According to Fields, litigation funding is a concept that the legal and financial industries alike are starting to better understand.
"Figuring out the transactional structures and overlaying that with all the compliance and ethics issues is complex," Fields concedes. "The bankers haven't historically understood the legal market, and the lawyers haven't historically figured out how to access external capital. So what you're seeing now is really the beginnings of the convergence of law and finance."
"If the worry is that this is going to foment frivolous litigation, I suspect that's not well founded, because the hedge fund investors will evaluate these cases very carefully and would only invest if they thought there was some merit to the case," Weil says.
Most funds consider cases eligible for financing in situations where the corporation is the plaintiff, such as breach of contract or fraud claims. One corporate area where third-party funding is ahead of the curve is IP litigation. It makes sense: Inventors, often in universities, usually just don't have the money to fund IP disputes with major corporations.
"I would not be surprised if most courts, as long as the arrangement is structured carefully, would probably be OK with this idea as long as it's not unconscionable or usurious," Weil says.
Privilege and Prejudice