Litigation Finance Investments Are Not Risk-Free Loans
Law360 (June 15, 2020, 5:51 PM EDT) — When it comes to litigation, perhaps the only certainty is that the outcome is uncertain. There are many roads to defeat, and your fate rests with unpredictable and fallible humans: juries, judges, lawyers and witnesses.
This is why claimholders and lawyers frequently share litigation risk with litigation funders. And it is why courts have held that usury laws do not prohibit litigation finance agreements. Usury laws apply only to loans, which have an absolute requirement that the borrower repay. Litigation funders are repaid only if the plaintiff wins.
In short, investing in litigation bears little resemblance to loans like mortgages, where…