As litigation funding takes on a bigger role in the legal industry, the next year could bring with it a series of important changes.
The past year in litigation finance has been riveting, at least for those of us in the thick of the industry. Next year promises to be just as eventful—perhaps even more so as the sector matures and faces new legal and competitive challenges.
In 2018 it seemed that every other week brought news of another funding company being hatched (including the one I lead, Validity Finance, which launched in June). Capital has rushed into our space like a flash flood into a canyon gully. Many of the benefits are obvious: for litigants, a wider choice of funders; for law firms, tools to boost profits and realization rates; and for the sector as a whole, a release of financial creativity generated by healthy competition.
Some of the potential concerns raised by this flood of capital are equally obvious: an industry focused on profits rather than on helping clients get their cases decided on the merits; inexperienced actors new to the complexities of litigation and economic risk; and nonlawyer funders who lack understanding of the ethics rules lawyers must follow.
Wall Street is driving much of the growth. Litigation has been discovered as a new asset class that’s impervious to the gyrating stock market, to rising interest rates and to the economy as a whole.
Lawsuit finance is no longer in its infancy in the United States. In this commentary piece, Validity’s Ralph Sutton predicts what is to come in the year ahead.