traditional ways. Gerchen Keller Capital, an industry pioneer managing over $1.4 billion in assets, offers late-stage and post-judgment financing. For instance, it provides plaintiffs in litigation that has ended successfully with immediate access to the proceeds from their judgments and settlements that would otherwise take them a while to obtain. It does so by purchasing the payment streams from these judgments and settlements. And Burford Capital, a large, publicly traded firm, recently announced that it was supplying funding to Hausfeld to help that formidable plaintiffs\u2019 firm pursue claims in Germany against Volkswagen.<\/p>\n
In short, litigation finance firms are dedicated to expanding far beyond their roots of just funding Rocky. Indeed, as investor appetite for them keeps growing, we will surely see investments of increasing size, variety, and complexity. And while this nascent, unregulated industry is not without its critics, that is a topic for another day.<\/p>\n
Pat Huyett is a law clerk for the Honorable Marjorie O. Rendell on the United States Court of Appeals for the Third Circuit.\u00a0 He previously served as a law clerk for the Honorable William H. Yohn, Jr., United States District Court for the Eastern District of Pennsylvania.\u00a0 Pat graduated magna cum laude from Temple Law in 2014.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" I became fascinated with commercial litigation finance for one reason: I love a good underdog story. But the more I learned about this burgeoning industry, where law and finance intersect, the more I discovered that litigation finance firms do a whole lot more than just help plaintiffs punch above their weight in commercial bouts. Commercial<\/p>\n","protected":false},"author":5,"featured_media":952,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[12,64,19],"tags":[],"coauthors":[214],"class_list":["post-953","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-alumni-authored","category-commercial-law","category-finance","masonry-post","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"\n