Bloomberg Law: Litigation Finance Doesn’t Pose a Security Risk. That’s a Myth by Adam Mortara
Litigation finance firms provide non-recourse loans to commercial parties with lawsuits, ensuring corporate defendants can’t use their wealth and access to top-flight attorneys to intimidate and crush smaller competitors. In this context, large corporations and the US Chamber of Commerce have launched a multi-pronged attack on litigation financing.
The most common complaint is that litigation financing supports frivolous lawsuits. But funders couldn’t remain in business if this were generally the case. An investment in litigation funding only creates a return if there is a judgment or settlement big enough to recoup the principal of the loan and provide a return. A funder that invested in sham cases wouldn’t return anything to its investors and would be unsuccessful.