A New Perspective on Litigation Funding with Shrey Gupta
Mar 11, 2021
Are you practicing as a contingency fee lawyer in the USA or other countries? If you are, then you are putting yourself in a high-risk situation. Lawyers like you or the law firms where you work take on most of the financial risk when representing cases in court. It might take long for you to receive payment for your service if you win your case. How does litigation funding come into the picture?
In India, there is an emerging third-party litigation funding company that aims to cushion this risk and give lawyers the pay they deserve. At the same time, they make justice more accessible to those who may be unable to pay for legal services. With this new business model, we can revolutionize the funding and litigation process that slows down our legal system.
In this episode, Shrey Gupta shares his experience as the Head of Growth of LegalPay, a pioneering litigation funding company in India. He is eager to tell us how this business model will benefit everyone: litigators, lawyers, and funding companies alike. He also talks about the risk factors he faced and how he remained successful despite potential losses.
Don’t miss this episode and learn the value of litigation funding!
Three reasons why you should listen to the full episode:
- Gain valuable insights on law practice in India and how it compares to wherever you are practicing.
- Strengthen your fundamentals on how to run a business as you expand your perspective on different business models.
- Discover how you can bring in more profit while helping others, whether you are an attorney, investor, or plaintiff.
The Makeup of the Legal Market in India
- Shrey discussed that there is only one supreme court in India. All the states have the High Courts, then the District Courts at the lowest level. All cases begin at the district level and go up until the case is resolved.
- India also has tribunals for different, more specific matters. These tribunals, therefore, resolve disputes faster than the traditional court process.
- According to Shrey, their company, LegalPay, only takes up matters in the High and Supreme Court levels. This is because these levels have good disposal rates and undergo faster.
- Shrey shares more details about the arbitration and appeal processes in India.
Differences in Legal Systems in India and the USA
- In the US, personal injury claims have contingency fees, but in India, the Bar Council itself bars these fees.
- However, according to Shrey, a third-party funding company can provide financial assistance to the litigating party.
Moshe: “I couldn’t imagine how things would look like here [in the USA] if you weren’t allowed to have contingency fees.”
Law Firms in India
- Shrey stated that the majority of lawyers in India only practice at the district level. Only a few have the adequate skills to practice in higher courts.
- In total, only about 1,000 to 2,000 law firms practice in different regions of India. These law firms range from large-scale full-service firms to smaller boutique firms.
- Shrey stated that they work mostly with boutique law firms in metro cities in India.
Shrey: “Everyone in the ecosystem, from my perspective, will benefit [from litigation funding]; the litigants, the lawyers, and us (litigation funding company) in multiple ways.”
- Litigants can benefit from having their entire case funded while it is still going on. For the lawyers, they are being paid for their services.
- The third-party litigation funding company serves as the contingency. They charge a certain percentage from the litigants in the future.
- Therefore, these third-party funding companies take the huge risk of losing or gaining, instead of just the lawyers. Essentially, the lawyers’ tasks as legal guidance and a bank are split; the funding company assumes the latter task.
- Listen to the episode to learn how Shrey found out how litigation fees worked in India.
Risk Assessment in Litigation Funding
Shrey: “We first see the facts of the case, and see if such facts have occurred in previous cases.”
- According to Shrey, they look diligently at previous historical patterns and legal merits on the case.
- Litigation funding companies look at the documents of the case of the litigant. Likewise, they look at the financial capability of the opposing party.
Shrey: “The important factor is the financial health of the opposing party, because if they become insolvent then we get nothing.”
- These third-party companies also look at the performance of the lawyers before they fund the case.
- Find out more about how these funding companies get hold of information before they fund a case.
How Funding Companies Make Money
- According to Shrey, their funding is in the early or late stages of the case. He explains why there is more profit when they fund in the early stages.
- Also, in India, the litigation cost to claims ratio is 4-5%, making it less risky and more workable for funding companies.
Shrey: “Suppose we invest in 50 cases, and you can only win 25 of them. Even in that case, our capital will triple itself.”
- To avoid troubles with lawyers and law firms, Shrey highlighted the importance of imposing a funding agreement.
Shrey: “We have a funding agreement, which contains all the terms and conditions in a law firm for that particular case. So that agreement also contains the specific amount that we are going to pay to the law firm. If the law firm also charges more, they will negotiate on the cut that we are taking .”
- He also pointed out that it is possible to negotiate for a bigger cut in the claim in certain situations.
- To have the funding for litigation, third-party funding companies are backed by investors who want to support the business.
Are Third-Party Funding Companies Successful?
- Shrey stated that they have had an 80% success rate in the past 12-24 months. Despite small losses, they still gain a bigger profit.
- He took pride in LegalPay’s business model, as it will still be profitable even if the success rate is only 17%.
- It takes diligent risk assessment to remain successful and profitable as a third-party litigation funding company.
Moshe: “So, you have more margin for error that is a cushion, but you are not using it.”
Litigation Funding in the USA
Moshe: “I think that access to justice, to have anybody who needs to be represented, to have access and not be limited by their ability to pay for it is extremely important… The more solutions we find for this, the better our legal system will get.”
- According to Shrey, a few people and companies could put litigation funding scenarios in the USA.
- Companies and capitals in the USA lend legal fees to help lawyers back their cases financially.
- However, Moshe stated that the USA's litigation funding process is not structured the same way as in India. In America, the lawyer takes most of the risk.
About Shrey Gupta
Shrey Gupta is the Head of Growth at LegalPay, a pioneering digital platform in litigation funding in India. Together with his business partner, he launched this platform to help his clients settle their lawyer’s bill. He achieved this feat way back in 2016, even before graduating from law school in 2019. Despite not yet taking the exam to practice law in India, Shrey helps people become financially capable in legal matters.
With his Legal Tech Onboarding experience, he makes litigation funding more accessible to stakeholders in the legal sector. Up to date, he continues to pursue his active interest and expertise in the legal tech ecosystem in India.
To get in touch with Shrey, you can email him ([email protected]) or reach him through his LinkedIn account. If you’re interested in learning more about his litigation funding company, check out LegalPay’s website.
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