Lake Whillans & Above The Law conducted a survey in 2016 to better understand how litigation funding is evolving. Their research was focused on understanding how clients view litigation funding and what might be holding the industry back.
They focused on solo practitioners, in-house counsel, law firm partners and counsel and law firm associates. From 407 respondents interviewed 40.18% had experience with litigation funding. We dive into some of the most interesting statistics below.
- From 407 respondents interviewed 40.18% had first-hand experience with litigation funding. Technology and energy were the industries with the most experience of using litigation funding.
- Small firms with only 2-5 staff had the most experience with funding and those 500+ were a close second. Interesting to observe the most experience with funding being at the two ends of the spectrum. Law firm size of 500+ lawyers: 48.57%, law firm size of 2 – 5 lawyers: 58.54%
- There is a mix of opinions regarding who is the main driving force in seeking funding. In-house counsel felt they made the decision 30.77% of the time with outside counsel doing so just 15.38% of the time. However, when outside counsel was asked the same question they claimed to be the driving force 29.78% of the time and viewed general counsel as instigating the decision just 7.3% of the time.
- No surprises regarding the motivation to secure funding. Lack of funds or to hedge risk were, of course, the reasons cited. Lack of funds is the main reason cited by outside counsel from both small and large firms. Hedge risk is the most popular reason by in-house counsel.
- If you are a litigation financier then referrals are the main reason you will see an increase in business. Trust is key in any engagement but even more so in this arena.
- Another key point for litigation financiers is economic potency. This was cited as the key consideration when selecting a firm.
- Of those 407 respondents interviewed the 40.18% were asked if they would use litigation finance again. A resounding 84.29% said yes they would.
Everything seems to be progressing well with those who have used litigation funding. So what are the possible obstacles that still stand in the way of this industry expanding?
75% of the respondents who said they didn’t have experience with litigation funding cited ethical concerns as the reason they won’t consider it. This is likely due to the nature of financing litigation. Companies are essentially profiting from conflict. This coupled with the fact that the legal industry moves slowly and has seen little disruption explains their reservations.
Ultimately we of course view litigation finance as a force for good. The easiest way to combat these ethical concerns is education. As the industry opens up and adopts more transparency it will surely help with these concerns.