Science and Law
13th May 2013

Litigation Funding – 3 Ways Scientists Can Help You Succeed

Litigation funding is certainly not new. Financiers have been funding lawsuits since at least the mid-90s and investors have ranged from hedge funds, to individual investors, to large banks. A few notable mentions include Credit Suisse’s litigation-finance unit (Parabellum Capital), Counsel Financial and LawFinanceGroup.

Litigation Funding – 3 Ways Scientists Can Help You Succeed

Litigation funding is certainly not new. Financiers have been funding lawsuits since at least the mid-90s and investors have ranged from hedge funds, to individual investors, to large banks. A few notable mentions include Credit Suisse’s litigation-finance unit (Parabellum Capital), Counsel Financial and LawFinanceGroup.

Most of this funding has flowed to personal injury lawyers, where it is not uncommon for lawyers to finance lawsuits for clients by eliminating hourly billing and reaping up to 50% percent of the recovery (if they win).

Moving beyond this model, newer third-party funding firms are providing cash to corporations to pay for the cost of arbitrating or litigating a claim as a plaintiff. Essentially, the investors bet that the cost of settling the case plus attorney fees will be below the amount it received from the client (the difference is pocketed by the investors). A great introduction to the industry was published in the The National Law Journal back in 2009. Now in 2013, litigation funding recently gained some high-profile attention from articles in the Wall Street Journal and the Economist.

The WSJ and Economist Articles

The WSJ article from April 8 featured a short introduction to litigation funding, as well as a focus on the newcomer in the industry: Gerchen Keller Capital (which recently closed a $100 million deal), as well as some discussion of older funds like Burford Capital and Juridica Investments Ltd.

Interestingly, Gerchen Keller Capital’s

model is to invest in both defendants and plaintiffs, but instead of financing litigation brought against businesses (e.g., personal injury, product liability, or class-action cases), they invest in litigation brought by major companies against other major companies (which allows litigants to keep litigation costs off their balance sheet).

Skeptics are afraid that more available funding will be used to fuel so-called frivolous lawsuits. However, according to Chris Bogart (CEO of Burford Capital), he makes it clear that he is no fan of frivolous litigation, and it would actually be “the fastest way for me to go out of business.” Really, the value is in picking winners, especially those potentially high-value cases that may have never been filed (because of the high costs associated with litigation). Other concerns have been expressed as well, including where an attorney’s loyalty will lie, and the possibility that attorneys may risk br

eaching client confidentiality (to the investors), who will want to properly assess the merits of a defense or claim.

The Economist piece, while not detailed or comprehensive, provided for good general information on the process of litigation funding organizations and their success. In the article – Investing in Litigation: Second-Hand Suits – the author discusses the phenomenal returns that some firms are posting, and prefaces the article with: “Fat returns for those who help companies take legal action.” A brief mention of specific firms is made, such as Burford Capital, which “boasted a 61% net return on invested capital in 2012.” And an excerpt by Juridica’s CEO, who told the Economist that the highest risk is not in the quality of cases, but it is in the timing of the suits since “courts’ gears grind slowly before suddenly producing results, so cashflow is ‘lumpy.’”

Many of the cases that these litigation funding firms take on will have a heavy scientific component. Therefore, scientific support will be critical moving forward.

The following are three ways that scientific advisors can help litigation funders succeed.

1)      Scientific due diligence to validate investment hypotheses

Scientists can help third-party litigation funders assess the scientific viability of a lawsuit.

Translating the scientific world into the legal arena can be daunting to those navigating this complex territory. Having scientists versed in both worlds will make the process more seamless and will help anticipate scientific arguments confronting the financial team. This will help the financial team develop a better estimate of what the value of a case.

Moreover, scientific due diligence can help inform third-party funders at various decision points, including at the pre-complaint stage through the close of discovery and beyond.

2)      Identify the right experts and ask the right questions

Identifying and retaining subject matter experts can help provide strategic insights that may not be apparent using traditional research methods. Working closely with a team of scientists can ensure the right questions are being asked of the experts. ISS’ extensive network can get the right experts onboard to help third-party litigation funders make the right decisions.

3)      Monitor the science to keep in-front of the opposition

Complex scientific data play an integral role in many lawsuits and the key to winning cases is an understanding and keen awareness of the related science. Clearly, good science alone will not win a case. But a case cannot be won without a good scientific foundation.

Often, this can seem like a daunting task and to make matters worse, new scientific and medical data are constantly published, medical conferences are held daily across the globe, and scientific grants are being awarded. A successful litigation team must be aware of all these sources and all the relevant information.

Building a solid scientific monitoring program is absolutely key to these goals and should include constant surveillance of the scientific landscape, categorical organization of publications, and a searchable archive. ISS has the tools to provide unparalleled support in this area.

About Innovative Science Solutions

Innovative Science Solutions (ISS) is a leading scientific consulting firm for the worldwide pharmaceutical, biotechnology, and medical device industries. We are an expert team of scientists, regulatory strategists, and consultants providing a wide range of fully-integrated services to industry and counsel including:

Scientific Support to Counsel (Scientific Analysis, Scientific Strategy, Expert ID)

Regulatory Strategy Development

Dietary Supplement Claim Substantiation and Defense Services

Scientific Due Diligence

For complex litigation support, ISS delivers specialized solutions for your science hurdles. With over 13 years of experience, let our proven blend of success and innovation work for you.

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