Theoretically, plaintiffs and defendants should experience equal footing in a court of law. In practice, however, the side with the deepest pockets often has the advantage.
“There has always been a tremendous imbalance when it comes to financing that has created true David and Goliath situations in the legal world,” says Justin Leto, CEO of Idea Financial. “Big corporations and insurers have bottomless financial resources and entire departments dedicated to defending lawsuits. It’s their job to outspend the plaintiff’s lawyer, pushing them to the point where they must agree to the lowest settlement possible.”
Leto, who holds a law degree from the University of Miami School of Law, launched Idea Financial to empower small businesses throughout the US by providing working capital lines of credit. Through its wholly-owned subsidiary LevelEsq, Idea Financial provides lines of credit to law firms to finance their case expenses.
While the financial imbalance in the legal space has traditionally had a negative impact on plaintiffs, a new day is dawning. Legal financing, which allows law firms to finance costs related to cases and other operational functions, provides the capital and risk management solutions needed to effectively stand up to corporate giants. The growth of the legal financing industry is leveling the playing field, addressing a previously unsolved and often burdensome problem in the legal industry.
“There has been a paradigm shift,” Leto says. “There is now private credit, hedge funds, and even banks entering the litigation finance space to assist plaintiffs and their lawyers.”
Allowing smaller firms to enter the fray
Finances are not the only factor that makes it challenging for plaintiffs to take on large corporations. The complex internal structures that exist at those corporations make it difficult to gain access to the evidence essential to proving a case. Challenging a large corporation can also bring plaintiffs up against delay tactics and public relations initiatives designed by the corporation to cast their opponent in a negative light.
To address those challenges, plaintiffs will often pursue a “bigger is better” approach to selecting counsel, choosing larger law firms when smaller boutique firms may actually be a better choice from a skill perspective. While that approach may provide a plaintiff with equal footing, it won’t necessarily give them the team they need to see justice served.
“We found that many victims — the injured and families of those killed through the negligence of others — were forced into larger plaintiff practices rather than having the choice of a more boutique practice that may actually serve their needs better because of the perception that bigger meant a better chance at victory,” Leto shares. “The support litigation financing provides to small firms gives them access to the firepower they need to fight large corporations, which means plaintiffs looking for justice can make sure to get the right firm instead of just a big firm.”
Strategies for leveraging legal financing
Pursuing larger cases can be instrumental in building a firm’s reputation and financial reserves, and is one way that smaller firms can leverage the power of legal financing. To engage in larger cases, experts must be hired, operations must be expanded, and mountains of data must be processed and analyzed, to name just a few of the costs that can crop up. Legal financing empowers firms to finance those tasks, giving them the capability to pursue high-value litigation previously out of reach.
Legal financing can also give firms the resources they need to pursue cases in niche areas, such as international, immigration, or intellectual property law. Firms can use the financing to gain access to the resources and expertise necessary for building their reputation as subject matter experts. Financing can also support efforts to stay up-to-date on case law relevant to niche areas.
“When incorporated into the right strategy, legal financing solutions can be catalysts for small firm growth and success,” Leto argues. “They empower smaller firms to obtain the legal expertise needed to confidently engage in the competitive legal arena.”
Additionally, legal financing can open doors for firms to obtain and utilize technology solutions. This can include case management systems for adding efficiency to operations and client communications platforms for improving client engagement.
“As we move into the future of litigation, legal financing ensures that more resources than ever before will be available to plaintiffs seeking justice,” Leto says. “They will no longer need to pass over the best option because it is a small firm without the financial firepower needed to take on a corporate giant. The playing field is finally being leveled.”
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