Litigation Financing and Online Reputation Management

Litigation finance and online reputation management are crucial areas for every business; both services help firms when things go wrong. Litigation finance refers to the funding of a litigation case by a third party who receives a share of any recovery, and online reputation management (ORM) ensures the business's positive online reputation at all times.

Litigation finance and ORM go hand in hand when companies are involved in a legal battle and help minimize risks and damages in court.

Understanding Litigation Financing

Litigation financing is similar to investing i.e. it is when a third party finances a lawsuit in return for a share of the settlement. Litigation financing is a global business with up to 40 large funders, including organizations that finance lawsuit operations. North America has the highest litigation financing market share at USD 25.3 billion, and the Asia Pacific region is a close second. Funders have a combined capital of upwards of USD 10 billion. Big players in the litigation funding market include Burford Capital LLC, Omni Bridgeway, Therium Group Holdings Limited, GLS Capital, Validity Finance LLC, and Parabellum Capital LLC.

There are two kinds of litigation financing: consumer and commercial.

Consumer Litigation Financing

Consumer litigation financing refers to non-recourse cash investments made for plaintiffs' personal injury lawsuits. Being non-recourse, it only requires the client to return the investment made for legal fees and pay a portion of the recovered amount in case they win the case.

Commercial Litigation Financing

Commercial litigation financing typically involves non-recourse cash investments in commercial lawsuits. Similar to consumer litigation financing, funders receive a share of the recovery if the client wins the lawsuit. Commercial litigation financing involves large amounts of money, typically in the millions, and also funds contract and commercial disputes and arbitration.

Understanding Online Reputation Management

Online reputation management is the process of ensuring that companies have positive online reputations. ORM strategy includes monitoring and answering online reviews, addressing misinformation, and interacting with customers online.

ORM is important since businesses with good reputations do not get into litigation as much as business people or companies with poor reputations. A firm with a poor reputation is unlikely to thrive financially as it might struggle to earn the trust of other businesses and attract customers.

Role of Online Reputation in Litigation Financing

• Risk Mitigation

ORM helps identify and mitigate reputational risks. A strong online presence and positive reputation can counter negative narratives and protect client interests. A positive reputation can also attract customers who would otherwise be scared away by a negative reputation.

• Reputation as a Key Factor for Funders

Funders are more likely to support cases where the public image is positive. Reputation is critical in the legal and financial sectors, and a positive image suggests a higher likelihood of successful outcomes.

• Controlling the Narrative During Legal Proceedings

ORM can help shape public opinion, potentially leading to better settlement opportunities and outcomes. A positive reputation makes it easier for lawyers to control the narrative during legal proceedings to win lawsuits.

• Post-Litigation Recovery

ORM strategies can rehabilitate or enhance reputations after a case concludes. Litigation puts a company’s reputation on the line; reputation damages include loss of customers, loss of trust, and damage to brand image. ORM helps ease those damages and helps companies regain a positive reputation.

Best Practices for Combining ORM and Litigation Financing

The following are ways companies can integrate ORM with litigation financing.

• Integrate ORM into Case Assessment

Conducting ORM at the start of litigation financing discussions helps identify potential risks and strengths that can impact funding decisions. This forms the foundation for future decisions in the case.

• Allocate Resources Strategically

Setting aside a portion of litigation financing for ORM initiatives, including reputation monitoring tools, helps companies stay on top of and leverage their reputation during legal proceedings. A positive company reputation helps its lawyers control the narrative during legal proceedings, leading to a higher potential for victory.

• Monitor Online Sentiment Continuously

Continuously monitoring their online reputation during a trial allows companies to mitigate negative reputational effects during legal battles.

• Engage ORM Experts

Companies should turn to ORM experts, especially when trying to manage their online reputation during litigation. Legal battles often damage companies’ reputations, and ORM experts help mitigate that damage.

• Evaluate Effectiveness Post-Litigation

After the conclusion of a case, conduct a review of ORM efforts and their impact on the litigation financing process to refine future strategies. This allows companies to determine what worked, what didn’t, and if the company needs to invest less or more in ORM services.

Case Studies

The Flint Water Crisis, on 25th April 2014, the city of Flint switched its water system from the Detroit system to the Flint River in Flint, Michigan. Lead contaminated Flint's water supply and its citizens complained about the foul, polluted water, but nothing was done until early 2016, when the residents sued the city.

The issue had already significantly damaged the city’s reputation when it repeatedly denied that there was nothing wrong with Flint's water and ignored groups protesting inaction. When Flint's residents and activist groups sued the city, plaintiffs had fully documented the problem and supported their allegations with data from multiple water tests. As a result of their work, the plaintiffs in this class action lawsuit against the city had a good reputation, which attracted offers from litigation funders.

Purdue Pharma and the Opioid Crisis

The opioid crisis sparked in the mid-1990s when Purdue Pharma first came up with the strong opioid, OxyContin. Purdue Pharma advertised that OxyContin was less addictive compared to other opioids. That was false; deceptive advertising by Purdue Pharma deceived doctors into prescribing the medication highly, and so began the opioid crisis.

Purdue Pharma's reputation is as bad as reputations get: most people blame the company for the opioid crisis, and the company has done nothing to change this reputation. Because of Purdue Pharma's terrible reputation, plaintiffs often receive litigation funding in cases against them. Since Purdue Pharma is considered untrustworthy, lawyers can manipulate the case in the plaintiff’s favor.

Bottom Line

ORM and litigation funding are indispensable resources for companies to take advantage of. Integrating ORM in litigation funding efforts is essential, as it allows companies to mitigate risk, secure funding, control the narrative, and conduct post-litigation recovery.

ORM and litigation financing work in tandem to ensure companies have all the power they need to win legal disputes, retain customers, and keep their reputations intact.

Author’s Bio:

Sameer Somal is the CEO of Blue Ocean Global Technology and Co— Founder of Girl Power Talk. He is a CFA Charterholder, a CFP” professional, and a Chartered Alternative Investment Analyst"". Sameer leads client engagements focused on digital transformation, risk management, and technology development. A testifying subject matter expert witness in economic damages, intellectual property, and internet defamation, he authors CLE programs with the Philadelphia Bar Foundation. Sameer is a frequent speaker at private industry and public sector conferences, including engagements with the Federal Home Loan Bank (FHLB), Global Digital Marketing Summit, IBM, New York State Bar Association (NYBSA), US Defense Leadership Forum, and US State Department‘s Foreign Service Institute.

He proudly serves on the Board of Directors of Future Business Leaders of America (FBLA) and Girl Power USA. Committed to building relationships, Sameer is an active member of the Abraham Lincoln Association (ALA), Academy of Legal Studies in Business (ALSB), American Bar Association (ABA), American Marketing Association (AMA), Business Transition Council, International Trademark Association (INTA), and Society of International Business Fellows (SIBF). A graduate of Georgetown University, he held leadership roles at Bank of America, Morgan Stanley, and Scotiabank. Sameer is also a CFA Institute 2022 Inspirational Leader Award recipient and was named an Iconic Leader by the Women Economic Forum.