Litigation Finance: Financial Engineering in the Courtroom

Abstract

Litigation finance is a relatively new financial product that has the potential to unlock the justice system for an unmeasurable number of people in the United States who have suffered injustices that would represent meritorious claims if the victims could afford to bring a civil case. Unfortunately, the costs of litigation are so high, that many cannot. Litigation finance is quickly becoming the key to the justice system for those people. The relative lack of familiarity with third-party litigation finance, and the lack of a regulatory regime are still roadblocks to the widespread use of the product, but it’s only a matter of time before that issue fades. Fortunately, these impediments to litigation finance’s emergence as a mainstream product are being actively addressed. Multiple countries have developed regulatory regimes, while the United States has thus far deferred to state governments to develop their own rules regarding litigation finance. This process will eventually lead to a federal standard that will provide clarity and stability for litigation finance to expand. Additionally, litigation finance is increasingly becoming a known financial product. Using traditional marketing techniques and the spread by word of mouth from friends and family members who have used the product, litigation finance is moving into the mainstream. This paper will explore litigation finance and follow its evolution from its ancient beginnings to its current state as a new financial product designed to provide the financial means for unlocking justice which has always been a cornerstone of our democracy.