Class action lawsuits provide an efficient way for courts to decide disputes that might otherwise go unaddressed, benefitting plaintiffs and defendants alike. Unfortunately, these cases often take years to conclude. And they often require infusions of time and money that are beyond the reach of many law firms.
Class action litigation funding fills this gap by providing working capital a law firm can use to finance the unique needs of a class action practice.
The Challenges of Class Action Litigation
By definition, class actions are complicated. Federal and state rules of civil procedure impose strict requirements—such as numerosity, commonality, and typicality—that increase the resources needed to try these cases successfully. Extensive discovery is common, and notice requirements often equate to substantial delay.
Litigation funding helps law firms meet the additional financial burdens associated with class action litigation without crippling other cases, clients, or the firm itself.
Litigation Funding Equips Attorneys for Class Actions
Even law firms with deep complex litigation experience need adequate resources to handle class actions effectively. Litigation funding provides vital financial support, allowing attorneys to cover an array of costs particular to class action cases, including the following:
- Advertising and outreach costs for class member identification and notification;
- Personnel costs for current or additional staff to assist with discovery and other aspects of the litigation;
- Expert witness fees; and
- Travel costs.
Attorneys can also use the funds to cover general law firm expenses, such as overhead and marketing.
Whether used for class action litigation or other firm-related expenses, litigation funding gives firms the capital needed to manage class action litigation and other types of cases comfortably. And repayment is only required if pledged cases resolve successfully.
Which Class Actions Can Benefit from Litigation Funding?
Class actions involving monetary damages are the best fit for litigation funding, which is collateralized by a case or portfolio of cases. But the underlying subject matter of collateralized cases varies widely:
- Consumer finance;
- Data breach;
- Defective drugs or medical devices;
- Illegal employment practices;
- Pollution and property contamination; or
- Product liability.
Regardless of the subject matter, litigation finance provides a cushion that enables attorneys to decide how to handle cases on their merits rather than being influenced by financial pressures.
Benefits for Plaintiff and Defense Attorneys, New Practices
Regardless of whether a practice focuses on plaintiff or defense work, financially secure law firms can better withstand the increased costs inherent in class action litigation.
Class action lawsuits often mean delayed compensation, leaving attorneys and firms looking elsewhere to cover regular operating costs. Class action litigation funding can level the playing field for plaintiff firms, providing attorneys the resources required to stay in the case for the long haul. It also enables these firms to maintain financial health during the pendency of complex litigation.
Defense firms can also benefit from litigation funding. The simplest use of funds is to provide a financial buffer during protracted litigation. However, the capital can also provide a boost for firms that wish to grow or that would like to balance out defense work with pro bono or occasional plaintiffs’ work.
On both sides of the proverbial “v,” litigation funding can provide less-capitalized attorneys or new law firms the resources they need to attract clients and represent them effectively. Building a book of business takes dedication and know-how, but it also requires financial stability. Attorney funding can offer that missing piece for many young professionals and law firms that want to venture into potentially lucrative class action cases.
Take the First Step with Pravati Capital