“Litigation Finance” Hits Corporate Litigation

A New York Times magazine article looks at a controversial practice that has been a minor factor in the personal injury business for years, but is now showing up in high-stakes corporate business disputes. Dubbed “litigation finance,” it involves third party investors putting up money for one side of a lawsuit and then taking a share of the proceeds if that side prevails. An intellectual property dispute between Miller UK, a small equipment manufacturer based in England, and Illinois-based Caterpillar, which once was Miler’s best customer, is examined by reporter Mattathias Schwartz as an example of what he says is a rapidly growing practice. “Those involved in the practice argue that it allows smaller companies like Miller to afford a day in court,” he writes. “Detractors worry that it could give rise to a litigation arms race, with speculative money aggravating the already high costs of the American legal system.” Among the latter: the Institute for Legal Reform, the affiliate of the U.S. Chamber of Commerce.