How Litigation Funding Can be a Transformative Tool for General Counsel

While early trends among those seeking litigation funding were concentrated on smaller claimants (companies) pitted against larger, more well-resourced defendants (companies), an increasing number of well-resourced claimants (companies), are now availing themselves of litigation funding to support their companies litigation strategies.

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Regardless of the companies size or financial resources, partnering with a litigation funder is a smart move for any litigant seeking to offset some or all of their financial risk as they take on litigation against well-resources defendants (companies).

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In this article, we look at the role of General Counsel and how litigation funding can benefit them.

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General Counsel and Their Role

The legal team member that has the most comprehensive range of duties within a company is referred to as the General Counsel. These responsibilities will depend on the company’s size, the type of cases they have, and the jurisdiction in which the company functions. However, the one thing that remains the same across all companies, is that the General Counsel will be answerable to their board of directors or shareholders. Therefore, they will be encouraged to mitigate risk and protect the company's legal rights. These will, of course, include recovering any remedial damages for the infringement of the company's rights during litigation cases.?

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Beginning a lawsuit can be lengthy and costly, thus financially risky for a company and a tricky decision for its General Counsel. One of the reasons it can be challenging is that access to justice can also be unpredictable and unmanageable. So this is where the General Counsel will face a tough decision: Do they pursue an elusive defendant while possibly risking the company’s finite financial resources? Even in cases where the harm to the company may seem limited, General Counsels still need to be careful.?

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What General Counsel will do at this stage is perform a cost-benefit analysis that may, on occasion, result in a conclusion not to follow a case that may have been a valuable asset. And this is why litigation funding, through it being non-recourse, can be pretty transformative. With litigation funding, General Counsel can notify the board of directors that they can face this dilemma while pursuing more offensive litigation. Thanks to litigation funding, taking on the lawsuit isn't risky and there won't be an expense to the company.?

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What is Litigation Funding??

Litigation funding https://www.dhirubhai.net/pulse/overview-litigation-funding-its-benefits-tai-collard-c1chf/?trackingId=CrC4XFC7Qi2Nix%2FF%2FX6P%2Fw%3D%3D is when a third-party funder pays for some or all of the expenses of a claimant's (companys’) legal fees during a lawsuit. The funder offers funding throughout the matter for a share of the recovered proceeds at the case's completion. Litigation funding is non-recourse, which means if the lawsuit sees no financial recovery, the claimant (company) isn't obligated to pay back the advance used. This makes litigation funding risk-free for the claimant (company).?

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So how is non-recourse funding different to ordinary commercial financing?

A traditional bank is recourse. It requires a borrower to repay the loan, regardless of the outcome of a dispute. Banking institutions do not have the litigation expertise to underwrite the merits of a claim, so they ask for collateral or personal guarantees—whereas litigation funders see litigation rights as an asset that can be funded without collateral support. That’s how we can structure transactions as non-recourse investments.

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Which Cases are suitable for Litigation Funding?

Commercial claims which are seeking a monetary outcome or an easily-liquidated asset (such as shares or real property) from a defendant who has the ability to pay. The case must be ‘economically viable for funding. This means that it must have a minimum 1:10 costs to award ratio. In other words, the total budget to run the case must be no more than one tenth of the claim value. This is to ensure that the claimant will receive a worthwhile sum from the damages after the Litigation Funders reimbursement and success fee are paid.

5 Benefits that Litigation Funding Offers General Counsel?

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1. Risk and Costs Are Transferred?

General Counsel can protect the company’s legal rights with the help of litigation funding because the lawsuit loan enables the company not to put their finances under pressure.

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2. The Best Lawyers?

With litigation funding, General Counsels have the money to choose the best litigation attorneys and are not limited by a restrictive budget.?

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3. Confirmatory Support of Claims

When a reputable litigation funder is willing to invest in a lawsuit, this offers affirmative support that the claims have merit and that the case should, in fact, have a positive resolution.

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4. Support From Start to Finish?

Litigation funders can also support General Counsels, and help them control the costs of the proceedings.

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5. A Change in the Dispute Dynamics?

There is less financial pressure to accept a low or unworthy settlement offer if the company’s lawsuit has litigation funding behind it. In this way, the company is more likely to reach a better and quicker settlement outcome with a funder by its side.?

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Ultimately, litigation funding permits companies the ability to hedge some of their risk, ensuring that they will be in a better position if the claim is successful, but in no worse position if their claim is unsuccessful. Thus, funding transforms litigation from a traditional “win-lose” proposition to a “win-don’t lose” proposition, as litigation funding is provided on a non-recourse basis.

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In the next article, we will look at these five benefits above in more detail.

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If you want to stay up-to-date with what is going on with non-recourse litigation funding, Wild Dog serves as a trusted advisor to attorneys and their clients who are exploring litigation financing. So follow our Linkedin Page for the latest updates on?https://www.dhirubhai.net/company/wild-dog-mu ?or visit our website?https://wilddog.mu ?for more.