By Earl Boyle, Esq.

Many plaintiffs’ lawyers find themselves litigating against giant corporate defendants and insurance companies with substantial war chests. Even in the most meritorious of cases, litigators can be confronted with a need to settle early or refer the case to a larger law firm, resulting in the receipt of only a fraction of the fee.

“There’s an enormous need for contingent fee litigator financing,” says Counsel Financial president Paul Cody. Since 2001, Counsel Financial has provided litigation law firms a financing alternative to personal lines of credit and recycled after-tax profits, offering loans and credit lines solely to law firms whose revenues are derived from contingency fee practice.

Litigation law firm financing companies like Counsel Financial provide loans that range from $50,000 to $5 million. Unlike banks, which often require attorney-borrowers to pledge personal assets as collateral, litigation law firm financing companies assess the case portfolio of the law firm and then lend money against the total value of the contingent fees the law firm expected to garner. As a result, these credit lines are substantially larger than banks can provide.

The attorney-borrowers remain in control of all legal decisions. They don’t provide any information that would violate client confidentiality.

Borrowing attorneys have up to four years to repay the loans, with flexible repayment terms. Those who wish to repay the entire amount sooner can do so without incurring pre-payment penalties. Fees are not assessed for any unused portion of credit lines granted so borrowers have a great deal of flexibility.

Law firms that borrow money can use the loan proceeds for all law firm related expenses—from advertising and expert witness fees to case costs, trial expenses, payroll and general overhead.

Many plaintiffs’ lawyers who go up against deep-pocketed defendants find themselves outspent and outpapered, with endless discovery demands and the like. In some instances, plaintiffs’ lawyers would otherwise not be able to continue with the case, without a loan.

In some instances, lawyers who have a relationship with a litigation funding company seek additional loans to finance entirely new practice areas.

Even lawyers who would otherwise fund litigation out of their own pockets can come out ahead by borrowing from a specialized lender. That’s because borrowing money can offer lawyers financial advantages over funding cases themselves.

Many attorney retainer agreements provide that disbursements are billable to clients. As such, treated as loans—not expenses—which means they aren’t deductible at the time they’re made. Meanwhile, while law firms wait for the case to be resolved and for that money to be paid, they’re losing out on the chance to invest that money elsewhere.

But when law firms borrow money, they can deduct the interest payments, which effectively slashes the cost of borrowing in half. What’s more, many will be able to pass along much, if not all, of the remaining interest fees to the clients.

For instance, if a law firm takes out a loan with an 18% interest rate, the firm can deduct the interest payments, making the true cost of borrowing around 9% (the exact amount will vary based on an array of tax-related factors). The firm is then allowed to pass along to clients a reasonable amount of interest on loans taken out to further their case.

The litigation funding field is still so new that companies face the challenge of educating lawyers who are accustomed to financing cases themselves. “In my opinion, most attorneys spend their professional legal careers building the net worth of their law firms by taking the profits from their cases and plowing them back into the firms,” says Hon. Joseph S. Mattina (Ret.), Special Counsel. Moreover, corporate CEOs don’t leverage personal assets to grow their businesses, why should you? Some lawyers view this course of action as a “badge of honor,” without calculating how much money it costs them, he says. “The opportunity cost of not using those assets to build personal net worth can be tremendous.”

By Michael Callahan

The Mikey’s Way Foundation was founded by Michael “Mikey” Friedman, then 16, after his own two-year hospital ordeal battling a rare and aggressive form of childhood cancer. Mikey believed that the worst part of hospitalization was not the treatment, but the intense isolation faced by children day after day, away from their family and friends. He used to say, “If cancer doesn’t kill me, daytime television will!” He grew determined to make a difference in the lives of other kids with cancer, despite his own frightening and uncertain future.

When approached by the Make-A-Wish Foundation and offered the opportunity to go anywhere, buy anything or meet anyone, he chose a shopping spree, but not for himself. He bought laptops and other electronics that would allow these devastatingly ill children to see, hear and talk with their families and friends all day, every day. “Connection,” Mikey said, “is our first step to the cure.”

Tragically, my nephew Mikey lost his battle in 2008, but his legacy–”Helping Kids Cope Mikey’s Way”–continues. Since 2005, Mikey’s Way has distributed thousands of iPads, laptop computers, iPods, gaming devices and similar products to children all across the United States. Mikey’s Way relies on the generosity of donors, so please consider donating at www.mikeysway.org.

By Paul Cody

We are pleased to share that Counsel Financial has earned the exclusive endorsement of the American Association for Justice for the eighth consecutive year. Over the past several years, we have met many litigators at AAJ CLE seminars and conventions and understand the value of the benefits AAJ provides to its members. As the only law firm financing company exclusively endorsed by AAJ, Counsel Financial is also a proud AAJ Extras provider and offers an exclusive discount for AAJ members.

If you are considering a line of credit to help grow your personal and law firm net worth, contact us or give us a call for a confidential consultation and evaluation of your contingent fee case portfolio.

By Hon. Joseph S. Mattina, J.S.C. (Ret.)

I am proud to announce that the Honorable Frank A. Sedita, Jr., who retired from the New York State Supreme Court on December 31, 2001, has joined me at Counsel Financial.

Judge Sedita has had a distinguished judicial career for more than 20 years, most recently serving as a New York State Supreme Court Justice. During that time, he presided over more than 7,000 civil litigation, tort and contract cases, as well as mass tort litigation. Prior to joining the bench, Judge Sedita was a well-respected litigator concentrating in commercial litigation and labor law matters. He is also the proud father of our district attorney, Frank A. Sedita, III, in Erie County, New York.

We are privileged to have Judge Sedita with us at Counsel Financial and extend him a warm welcome.

By Michael Callahan

On March 3, the Buffalo Hearing & Speech Center Foundation hosted its annual black tie gala at Seneca Niagara Casino in Niagara Falls, NY. This year, I am pleased to share that Counsel Financial is helping to further BHSC’s mission as their presenting sponsor in honor of Mikey’s Way Foundation. I have been honored to serve as one of the co-chairmen of this event along with several remarkable area professionals, and am proud Counsel Financial has been provided the opportunity to be a part of such a great event, and for a tremendous cause. To learn more about BHSC, visit www.askbhsc.org.

As a former New York State Judge for nearly 40 years, I have personally witnessed the struggle of the plaintiffs’ bar to financially compete against large insurance companies and other well-funded defendants.

In my day, there was no helping hand. Traditional banks were (and still are) supportive in small measure, but lending is almost always limited to the value of your personal assets.

Now, there is Counsel Financial–the nation’s largest provider of loans exclusively to litigators. Unlike other lenders, Counsel Financial understands that the estimated value of your contingent fee portfolio today can help finance tomorrow’s verdicts and settlements.

Here are just a few of the benefits of what I like to call, “The Power of Attorney Funding®”:

• A four-year, flexible credit line up to $5 million

• Proceeds that can be used for any law firm purpose, including case costs, expert witnesses and additional staff

• Maximum borrowing based on the total value of your anticipated fees

• Interest that is 100% tax-deductible* and, in most states, can be charged back to the client

I am proud of the fact that we have helped so many trial lawyers level the playing field by offering funds to build your client base and maximize their recoveries.

* Check with your tax advisor and please reference state ethics opinions