Litigation finance expert witnesses may opine on litigation financial options and attorneys fees, among other topics. Litigation funding is a practice in which individuals who are plaintiffs in lawsuits receive money from firms and individuals who take a lien on the proceeds of a personal injury suit in return for ready cash. It is not considered a loan as the money does not have to be repaid if the plaintiff’s law suit is unsuccessful. It is a nonrecourse debt. Funding companies also advance money to attorneys against anticipated legal fees earned in a personal injury matter.
In A Fee Limitation Rule for Litigation Finance, Michael B. Abramowicz of The George Washington University School of Law writes:
Interest rates on such loans are accordingly well in excess of typical market rates, but the arrangements may be beneficial to plaintiffs who do not have enough cash on hand to finance a lawsuit and who either cannot obtain funds through traditional loan sources or do not want to risk the possibility of facing a large debt if the lawsuit fails. The social welfare case for litigation finance is simple. Such financing enables liquidity-constrained plaintiffs to bring more cases and to prosecute cases more effectively. Increased funding for litigation should thus reduce legal error and help achieve the legal system’s goals, including both compensation and deterrence of negligent or wrongful acts.
Read more: http://www.law.northwestern.edu/searlecenter/uploads/Abramowicz_Finance_Final.pdf