As every attorney knows there are certain things that he immediately regrets having told his clients as invariably they bounce straight back and make him wish that he had never been so irresponsible. Litigation finance being still a very new concept and usually taken on by lawyers on a contingency basis, there is all the more the need for lawyers to be extra careful about what they are communicating to clients who may already be under severe duress. Some of the typical statements that lawyers should never tell their clients:
“Pre-Settlement Financing Is the Right Route for You to Take”
A smart lawyer should never make sweeping statements like this as there are a number of aspects to be considered before coming to a conclusion whether plaintiff financing is to the client’s benefit. In any case, such a financing mode is a short-term solution that may or may not be appropriate. Lawyers need to meticulously compile and understand the profile of their clients before recommending lawsuit funding to them.
“There’s No Risk Attached with Lawsuit Funding”
Attorneys should never downplay the risk associated with pre-settlement financing even if it really appears that there is absolutely no downside to it at all. After all, what could go wrong with a non-recourse mode of financing wherein the lawsuit funding companies assume all the risk of lending and the plaintiff can simply walk away without any obligation if the case is lost? However, what every attorney should keep in mind that after the case has been won and the settlement arrived at, the client will need to repay the amount of advance together with the applicable rate of interest and the various fees and charges that might have been agreed upon when the agreement had been initially signed. There is a very high possibility that the client, when faced with the steep rates and charges, might be less than happy with you for having permitted him to have taken the advance. Bad word of mouth could prove to be very costly for the attorney’s reputation in the long run.
“You Should Go in for the Funding”
As every lawyer worth his salt knows, he should never be completely direct with the client regarding his opinion. It might be extremely perceptible that it is the best interest of the lawyer if the client goes in for pre-trial funding as otherwise he would be tempted to settle for an out-of-court settlement that is quite low and end up hurting the lawyer’s interests. However, it needs to be kept in mind that the interest of the plaintiff is paramount and any recommendations that the lawyer makes regarding pre-trial advances should work to the client’s interest.
“Regardless of What Happens, You Get to Keep the Funds”
While it is good that the lawyer explains to his clients that legal financing is non-recourse and they have no obligation to repay the advance in case the lawsuit goes against them, it should also be made very clear that in the very likely situation of the case being won, they will have to pay the advance back together with the applicable interest and fees. The lawyer should also ensure that he puts it down in writing to the client just to make sure that the client does not start blaming him when it comes to paying the finance company back a hefty sum. The lawyer should also make it clear that even if the plaintiff’s case is lost on trial, it can be subsequently won on appeal and the client would be obligated to pay back the advance.