Litigation Capital

Written by Patricia Tunstall
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Litigation Capital to Finance Lawsuits

Litigation capital for funding lawsuits that are in danger of being dropped for financial reasons is forthcoming from investment groups usually composed of investors and attorneys. On the rise since the 1990s, these interim funding groups are playing an increasingly critical role in the legal system. By financing lawsuits in ways plaintiff's attorney may not, these groups enable a strong legal case to proceed when it would otherwise end.

Because these groups are not subject to the same professional conduct rules as lawyers, they can develop innovative solutions for litigation capital to assist an insolvent plaintiff. Although supporting a worthy cause of action is foremost in their plans, making a good investment is the ultimate goal. By combining these two motivations, litigation financing groups are becoming a potent force in the conduct of lawsuits.

Contingency Fees in the United States

Although most other nations do not permit contingency fees, they are the norm for financing personal injury lawsuits in the United States. Indeed, they have been an accepted legal arrangement since the late 1800s after the Industrial Revolution had transformed an agrarian society. Factory workers were uprooted from farms to cities; they were poor, and they were frequently injured.

Contingency fees were the only means by which workers could bring a suit to get compensation for mutilated limbs and other severe injuries. Such arrangements caused an uproar in business circles, because they enabled poor workers to sue rich corporations. Today, some business people and others object to litigation capital being used to sustain lawsuits by poor plaintiffs against corporations, which have virtually unlimited financial resources.

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