QUESTION

What is litigation financing?

SHORT ANSWER
Litigation financing (or litigation funding) refers to when a third party funds the cost of a lawsuit in exchange for a percentage of any recovery.
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Litigation financing has been available to personal injury plaintiffs for many years.  In the mid-2000’s, litigation finance became available in commercial lawsuits. Over the last few years, commercial litigation finance has grown considerably, with new financers entering into the market.

Litigation finance involves a number of issues, many of which are still evolving. One such issue is whether the use of such financing must be disclosed to the other side in litigation. Another is preserving attorney-client privileged information while still allowing the financer to do its due diligence before investing in the case.