What factors will a litigation funder consider in making its decision?
In determining whether to fund a case, professional litigation funders put each potential investment through rigorous due diligence, which typically takes 30 to 45 days. Given the significant financial commitment, Bentham’s in-depth review is essential. Although the assessment of each case is bespoke, the following factors play a role in Bentham’s assessment:
1. Merits of the claim: The claim should have a strong likelihood of success, based on the evidence and the law. Bentham will ask for any available pleadings that best summarize the legal and factual arguments from each side, together with documentary or other evidence that both supports the claims and refutes any facially strong arguments from the defendant.
2. A sound damages theory: Bentham assesses the realistic quantum of damages that would follow a finding of liability. Bentham must understand the legal theory that supports the damages claim, the evidence necessary to prove it, and any expert evidence on point.
3. Litigation budget: Bentham considers the realistic budget through to the trial of the matter. Although many claims settle before trial, Bentham requires a comprehensive budget through to the conclusion of the trial. In order for a claim to be viable for funding, the budget should be roughly 1/10 the realistic damages assessment.
4. Defendant able to satisfy judgment: The defendant must be able to satisfy any settlement or judgment.
5. Adverse costs exposure: As part of any Litigation Funding Agreement, Bentham typically covers any court-ordered costs made during the duration of the funding agreement. As a result, Bentham will need to understand what the costs exposure is based on the jurisdiction and the applicable tariffs (if any).
6. Invested and commercially rational plaintiff: Bentham seeks to work with commercially rational plaintiffs who will play an active role in the case, and will dedicate the time needed to marshal the evidence and instruct counsel.
During the due diligence process, counsel and clients should be frank, realistic and dispassionate about the case. Litigation funding is a multi-year partnership, and it is best for all parties involved if the funder has the essential information at the outset to make an accurate decision.
Depending on the stage of the matter, all the above information may not be available. For example, if the case has not yet been commenced, claimants may not yet be in a position to provide these details. An application for funding can nonetheless be made at any stage, and our team will work with the information that is available.
For more information on what to expect during the diligence phase of the funding process, please contact us for a consultation.