The State of Legal Funding

Legal funding is a tricky trend to track. Given the confidential nature of litigation, rarely is it made public whether a party seeks outside financing. But a recent survey sponsored by Burford Capital LLC suggests that legal funding has a healthy future in American practice.

Burford, whose successful bond offering we covered earlier this summer,  bills itself "the world's largest provider of investment capital and risk solutions for commercial litigation." It commissioned Briefcase Analytics to conduct the study, released in January 2014. The respondents come in three groups:

• 313 lawyers in private practice,
• 74 senior legal executives in-house at large and midsize companies,
• 45 "senior finance executives" at large and midsize companies.

The results hold promise for legal funding, though they bring surprises as well. Chief among these is that some attorneys simply do not know legal funding exists! According to the survey, only 75% of financial executives are aware of it; this figure rises to 85% among in-house counsel, and a reassuring 91% of private practice attorneys. Let us rephrase. Prior to completing this survey, a quarter of senior financial executives, and nearly one-fifth of in-house counsel had never heard of legal funding.

These numbers are not whopping, but they are far from negligible. After all, we're talking about seasoned professionals who have been practicing law for years! Imagine a pro athlete who doesn't know she can hire a personal trainer. Instead she goes to the bookstore and buys dense tomes on nutrition, fitness, and human musculature.  Then she spends hours reading, scribbling notes in margins, and figuring out the optimal fitness regimen-hours she could have easily spent actually working out.

What Burford's study tells us is that American litigators just aren't optimizing their workouts. Look at the numbers who have actually used legal funding:

• 7% of private practice attorneys,
• 2% of in-house counsel
• 3% of finance execs.

Curiously, 26% of private attorneys report knowing someone who has used legal funding. Of course, maybe they all know the same person, but what this tells us is that things are not quite so dire.

In fact, a majority of that group sees multiple benefits of legal funding:

• 64% believe "it will lead to good cases being brought"
• 79% believe "it is a useful tool that allows non-contingency lawyers to do cases they otherwise could not"
• 65% believe "it levels the litigation 'playing field' between parties with unequal financial resources."

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(These figures are smaller among corporate respondents, who perhaps would prefer not to find themselves on the opposite side of plaintiffs backed by legal funding.) But the study's most important takeaways are its most optimistic: a considerable percentage of every group (37%, 33%, and 50% respectively believes law firms should educate their clients about legal funding.

An even greater percentage - 59%, 43%, and 57% - expects an increase in demand for legal funding in the next 18 months. Well, hey -- we just happen to agree. And we're here to make sure that demand gets met.