Helping Defense ‘Head Off’ Third Party Litigation Funding
Third party litigation funding (TPLF) has became a multi-billion dollar industry run in partnership with venture capitalists and other investors, creating gridlock in the court system and massive suits that would ordinarily never see the light of day. The pressure for continued suits is brought by the investors, who enjoy huge returns for positive judgements.
Defense attorneys find themselves in suits with nameless plaintiffs, unrealistic settlement demands and investors in cahoots with plaintiff attorneys to keep all the odds in their favor. One way to head off these TPLF suits is through early research about all named parties in the suit. Often a social media or court records search will surface information that may cause plaintiff attorneys to forego TPLF because they may no longer feel like they have a sure winner. Social media data can weaken a plaintiff attorney case to the extent that it is no longer eligible for funding, and in some cases, evidence that my halt the case entirely.
Removing funders from a suit is an obvious goal for defense counsel, especially considering the vast funding available for TPLF from investors. According to DailyDAC.com, the investors in TPLF include some robust funding groups including these:
- Burford Capital, LLC (“Burford”)
- Bentham IMF
- GLS Capital
- Therium Group Holdings (announced a $300 million fund for commercial litigation TPLF in April 2016)
- Longford Capital Management LP
- Lake Whillans Litigation Finance LLC
- Harbour Litigation Funding
- Vannin Capital
- Pravati Capital
- Icahn Capital L.P.
- TownCenter Partners
Burford alone reported total investments in TPLF totaling more than $2 billion. Why is this kind of investing considered a virtually guaranteed money maker? Often the TLPF funding source has access to confidential information, has control over the financed litigation, or has some other ‘upper hand’ position. This virtually guarantees the verdict will rule in their favor and the ROI compounds the initial investment.
As this new investment vehicle grows over time as it inevitably will, due to its profit profile, what will the long term consequences be for the legal system? According to the US Chamber Institute for Legal Reform the natural outcome could parallel the real estate bubble of 2008. As legitimate cases are settled, the TPLF investors will continue to demand more lawsuits to fund, resulting in lower quality / frivolous suits replacing the legitimate issues of a poorly funded victim of corporate malfeasance. As the suits become more abusive and prolific, the legal system will slow under the glut of these large complex cases, causing real problems for the legal system.
Defense attorneys are going to need all the tools they can get. Fraud Sniffr is here to help.