Big Ticket Litigation Finance Deals Set to Rise in 2018 – two recent examples
In late 2017, TheJudge was approached by a specialist pharmaceutical company involved in a substantial dispute. While the initial approach emanated from the plaintiff’s interest to explore litigation finance options for its legal budget – which amounted to tens of millions of dollars – as discussions unfolded, the client indicated its willingness to explore an out-of-the-box approach and consider a more diverse range of options. TheJudge was able to source multiple offers, which included a $100m facility that the client could use for a host of business purposes, well beyond the simple financing of the case in question.
Instructed by a claimant who held a commercial arbitration award, TheJudge secured $80m of capital to part-monetize the award and obtained an onward commitment of $20m for enforcement fees and expenses. 2018 is likely to see an increase in the volume of monetized awards – whether in whole or in part. Such arrangements can also take place ahead of the award being made, which, although increases the risk to the capital provider, releases capital that could otherwise be tied up for years. By using the award or prospective award as collateral, claimants/plaintiffs can raise capital for a variety of purposes, which could prove to be a boom market, particularly among disputes where hundreds of millions or billions of dollars are at stake.
Of course, monetization need not be limited to the litigants themselves. Law firms running contingency fees now have more flexibility than ever to monetize the value of their cases. Portfolio financing for law firms’ contingencies can reduce the cost of litigation finance, particularly where the funder can cross-collateralize their risk. If immediate cash-flow is not a primary concern, but the law firm would nonetheless like to limit the potential volatility of contingency outcomes, then Contingency Fee Insurance could be the ideal solution. In fact, a significant portion of litigation finance companies also have insurance in place behind the scenes, as it remains an economical hedging of risk.
The above are just two recent examples that demonstrate how extensive the market is becoming, even for single transactions. It is imperative that attorneys have a more expansive outlook and present their clients with the full range of potential options, including the litigation insurance options such as Attorney Fee Insurance, which looks set to see exponential growth among corporate plaintiffs in 2018.
Being too close to a single funder in today’s rapidly expanding market could be detrimental. We are now seeing the emergence of markets within markets, with traditional litigation finance companies involved at one end of the spectrum, and a separate specialist market available for transactions where the finance required exceeds $100m – a sum often too large for many traditional litigation finance players.
There is simply too much competition, both in terms of pricing and creative structuring, that you could be doing your client a disservice. It is our duty to stay ahead of the curve and ensure our law firm clients have all the tools they need to not only to successfully secure a pitch e.g. by differentiating from the competition, but also by ensuring that the firm’s client receives a tailored solution, on the most competitive terms.