Cases taking longer than expected? Consider litigation finance.
- Connor Williams
- Associate Investment Manager and Legal Counsel - United States
It is commonly understood that civil litigation in the United States can be a costly endeavor lasting years, and in some cases, more than a decade. According to recent statistics published by the United States District Courts, the average civil case took 28.4 months from filing to trial as of June 30, 2020, up from 27.2 months the previous year. (And given the ongoing impacts of COVID-19, that average duration seems likely to increase further.)
At Omni Bridgeway, potential claimants and their attorneys most frequently approach us for funding either before filing a case, or shortly thereafter, and we frequently see case budgets outlining likely costs for the expected linear march of litigation: filing, perhaps a motion to dismiss, discovery, summary judgment, trial, post-trial motions, then, perhaps, an appeal (or two). But what happens when litigation gets sidetracked from that linear path and parties find themselves in the 50% of federal cases that take longer than 28.4 months to reach trial?
For example, in Viamedia Inc. v. Comcast Corp., plaintiff filed suit on May 23, 2016 alleging antitrust violations seeking damages approaching $160 million. Plaintiff received negative dispositive rulings from the district court, but subsequently won a reversal in the Seventh Circuit Court of Appeals on February 24, 2020. Now, more than four years after the case began, defendants have filed an amended answer and the case is picking up in the district court again. (Perhaps. Defendants have also filed a petition for certiorari with the United States Supreme Court.)
The silver lining of such scenarios is that they can present viable opportunities for litigation funding. Consider the following hypothetical: Plaintiff decided to self-fund a case and retained attorneys on a 50/50 hybrid fee arrangement with a total budget of $2 million for filing, discovery, motions, and trial. (Put another way, Plaintiff would pay fees up to $1 million, and the attorneys would gain a partial contingency interest in any judgment.) But Plaintiff unexpectedly lost on a motion to dismiss, and was forced to file an appeal just to keep the case alive. Plaintiff then won on appeal, but now faces the reality of a Pyrrhic victory: a revived case with insufficient funds to pursue it, as much of the initial budget has been spent on appeals and the prospect of costly discovery and trial still loom on the horizon.
As it happens, a dispute that has been remanded by an appellate court back to the lower court can be well-suited for litigation funding because of its atypical posture. The funder has the benefit of a binding ruling in the case on at least one, if not more than one, issue in the dispute. Indeed, depending on the specific language in the appellate court decision, the remanded case may be more attractive to a funder than it would have been at the outset. In addition to the obvious benefit of continuing to pursue the case, a plaintiff may well find that, by turning to funding later in the case, the effective cost could well be less than it otherwise would have, as funders often structure their investments as a time-weighted multiple of capital deployed.
The lesson: plaintiffs and funders alike should avoid thinking about funding as a binary option at the beginning of a case, only to be revisited post-trial if a plaintiff is successful and seeks to monetize a judgment. The long and costly nature of litigation means that relevant case dynamic—including, crucially, the strength of the merits and a plaintiff’s ability to self-fund—may change during the life of a case, and outside funding can enhance the likelihood of success even if introduced at a later stage.
To learn more about how dispute finance can assist claimants in a variety of commercial disputes, visit our Company Insights. Or contact us for a consultation to learn more about the ways we can help you and your clients unlock the value of meritorious claims.