Our blog scours the web to find you all the latest and greatest legal disputes, but THIS is a new one. Have you heard of litigation investing? Believe it or not, you can invest in the outcome of lawsuits.
In a nutshell, “It enables David to fight against Goliath in pursuit of justice,” says Steven Mandel, founder of the Mandel Law Firm in Manhattan.
Oliver Bravo, founder and CEO of Best Lawsuit Funding, which provides lawsuit funding in Beverly Hills breaks it down like this. “Someone has a lawsuit which is expected to result in the recovery of money. It could be any lawsuit, like a car accident or patent infringement. The plaintiff needs money and can’t wait for the lawsuit to settle to get his money. It could be two-10 years before you see a penny, and that’s assuming you’re successful.”
Most litigation finance investments are non-recourse, meaning the plaintiff does not have to repay the third-party investor if a lawsuit resolves unfavorably.
It works like this. Investors commonly invest through dedicated litigation finance funds — like venture capital funds, except the investments are in legal matters, not startups. Some funding companies are publicly traded. Others use crowdfunding to source capital for individual cases. Two popular companies are LexShares in Boston and YieldStreet in Manhattan.
There are two types of litigation funders, those that specialize in commercial litigation and those that specialize in personal injury lawsuits and other civil claims. Commercial litigation funders typically invest in civil disputes between businesses, such as breach of contract, theft of trade secrets, and patent infringement claims, wherein the plaintiff often seeks several millions of dollars in estimated damages.
By investing in litigation finance, you are purchasing a stake in the outcome of a legal claim. Transactions are often priced as a multiple of the principal investment or percentage of the gross recovery of the case. Litigation funders usually invest no more than 10-15% of the plaintiff’s conservative estimate of total damages owed.
The minimum investment required for those participating in individual marketplace offerings may vary based on the size of the opportunity; however, it can be as little as $2,500. Once LexShares and the funding recipient have consummated the litigation funding agreement, investors receive an email alert 24-48 hours before the new case is added to the marketplace, during which time they can review the details of the case before choosing to invest. Investors can follow the proceedings of the case.
“The potential returns in litigation finance are higher than what investors can earn elsewhere,” says Chip Hodgkins, co-founder of Statera, a Chicago investment fund focused on commercial litigation claims.
So just when you thought you had heard everything, you find out about companies investing in the outcome of lawsuits. Hey, there’s no shortage of them — disputes are EVERYWHERE! And when those things get legal and affect YOU and YOUR business including landlord/tenant matters, contract issues, nuisance ADA claims and even collections, you’ll want to call in the good guy business litigator, Dean Sperling, to resolve YOUR matter with YOUR best interests in mind.
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