Litigation isn’t cheap but payoffs can be massive. Smelling a business opportunity, investors in recent years have bought stakes in lawsuits helping to shoulder expenses in exchange for a cut of potential winnings.
The field, known as litigation finance, is still relatively obscure in the U.S. – but it’s growing. Banks with litigation finance arms in Europe and Australia have expanded into American markets and bankrolled a broad range of individual-plaintiff and commercial disputes.
The practice can breathe life into worthy lawsuits that parties lack sufficient capital to pursue, but it can also increase the complexity of cases by introducing another character to the cast. And though investment firms for a variety of reasons tend not to appear with their clients in court or mediations, their mere existence can cast a shadow over settlement proceedings.
