October 20, 2021

Why Financial Independence Is Important for Law Firms

Litigation funding is a fast-growing industry, and one that is slowly gaining acceptance in jurisdictions across the United States. However, a recent study from the American Bar Association notes that the acceptability of litigation funding is a “developing area” of law. This is why it is important for attorneys who are seeking funding or represent clients seeking funding to study the latest developments in their jurisdiction.

But in every jurisdiction, a consistent theme emerges: litigation funding cannot be allowed to interfere with the independent judgment of counsel handling the litigation itself. The more specific concerns relating to litigation funding, such as whether third-party funding constitutes unethical fee-splitting, are animated by this underlying concern. Legal regulatory authorities do not want third parties to exert control over the conduct of the litigation. The attorneys handling the case must be free to make the decisions they think are best.

What does that mean for attorneys or litigants seeking funding? Applicants should avoid any litigation funders that refuse to expressly disclaim any right to participate in the litigation, ideally by inserting language into the funding agreement itself preserving the independence of the parties and their attorneys to control the case. 

Of course, funders will want to stay updated on the status of litigation. It is also quite common for funders to request evidence that the funds advanced are being used for the purposes promised (such as paying for expert witnesses) and are not being diverted to improper uses. But if a litigation funder demands the right to exercise control over any aspect of the litigation or the attorney-client relationship, keep looking. Otherwise, the entire transaction may be at risk, along with the attorneys who approved it.

Litigation funders can provide critical financing that levels the playing field in complex litigation, but funding is only a tool. The attorneys and their clients must control the case. Ensuring that funding agreements preserve independence is key to a successful outcome.

Contact Us Today to Learn How We Can Help

At Pravati Capital, we’ve built a team of experts with specialization in the legal and financial industries. This experience allows our underwriters to examine complex cases and evaluate strengths and weaknesses in a single case or a legal portfolio. Our ability to offer adept analysis minimizes risk, which means we can provide capital on favorable terms.

With financing from Pravati Capital, law firms can avoid referring valuable cases to competing firms or splitting fees with other attorneys to cut costs. Handling complex litigation or contingency fee arrangements becomes feasible. And firms can build relationships, grow, and thrive.

If your law firm needs a flexible financing alternative, contact Pravati Capital for a free, confidential evaluation. Call 844-772-8284 or contact us online. We can help you turn your legal assets into working capital.


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