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Could a commercial lawsuit bankrupt your business?

In a recent post, we described the consequences of a zoning challenge to a real estate project. However, a legal dispute can be equally devastating to a company's business operations. Small wonder, then, that a new type of safeguard has arisen: litigation funding.

The model offers investment opportunities in commercial lawsuits, somewhat analogous to making a side bet on the lawsuit's outcome. Funds are raised to help the corporate defendant mount a strong defense, and investors can reap a payout if the defense is successful and the court rules in favor of the company.

One Boston-based investor explains that the appeal lies not only in the potential return, but the fact that the securities market doesn't directly influence the outcome of this type of investment. If the lawsuit isn't successful, however, the investors most likely will lose their entire investment. There's also a potentially long wait involved, as business litigation might take several years before arriving at an outcome.

Our Massachusetts business law firm has helped corporate clients of all sizes with a wide variety of matters. Some issues might be proactively handled through a corporation's organizational documents, such as how the corporation will respond to an original shareholder's departure, corporate governance problems or perhaps a sale or merger. Yet surprises may arise that are beyond the scope of formation documents. In such instances, a corporation may need to prepare for litigation.

Our attorneys are also skilled negotiators and may be able to reach a favorable outcome outside of the courtroom. If those alternative methods of dispute resolution fail, our attorneys can build an aggressive trial strategy that will present a strong case in court.

Source:  The Wall Street Journal, "Litigation Funding Moves Into Mainstream," Sara Randazzo, Aug. 4, 2016

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