Litigation finance is becoming increasingly common for mid-market cases, where the potential return justifies the investment, but the costs might otherwise be prohibitive for the plaintiff or a barrier to pursuing the claim fully. Here's a breakdown of key aspects and considerations:

What Defines "Mid-Market" in Litigation Finance?

• Claim Size: This is the most common defining factor. While definitions vary, "mid-market" cases typically involve potential damages awards ranging from $1 million to $25 million. Some firms might extend the upper range to $50 million or even higher depending on complexity and risk.


• Commercial Disputes: Mid-market litigation finance is largely focused on commercial disputes rather than consumer or personal injury cases, though some specialized firms exist.


• Case Complexity: These cases are often complex enough to require specialized legal expertise and incur significant litigation expenses, but they aren't the massive, bet-the-company, multi-jurisdictional disputes that dominate the high end of the litigation finance market.

• Breach of Contract: Disputes over commercial agreements, supply contracts, partnerships, and franchise agreements are frequently financed.


• Intellectual Property (IP) Disputes: Patent infringement, trademark disputes, trade secret misappropriation, and copyright infringement cases. The technical complexity and expert witness costs make these attractive for financing.


• Business Torts: Claims like fraud, unfair competition, tortious interference with contract, and breach of fiduciary duty.


• Construction Disputes: Large construction projects often lead to complex disputes involving multiple parties, making them suitable for financing.


• Bankruptcy Litigation: Trustees and creditors' committees often seek financing to pursue avoidance actions, preference claims, and other litigation within bankruptcy proceedings.


• International Arbitration: Cross-border disputes can be very expensive due to jurisdictional issues, language barriers, and travel costs, making them a good fit for financing.


• Shareholder Disputes: Minority shareholder oppression, derivative actions, and other disputes within privately held companies.

• Access to Justice: Allows companies or individuals with meritorious claims but limited resources to pursue litigation against larger, well-funded opponents.


• Risk Mitigation: Transfers the financial risk of litigation to the funder. If the case is unsuccessful, the client typically owes nothing.


• Improved Cash Flow: Frees up capital that would otherwise be tied up in litigation expenses, allowing the company to invest in its core business.


• Expertise and Diligence: Funders conduct thorough due diligence on the merits of the case, providing an independent assessment and often identifying weaknesses or strengths.


• Strategic Alignment: The funder's interests are aligned with the client's – maximizing the recovery. This can lead to more efficient and strategic litigation.


• Leveling the Playing Field: Helps equalize the resources available to both sides, preventing a well-funded defendant from using litigation as a weapon to exhaust the plaintiff.

• Cost of Capital: Litigation finance is not cheap. Funders typically seek a significant return on their investment, which can include a multiple of the invested capital or a percentage of the recovery (or a combination of both).


• Loss of Control: While the client retains control over the litigation, the funder will have input on key decisions, especially those that impact the budget and strategy.


• Due Diligence Process: The due diligence process can be lengthy and intrusive, requiring the client to provide detailed information about the case.


• Finding the Right Funder: Different funders have different investment criteria and areas of expertise. It's important to find a funder with experience in the relevant area of law and a track record of success in similar cases.


• Ethical Considerations: Attorneys must be mindful of their ethical obligations when working with litigation funders, including maintaining client confidentiality and avoiding conflicts of interest. Transparency with the court and opposing counsel regarding the funding arrangement is sometimes required or advisable.


• Valuation: Valuing a mid-market case can be challenging, requiring careful analysis of damages, liability, and the likelihood of success. Funders need to accurately assess the potential recovery to determine whether the investment is worthwhile.

• Strong Legal Merits: A solid legal theory and compelling evidence are essential.


• Clear Liability: The defendant's liability should be reasonably clear.


• Quantifiable Damages: The damages must be reasonably quantifiable and substantial.


• Solvent Defendant: The defendant must have the financial resources to pay a judgment or settlement.


• Experienced Legal Team: A competent and experienced legal team is crucial.


• Realistic Budget: A well-defined and realistic budget for the litigation is important.


• Favorable Jurisdiction: The jurisdiction where the case will be heard should be favorable to the plaintiff.

• Referrals from Attorneys: Experienced litigators often have relationships with litigation funders.


• Industry Conferences: Attend litigation finance conferences and events.


• Online Directories: Several online directories list litigation funders. (e.g., The Legal 500, Burford Capital's list, Validity Finance's resources)


• Consultants: Some consultants specialize in connecting parties with litigation funders.


• Direct Outreach: Identify funders who specialize in mid-market cases and the relevant area of law and contact them directly.

• Continued Growth: The use of litigation finance in mid-market cases is expected to continue to grow as more companies and individuals become aware of its benefits.


• Increased Competition: The increase in the number of litigation funders will likely lead to more competitive pricing and terms.


• Specialization: Funders will likely continue to specialize in specific types of cases or industries.


• Technology: Technology will play an increasing role in the due diligence process, allowing funders to more efficiently assess the merits of cases.