Funding Securities and Shareholder Litigation

Securities and shareholder litigation involves some of the most labor- and capital-intensive cases a firm handles. Often certified as class actions, the client base for a single case may be substantial, making case management demanding in terms of both time and money. Securities and shareholder law firm funding can ease the financial burden of handling these cases, providing necessary capital until the successful conclusion of the case.

Financing Resources for Securities and Shareholder Litigation

Securities and shareholder litigation allows plaintiffs to pursue claims collectively that they might not otherwise pursue; it also allows companies and their counsel to contain litigation costs by providing a single defense to numerous claims.

For both plaintiff and defense attorneys, these cases require a review of voluminous corporate records and the assistance of expert witnesses. The labor, time, and financial resources required to see a case through to a favorable resolution can strain law firms of available resources.
Law firm funding provides terms tailored to each firm’s unique circumstances with financing that leaves the attorneys firmly in the driver’s seat.

Challenges of Securities and Shareholder Lawsuits

A corporation may have a large number of investors, especially if it is publicly traded. In the event of alleged corporate wrongdoing, the large pool of potential plaintiffs can mean the potential for sizeable damages.

Although the facts and law at issue in these cases vary considerably, many share common characteristics:

    • Court filings to obtain class action certification;
    • Discovery of large amounts of corporate and financial records;
    • Documentation review based on proxy litigation;
    • Expert witness involvement;
    • Numerous witness interviews; and
    • Travel expenses.

Discovery requested in securities and shareholder litigation often seeks documents and records the corporation deems confidential. As a result, the parties may use significant resources litigating the discoverability of such records.

Litigation on the scale often found in these cases requires significant resources. As activity in a case waxes and wanes, demand for personnel will increase and decrease accordingly. Firms engaging in this kind of litigation need to be able to accommodate these unique litigation dynamics.

How Litigation Funding Can Help

Conventional financing methods set strict terms on how the capital received may be used and may require personal guaranties from one or more senior members of the firm. The financed amount is reflected on the firm’s balance sheet until it is paid in full, regardless of whether the case resolves favorably.

Law firm funding provides a flexible financing alternative to conventional funding methods. This form of financing helps law firms meet the rigorous demands of representing securities and shareholder clients without negatively impacting firm balance sheets. Terms are tailored to each firm’s circumstances, and the firm remains in charge of both directing the course of the litigation and allocating the capital.

The Application Process

In many ways, the process of applying for litigation funding is less onerous than that used for conventional loans. And the collateral pledged consists of a law firm’s ready assets: its cases.

The process begins when the firm identifies cases that are expected to resolve favorably from a financial standpoint. The firm then provides the funding company sufficient information to evaluate the cases, the likelihood of winning, and the anticipated value of the cases. Once underwriters confirm the value of the cases, the funding company offers a package detailing the amount and terms of financing.
Most significantly, law firm funding is non-recourse, meaning the obligation to repay the financed amount is triggered only by a favorable outcome in the case or cases pledged.

Pravati Capital specializes in helping law firms use their existing caseload to fund litigation, firm operations, and even firm expansion.

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