Third party litigation funding: a significant opportunity to drive law firm growth

Brought to you by our friends at Vannin Capital PCC Limited

The benefits of litigation funding for claimants are relatively well understood, but little has been written about how litigation funding can be used by law firms as a business development tool to increase the volume of contentious matters flowing into their litigation and disputes departments.

Law firms facing significant challenges

Law firms are faced with a myriad of challenges in the current marketplace. They are expected to grow profits – and, specifically, demonstrate increasing profits per equity partner (PEP) – year-on-year whilst grappling with business model issues including: persistent downward pressure on fees from increasingly demanding clients, how to move away from the billable hour without eroding profitability, intensifying competition to win instructions and the emergence of alternative business models.

On top of this, clients have become more sophisticated. They realise that, owing to the rapid growth of law firms over the past several decades and a recent slackening in demand, it’s a buyers’ market for legal services. As a consequence, law firms can no longer rely solely on their existing relationships or claims of top-tier expertise to differentiate themselves from their competitors and win business.

Selling litigation and arbitration services also requires law firm partners, perhaps more than in other areas, to address clients’ concerns around uncertainty of the final bill. An article in The Lawyer at the end of 2013 entitled ‘Clients rail against botched litigation budgets’ stated: ‘General counsel and other leading in-house lawyers claim that even experienced law firms are often woefully inept at accurately forecasting litigation costs, with the average disparity between budget and the final bill being nearly 40 per cent.’

Litigation funding offers opportunities for law firms

If law firms are able to continue educating their clients about the advantages of litigation funding, there are likely to be significant resulting benefits for those law firms.

There are three main benefits:

Increased number of claims in the market

In the absence of litigation funding, claims will only be pursued if there is sufficient budget at the client to do so. Typically only the strongest claims or those that are of most strategic importance to the client’s business will be prosecuted. As a consequence, numerous meritorious claims are never pursued and the client is likely to be losing out financially as a result.

Rather than increasing budgets and putting more cash at risk, clients can use litigation funding to pursue these potentially valuable claims with no impact on cash flow and no downside risk if the claim is unsuccessful.

Litigation funding allows clients to unlock the unrealised value in their litigation assets and, as a consequence, delivers an increased flow of contentious matters to the law firms that advise them. It’s a win-win.

Ability to take market share from competitors

Losing business to cheaper competitors is a constant concern for law firm partners. For clients that are unable or unwilling to pay the level of fees a particular law firm requires, that law firm should suggest that they consider litigation funding. The client benefits in the usual way (i.e. it will not have to outlay any cash and will not suffer any loss if the claim is unsuccessful) and the law firm will be able to charge its hourly rate with payment of its fees guaranteed by the litigation funder.

This can be a powerful tool to prevent clients going to cheaper law firms and may even allow a law firm to target its business development and marketing efforts at clients that would not have been able to afford its fees without third party litigation funding.

 Reduction of uncertainty on recoverability of fees

Litigation funders have extensive experience of cost budgeting since every case they fund will have an agreed budget drawn up which forms an integral part of the litigation funding agreement. A law firm who works with a litigation funder will benefit from this experience, which increases the likelihood of the law firm recovering its fees – if the law firm sticks to the agreed budget then their fees are guaranteed by the litigation funder.

This removes the risk that the law firm cannot recover fees directly from its own clients and goes a long way to reducing the likelihood of cost overruns.

Conclusion

The litigation funding marketing is growing rapidly. Law firms that build productive relationships with litigation funders and educate their clients on the benefits of using third party litigation funding will strengthen their contentious practices to the likely detriment of those that do not.

Find out more about Vannin Capital and litigation funding at http://www.litigationfunding.com/

Posted in Uncategorized | Comments Off

Talk about online business

Posted in Uncategorized | Comments Off

Talk on comedy and the law at ICLR

Posted in Uncategorized | Comments Off

Queen’s Counsel Lawyer’s Omnibus

QC_Omnibus_6Feb2013 (1)2013 marks the 20th anniversary of the Queen’s Counsel cartoons by Alex Williams first having appeared in ‘The Times’ and we’re proud that we will be publishing this bumper omnibus edition to mark this milestone. The draft cover is on the left and the book will be out later in the year.

Posted in Uncategorized | Comments Off

Interview with Alex Williams, illustrator of the BabyBarista and Queen’s Counsel cartoons

Untitled from Tim Kevan on Vimeo.

Posted in Uncategorized | Comments Off

It’s time to be optimistic about the legal industry

Brought to you by our friends at Law Absolute

There are always plenty of people ready to take a swipe at the future of the legal industry, not least its own members. This is certainly understandable in the current climate with the government aggressively targeting the legal aid sector. Not only that but they’ve also been taking on the personal injury legal world with the referral fee ban and fixed costs in particular. But if you take a step back and look at the legal industry more objectively, in my view it’s not only one with a future overall but a bright one at that and therefore I wouldn’t be at all surprised if lawyer recruitment and legal jobs in London were in fact going well at present despite the headlines.

So what is it that provides such cause for long term optimism? Well, first off, there is the demand. In my view society will always need lawyers to help it tick over smoothly. They’ll be needed to write the new laws, to help define the existing laws and above all to help regulate disputes which may arise on any number of particular sets of factual variations.

Next, there is the talent. Despite the wisecracks, it’s a well-respected profession and attracts highly intelligent people into its fold. Not only that but when they arrive there are rigorous professional standards and norms such that the standard of both the training and the work itself is high.

Finally, there is a limited supply of good lawyers and that coupled with the strong demand for the services means that the price will only go so low. Though it should be remembered that the flip side of this is that there is a lot less optimism for those lawyers who don’t come within this bracket. Now don’t get me wrong, I’m not just suggesting that the market would work this all out all by itself and certainly not that it’s all about price. Particularly when some of the best lawyers might be working pro bono or in an area where people simply can’t afford to pay them. But I am being optimistic that the market coupled with government and society in the longer term will work out solutions.

So what about the government cuts and all the other causes for pessimism? Well, I’d thoroughly agree with the substantive concerns which are raised in this respect. Indeed, my even bigger and far more serious concern is for the prospective clients who may end up falling through the net if society isn’t careful. But I still remain optimistic (or at least hopeful) for the longer term that society will indeed step in and support these groups of people. What’s more, whilst some lawyers will face at least short term difficulties, there may well be structural adjustments made which mean that in the medium to long term in fact they manage to survive.

 

So, yes, there is great cause for concern at present but overall and with a fair wind I’d also say that there is more cause for optimism about the long term future of the legal industry as a whole.

Posted in Uncategorized | Comments Off