How has litigation funding changed during the pandemic?

February 10, 2022

February 10, 2022

How has litigation funding changed during the pandemic?

At the start of the Covid-19 pandemic, many feared a drastic disruption of the legal industry, as emptying offices spurred fears of layoffs, pay cuts, and insolvency. The legal market, however, experienced a boom in 2021, with record partner and associate compensation and law firm revenue going up 14% on average, compared to 4.6% in 2019, the last full year before the pandemic.  

Economic shifts have abounded. At the start of the pandemic, the financial strain on the retail, hospitality, and travel industries dampened litigation funder enthusiasm for cases against questionably solvent defendants. But a faster-than-expected economic recovery has reduced these concerns. Business disruption claims against insurers increased after March 2020, but most were unsuccessful. Supply-chain breakdown disputes involving cross-border breach of contract claims related to manufacturing and delivery delays are thriving. These costly, complex cases continue to attract third-party funding. Law firm expenses are climbing as the legal talent market heats up, inflation increases, and pandemic-era cost savings on travel, office upkeep, and in-person events abate, all of which could make litigation funding more attractive to firms.

Despite the trend toward transparency and disclosure of litigation funding agreements, broad disclosures have been rare. An analysis of 52 U.S. court decisions through July 2021 found that in 43 cases, the courts disallowed significant discovery of information and documents about an opponent’s litigation funding.  

As the number of commercial funders in the U.S has exponentially expanded, preferred partnerships between big firms and funders have emerged. Long-term relationships with funders that have strong investment records can give firms a ready source of capital for plaintiff-side clients and facilitate client-friendly fee arrangements without placing full financial risk on the firm.

Controversial moves toward non-lawyer law firm ownership have gained traction, with litigation funders showing interest while wary of obstacles, including varied regulations that could hamper firm growth across state lines and unenforceable non-compete agreements that permit partners to sell equity to non-lawyers, then leave, draining the firm’s principal asset—legal talent.  

Institutional capital from investors like pension funds and university endowments has been entering the litigation finance market. Changing inflation and tax rates has increased pressure for market-bearing returns, attracting these investors to litigation funding. With more deployable capital, funders can support larger individual claims, transact directly with corporate legal departments, and dedicate significant funds to preferred partnerships.

As your firm’s costs are likely to rise in 2022, you may consider finding funding relationships and leveraging outside financing for your biggest cases. LevelEsq’s straightforward solutions avoid the controversies of non-recourse funding while still allowing you and your plaintiff clients to withstand the predations of big defendants and their insurers.  Our lawsuit financing and lawsuit cost insurance feature fast and easy approval processes and reasonable rates and won’t trigger concerns about client privilege, case control or required disclosure of terms to courts and defendants.  

How can we help your firm?

Lawsuit Cost Financing

Quick and seamless access to capital to fund your case expenses.

Litigation Cost Protection

Protect the downside with insurance coverage for litigation costs.