Litigation funding practice pointer: what funders look for when evaluating damages
Over the course of its years in the litigation finance industry, Bentham has developed funding criteria to guide its investment strategy. These criteria are tailored to each type of funding product Bentham offers, and, while they vary slightly by funding category, they are all designed with the common goal of helping to identify quality cases where the introduction of litigation funding can provide a fair, healthy return to all parties involved – claimant, lawyers, and funder.
Let’s focus on the listed criteria for commercial funding as an example. We list the following five requirements on our website:
- Only commercial cases may be used as collateral for funding. We do not fund personal injury, discrimination, or malpractice cases.
- Funding requested must exceed $1,000,000.
- Anticipated judgment must exceed $10,000,000 (exclusive of punitive damages).
- Defendant must have a clear ability to pay.
- The litigation must have strong prospects of success.
At the risk of stating the obvious, these are typically the first five points that Bentham will focus on when evaluating any request for commercial funding. So, suppose an individual has a legal claim and is interested in exploring financing – how can he or she best show that the claim meets all of the above?
The truth is that, while an individual can likely tell whether their claim is a commercial claim (as opposed to personal injury, discrimination, or malpractice), the remaining four points can be a little tricky and often may require some outside verification before Bentham can enter the case. Just as having a box full of receipts and financial documents by your side when you sit down to do your taxes helps ensure a faster, more efficient filing process and more accurate results, the same principle holds true when inquiring about commercial litigation funding.
Points two and three relating to particular dollar amounts can be especially tricky. It can be extremely difficult, if not impossible, for an individual with no prior legal experience to accurately forecast both a case budget to request the proper amount of funding and whether the anticipated judgment will exceed $10,000,000. (This is also a product of human nature – it’s just difficult for people involved in a case to be objective about its value.)
So how can the potential claimant get to the starting line? The short answer is: keep the receipts! If a claim is for breach of contract, having a copy of the contract in question at the ready provides invaluable detail. If a damages theory is a bit more complicated, it may help to speak with a lawyer even before reaching out to Bentham to help crystallize the issue and provide some outside support. Being able to show why an anticipated judgment will likely exceed $10,000,000 can help everyone move forward faster in the funding process.
To be clear, a potential claimant need not have his or her case completely polished or be aware of the exact amount of actual damages at issue before seeking funding. In fact, Bentham prides itself on adding value to matters through its extensive due diligence process, which is designed to address all funding criteria and make sure that each one is fully satisfied. By the time the diligence period has ended, both the claimant and Bentham should have a clear idea of how much a case is worth, how likely it is to succeed, and how likely the claimant is to collect. Bentham’s U.S. team is comprised of litigation experts who are adept at evaluating the potential success and monetary value of a case. But, it is also true that the more detail a claimant can provide at the beginning of the process, the more likely it is that Bentham can efficiently and accurately assess the claim.
Should you have an interest in obtaining financing for a case, please contact us for a consultation.