How Litigation Funding Helps Plaintiffs Avoid Getting Burned By a Scorched-Earth Defense
In a typical business case, counsel on both sides generally agree to a number of reasonable pre-trial steps, like curtailing the scope of discovery or limiting the number of motions. It can keep the litigation process from becoming too combative or expensive for clients.
Not everyone plays so nicely though. In some cases, one side will launch a “scorched earth” strategy, litigating every issue, pursuing each technical argument in stultifying detail, filing endless motions and making seemingly impossible discovery requests for physical and electronic documents.
Scorched earth tactics often occur in cases where a smaller business sues a larger, deep-pocketed defendant. For the defense, the logic is brutal and, in many cases, effective: drive up costs so high that the plaintiff is forced to abandon the claim.
“It can become so expensive and overwhelming that the plaintiffs must decide whether they can continue to pursue a meritorious claim,” said Naomi Loewith, a Bentham IMF investment manager and legal counsel.
It’s exactly the kind of scenario where a litigation funder’s resources and expertise can play a critical role. The funder, after assessing the merits of the case and its chances of success, allows the plaintiff to confidently fight back — even in the face of total litigation warfare.
That’s what happened in the case of Joseph Radcliff, an Indiana roofing contractor who faced scorched earth tactics in a battle with insurance giant State Farm. Radcliff accused the insurer of improperly denying claims made by homeowners whose roofs were damaged during a 2006 hailstorm. According to an article in The American Lawyer, the insurer retaliated by investigating Radcliff’s roofing business. Through an industry intermediary, it fed claims of insurance fraud against Radcliff to a local prosecutor, who, in turn, filed charges. Eventually, the prosecutor dropped the charges, and Radcliff won a $14.5 million jury award in a defamation case against the insurance company.
State Farm appealed the jury’s decision and threatened another protracted round of litigation. His business in tatters, Radcliff couldn’t afford to pursue the appeal. So his counsel put him in touch with Bentham IMF. Bentham provided Radcliff with cash to fund a new business and paid for his lawyers. Eventually, the Indiana Supreme Court ruled in Radcliff’s favour. With interest, State Farm had to pay Radcliff more than $17 million, according to The American Lawyer.
Like Radcliff, most plaintiffs facing scorched earth tactics contact litigation funders when they face the prospect of dropping a case. On occasion, they act much sooner, approaching a funder before they begin the litigation process because of worries about a deep-pocketed foe and its counsel. Litigation funders deeply analyze cases, and because of their experience, can help a plaintiff deal with scorched earth defense tactics.
“One of the reasons that Bentham hires litigators with a lot of experience is that we know who the players are,” said Loewith, herself a veteran litigator. “Sometimes knowing the identity of the firm or the lawyer will tell us whether they are likely to pursue these tactics.”
In Australia and Canada, a litigation funder’s entry into a case can send a strong message to defense counsel – pushing them to reconsider scorched-earth tactics or engage in early settlement discussions, as they realize the plaintiff will have the means to ensure its claims are heard in court. In the United States, where parties traditionally do not disclose that they’ve sought funding, Loewith says “the involvement of a litigation funder allows the Plaintiff to see the case through and to properly resource it, regardless of the defense strategy.”
For plaintiffs, the impact of having a litigation funding company join a case goes far beyond money. “They know they have a partner with them, that we stand with them and that we can help them through,” Loewith said. “It’s comforting, and it allows them and their lawyers to focus on the merits of the case.”
If you’re facing scorched earth tactics in a case, contact us for more information about possible litigation funding options.