Law firm finance: can the defense compel discovery?

September 13, 2021

September 13, 2021

Law firm finance: can the defense compel discovery?

Outside of publicly traded companies, a law or policy that required an enterprise to disclose to the world where it gets its capital would be considered ludicrous, a complete invasion of privacy.  

So why then are lawyers and law firms -- particularly those that represent victims suffering the consequences of others’ negligence – treated differently?  

The answer is actually quite simple.  

Anti-plaintiff lobbyists are stronger – and better funded -- than ever. Through smear tactics and false stories of litigation fraud, these anti-plaintiff groups continue to chip away at law firms’ basic privacy rights with ever-increasing levels of success. How a lawyer or firm finances a case is now fashioned into a weapon against them.

All is not lost, however: The current disclosure rules and laws appear to be limited to situations and circumstances in which law firms invite a financial participant into the case or take loans “non-recourse.” For traditional bank loans and other forms of recourse financing, the disclosure laws do not seem to apply. [1]  

Lawyers and law firms need an alternative to the non-recourse advance.  

Rather than running their law firms like a partnership with non-lawyer third parties, it is time for lawyers to begin running their law firms like businesses.  

Enter LevelEsq

Until now, the alternative, non-bank lending space has left lawyers out in the cold. LevelEsq is a balance sheet lender that offers lines of credit to lawyers and law firms. Like the small business lending counterparts that offer funding quickly, LevelEsq can put money into the law firm’s bank account within 24 hours of applying. And because this is an actual, arms-length loan in which LevelEsq takes no financial position in the case and has no say in firm strategy, disclosure of these loans should be exempted from these disclosure rules that are becoming more prevalent.  

So long as these are actual loans and not non-recourse advances, groups such as the Chamber of Commerce will be hard pressed to interfere with -- or demand disclosure of -- loans that the law firms take to finance their business.  

While LevelEsq is a true revolving loan, the founders of LevelEsq also founded Level Insurance, the first and only insurance that protects the financial investment a law firm makes in a case. By providing Level Insurance with each qualified LevelEsq loan, the borrower is protected from paying principal in the event of the worst-case scenario: the trial loss. If the case is lost at trial, all of the principal borrowed is repaid to LevelEsq through the coverage provided by Level Insurance.  While LevelEsq is not a non-recourse advance, the existence of the insurance brings the borrowing attorney as close to non-recourse as you can get without worrying about discovery and disclosure.  

In addition, LevelEsq offers a payment schedule that is designed to provide tremendous access to capital while limiting repayment until the case is resolved. You will only be responsible for interest payments during, at least, the first 18-24 months of your case. After that, as long as there is record activity on the case and the credit requirements are still met, LevelEsq will extend the interest only payments for a longer period of time.

For those of you already involved with non-recourse lending, LevelEsq is the safe alternative to protect you and your clients from these disclosure rules.  

For those that have not yet explored financing your cases, LevelEsq is the single best tool you can have in your arsenal to truly run your law firm like a business

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[1]United States District Court of NJ, Civ. Rule 7.1.1

Northern District of California, Standing Order for All Judges

2017 Wisconsin Act 235, Section12

Justin Leto
Co-Founder and Chief Executive Officer of LevelEsq. He is also the Co-Founder and CEO of LevelEsq’s parent company, Idea Financial

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