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.
In A Fee Limitation Rule for Litigation Finance, Michael B. Abramowicz of The George Washington University School of Law writes:
It should be possible…to improve the incentives of litigation finance companies by enacting rules that will affect their financial return. Indeed, those who are critical of litigation finance on the ground that it can spur frivolous litigation should recognize that in fact, litigation finance presents an opportunity. Because litigation finance companies will necessarily perform some screening on the quality of lawsuits they fund, we can devise rules that will tend to improve the incentives of companies to support lawsuits they truly believe are meritorious while rejecting nonmeritorious ones. There exist a variety of existing mechanisms operating directly on litigants that seek to achieve similar effects. These mechanisms include sanctions for frivolous suits7 and fee-shifting rules.8 It is not straightforward to design such mechanisms to produce optimal incentives even for liquid, risk-neutral plaintiffs,9 however, and it may be particularly difficult for such mechanisms to optimize the incentives of plaintiffs who might not have the funds to pay sanctions or for opponents’ legal expenses. A requirement that plaintiffs put up a bond may arbitrarily screen out good cases if the plaintiffs have no access to litigation finance. It may be easier to design mechanisms that affect the returns of the lenders, so that their screening will be closely aligned with the social interest. This Essay’s project is to describe such a mechanism, along with a number of variations, and to identify its advantages relative to alternatives.
Read more: http://www.law.northwestern.edu/searlecenter/papers/Abramowicz_Finance_Final.pdf