Finance Corner: A Guide for Plaintiffs' Attorneys and their Clients 

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LAW FIRM FINANCING

Why Finance?: Blog Post #2

2 Significant Litigation Benefits of Legal Financing

Posted by Erin Delaney, Esq. | Senior Counsel on 24, Sep 2018
Erin Delaney, Esq. | Senior Counsel

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A reality of litigating plaintiffs’ claims is that it can be financially straining on a firm to advance case costs throughout the life of a proceeding. Some larger, more complex cases can take years to resolve, potentially even over a decade, and you and your clients need to feel secure that you’ll have sufficient funds to withstand the economic pressures that come with taking a lawsuit to trial or beyond. And yet, you don’t want to turn down the case of lifetime over the operational challenges it may bring.The truth is that there’s often a disparity of resources between plaintiffs and defendants. Defendants with deep pockets can intentionally draw out the proceedings to the point where your client can’t feasibly afford to continue or they feel pressured to take an earlier, lower settlement. In the event that the defendants’ delay tactics result in your firm not having the capital to continue to litigate the case, you could be forced to take on personal debt so you can fulfill your ethical obligations, or alternatively, engage co-counsel and be required to share your fees.

Here’s how obtaining a business line of credit for your firm can level the playing field in 2 major ways:

1) It gives you a consistent capital resource to fund out-of-pocket case expenses

The workup of a lawsuit prior to resolution can be costly. A revolving line of credit can help you pay for up-front costs, such as medical record retrieval, that are incurred well in advance of a verdict or settlement. You’ll also have the financial resources to retain experts and secure supplementary evidence for your case that you otherwise may have forgone because it wasn’t critical to the case and overly expensive. For attorneys involved in mass tort cases, a line of credit can be even more impactful because it’ll provide you enough capital to pay what are often tremendous case expenses and advertising costs incurred over the life of a national litigation, particularly if you’re in, or want to be in, a leadership role.

2) You’ll gain a capital reserve to help decrease the financial risks of litigation

One of the biggest obstacles to a contingent fee firm is the unpredictability. From court decisions, to delay tactics, firms can use a line of credit as a means to combat the unknown. It provides you a financial reserve to pursue any litigation that your firm wishes to handle, rather than having to pass up opportunities for fear of cost or time invested.

A common misconception that often arises is that parties obtain legal financing to reduce risk when dealing with a weak case. However, the opposite is more likely to be true—a firm’s ability to procure funding shows that not only does the firm believe in the merits of their cases, but an unrelated third-party, who has conducted due diligence to assess the viability of the cases, does as well. Getting a line of credit for your firm doesn’t indicate weakness; on the contrary, it shows strength and sustainability.

 

The world of litigation can be unpredictable. Many times, firms may worry about their ability to continue to operate if an unfavorable ruling were to be handed down. A line of credit allows you to take on more cases, expand your portfolio and become more competitive. It provides peace of mind that you will be able to zealously advocate for your client without feeling the pressure to relent to a fast resolution in a case, in turn benefiting both the client and the firm.

Categories: Why Finance?

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