Litigation funding is a quickly growing industry that attorneys established to help plaintiffs in personal injury litigation pay for their basic living expenses while attorneys litigate their claims. The industry has seen rapid expansion due to little correlation between the legal funding industry and the stock market and the possibility of long-term high returns. One of the largest litigation funding companies is Baker Street Funding, with offices in New York and South Florida. Daniel Digiaimo, the founder and chief executive officer who previously spent time at Morgan Stanley, Merrill Lynch, and Oppenheimer & Co. We sat down with him to ask questions about the litigation funding space and the future of the industry.
Litigation funding is a relatively new industry, and something not seen outside of America. What exactly is litigation funding, and why is it helpful?
Litigation funding, in a nutshell, is where companies like ours provide plaintiffs, typically those who are involved in some catastrophic injury claim or long-term wrongful imprisonment claim, with a means to provide for themselves and their family while their attorney litigates their case. In most circumstances, when someone is catastrophically injured, for example, they cannot work and thus can quickly fall behind on their bills. This not only impacts their day-to-day life, but it sometimes restricts them from going to doctor’s appointments and getting the treatment that they need. Additionally, it puts them in a position where things are so dire that they may accept the first offer that the defendant makes so that they can pay their bills. We, as litigation funders, help level the playing field with insurance companies and give plaintiffs the independence and opportunity to pursue a case as long as they need to, and make sure that they are appropriately compensated for their damages.
There have been some people vehemently opposed to litigation funding, some since its inception. What do you think about their stance?
I understand that if you look into the industry with a cursory glance, which, unfortunately, some politicians are doing, it could induce an emotional instead of logical reaction. Many people look at the rates we charge, and when compared (unfairly) to something like a bank loan or a mortgage, our rates will look extremely high. When you look into the industry and how it works, we require a high return because we risk principal on every transaction. When a bank provides a loan or a mortgage, their investment is secured. If you don’t pay your mortgage, your house can be repossessed, and if you do not pay a personal loan, the bank can take you to court.
Additionally, most of these loans are secured by an asset and require monthly payments. Legal funding is entirely different. We are providing non-recourse financing, which essentially means that our investment is solely based on the merit of the claim, and if that claim does not settle favorably for the client, then we lose our entire investment. We do not base funding decisions on things like credit or job history or require monthly maintenance payments.
Do you have any influence on how a case is litigated?
We do not influence the management and litigation of any case we invest in. When we invest in a case, we are also investing with the confidence that the attorney will perform and do everything in their power to generate a favorable outcome for the client. We leave the litigating to the professionals and sit back and act as a financial support system for the client.
Many funders are now moving away from investing in individual cases and are now investing in portfolios of cases. Is this a strategy that your firm is employing?
While investing in portfolios of cases carries a different inherent risk profile and a different due diligence strategy, it is not something that we have written off. We like to see Baker Street Funding as the only full-service litigation funding company, meaning that you can come to us as an attorney, law firm, surgical center, plaintiff, or a corporate plaintiff and get funding tailor-made to their specific circumstances. That will never change, and we will always provide services to the end-user. So while portfolio investment is definitely of interest to us, we do not focus on being the sole part of our business.
What types of claims do you fund?
As I mentioned earlier, we really pride ourselves on being full service. We will fund large-scale patent and corporate litigation, personal injury claims, medical malpractice claims, qui tam claims, and everything in between. Case type does not matter to us as much as merit. If we believe a case is strong enough to garner investment, then it will be within our mandate. Additionally, we provide medical lien financing, where we provide payment for the surgical and medical procedures that uninsured plaintiffs need an attorney and law firm funding. We will provide attorneys and their firms with receivables-based financing.
Thank you for taking the time to speak to me. One final question; What is the future of the legal funding space?
I think there will be a big swing into transparency and a focus on client service. Many small firms out there pop up every day, and there is no transparency into how they operate and what they are charging clients. Hopefully, we will see some consolidation in the industry that will benefit clients and attorneys by giving them simple and transparent service. Additionally, some of the larger firms in the industry have completely lost focus on client service. They try to win cases with things like text message case updates and apps, but they fail to realize that this industry is built off clients. These clients typically have experienced extreme turmoil in their lives and want to be able to speak to someone who will treat them with dignity and respect. That is why we are so hyper-focused on providing clients with the best possible service experience from the first time they apply with us up until their case settles. Thank you.