Ensuring Confidentiality When You Apply for Legal Funding

by | Oct 9, 2017 | Blog Posts

No law firm wants others to know they need additional funds to run their practice. That’s why confidentiality is so important in dealing with a legal funding company. Many firms are concerned that their finances will be revealed to competitors or co-counsel. However, a reputable company should follow these rules regarding confidentiality of your application:

  • Attorneys on the other side of the settled case should not be contacted. Opposing counsel does not need to confirm the terms of the settlement or acknowledge the lien on the settlement proceeds. Instead the funding company should rely on the funding application and documentation you provide including a copy of the signed settlement agreement. In addition, the funder will do their own independent due diligence. The only time a funder may reach out to opposing counsel is if the lawyer seeking funding commits fraud, misrepresentation or otherwise fails to communicate with the funding company. This is rare.

 

  • Co-counsel or attorneys who are sharing in the fee should not be contacted. Where there is a fee sharing agreement or another attorney is receiving a referral fee, funding companies typically request a signed agreement between the parties, which you should already have in your possession. In the event, you don’t have a signed agreement, correspondence/email confirming the arrangement may also be sufficient. There is typically no need to disclose to other counsel that you are seeking funding. You can simply send an email setting forth the agreement and ask other counsel to confirm.

 

  • Banks may need to be contacted. If there is a bank lien or another funder that the new funding company is “buying out,” the new funder would need to be in contact with them in order to arrange the buyout. If there is a bank lien or other funder and they are subordinating that particular case to the new funder, then the new funder also would be in contact with them on that particular case.

 

  • Even if you have trouble providing the necessary documentation, you may still avoid disclosure. A reputable funding company will look at your situation and decide on a case by case basis.

Your funding transaction should be between you and the legal funder. Just as you deal with your clients in a confidential manner, you should insist on dealing with a funding company who subscribes to the same rules as you do.

Learn more about the funding process or contact us for a consultation.