The bankers, brokers, and big money transforming litigation finance from a lawyer's hustle to a multibillion-dollar asset class
- Litigation finance is growing, with a reported $11 billion invested or ready to invest in lawsuits.
- What was once a niche industry is now swarmed with consultants, bankers, and public companies.
- We spoke to over 25 funders, lawyers, and finance professionals to learn who's shaping the field.
Paying for someone else's lawsuit used to be illegal. Now it's a multibillion-dollar opportunity.
Commercial litigation funders make money by advancing money to businesses that lack the resources or the patience for a lawsuit. In return, they get a multiple of what they invested (often double or triple) or a return anchored to an interest rate. Litigation funders now have $11.3 billion invested or ready to invest in US commercial litigation, according to a recent estimate by Westfleet Advisors.
The original litigation financiers in the US were often plaintiffs' lawyers, whose contingency-fee model - "no fee unless we win" - is a form of self-funding. A simple slip and fall might net just a $10,000 fee, but complex and risky cases can be lucrative; the lawyers hired by states to sue tobacco companies in the 1990s made billions.
Today, litigation finance is much more specialized, even corporate. While funders still back large groups of little guys, like drivers who bought a dirty diesel from Volkswagen or shops that say Visa and Mastercard charged excessive fees, they also cut deals with big businesses, like supermarket chains that overpaid for broiler chickens and manufacturers that believe their trade secrets have been stolen.
"This asset class is growing and maturing and becoming an accepted part of the litigation industry," said Bill Farrell, a managing director at Longford Capital, a private-litigation funder.
Westfleet Advisors, the source of the $11.3 billion estimate, has said there are at least 46 litigation funders active in the US market.
Heavy-hitting industry players include hedge funds like Fortress Investment Group and D.E. Shaw & Co. Bankers at Stifel and Jefferies have also worked on legal-industry deals. And some of the biggest funders have formed a trade group, the International Legal Finance Association, meant to be a counterweight to groups like the US Chamber of Commerce that would like to see more regulation of their industry.
Commercial-litigation finance is fraught with risk. In many cases, the money is nonrecourse, meaning that if a case is unsuccessful, investors suffer a total loss. But many funders have made investments in portfolios of cases, in which a win against one adversary can offset a loss against another. And some companies specialize in making loans to law firms that are backed by guarantees, though such companies aren't the focus of this article.
Since 2020, Insider has spoken with dozens of funders, lawyers, and finance professionals about the commercial-litigation finance industry, with a focus on the US and on investments in categories other than patent litigation. Below are some of the companies and individuals they singled out for their influence and savvy.
Billion-dollar behemoths
Burford Capital, which reported a $4.5 billion portfolio in its last annual report, is one of the top dogs in litigation finance. It pursues a mix of strategies, funding single cases and groups of cases while also cutting deals directly with corporations that might have large legal claims but lack the bandwidth to pursue them. Its co-chief operating officer Aviva Will is involved with underwriting major deals, with support from a large staff with expertise in insurance, IP, and other areas.
One of Burford's biggest cases is the so-called Peterson case, which started as a claim against the Argentinian government that Burford paid €15 million ($18 million) to acquire. Its value has risen as the case has progressed, and the company sold 10% of the claim for $100 million in 2019. Burford has also been targeted by the short-seller Muddy Waters.
Omni Bridgeway, with locations around the globe, manages about AU$2.2 billion ($1.7 billion), according to its most recent annual report. With roots in Australia, it still has major cases there, like a firefighting-foam contamination case that settled for AU$213 million ($167 million) last year. But it also has dozens of employees in the US, including Jim Batson in New York and Matthew Harrison in San Francisco. Chief Investment Officer Allison Chock gets involved in big deals.
Neil Purslow runs the group, and Eric Blindermann runs the Therium Inc. team in the US. He said the US investments run the gamut, from a recent $5 million investment in an antitrust lawsuit to a $10 million-plus investment in a portfolio of insurance cases brought by a major international law firm.
Longford Capital is another major player and has made headlines with an effort to team up with schools like the University of California, Santa Barbara to monetize the patents developed by its researchers. Longford has raised more than $1.1 billion, including $435 million earlier this year. A recent regulatory filing lists a Fund P with more than $119 million in gross assets whose existence hasn't previously been reported. Bill Farrell, Tim Farrell and Michael Nicolas are its leaders.
Pure-play private funders
The team has recently grown with hires including Jeff Cohen from Southpaw Asset Management and Kacey Wolmer, who joined from FirstKey Mortgage.
"We review deals anywhere between $1 million and $50 million in size," Spiegel said. "Our sweet spot is between $5 million and $10 million."
Lake Whillans, founded by Lee Drucker and Boaz Weinstein, is also cited as a major player. Said by one observer to be "comfortable with more distressed, hairy situations," the company raised $125 million in late 2017. At least one of its cases has been publicly disclosed: a $5 million stake in a case brought by Cel-Sci, a drug developer.
LexShares, run by Jay Greenberg, has also emphasized a data-driven approach, using a program it calls the "Diamond Mine" to find investment opportunities in court filings. The company courts individual investors as well as institutions and announced last year that it was raising an additional $100 million to invest in cases.
Mainstream investors
The Fortress team is led by Jack Neumark, with Joe Dunn described by some people as his right-hand man. (The firm has also been involved in high-stakes patent disputes, but a different team led by Eran Zur handles those deals.) While Fortress has directly funded some high-stakes disputes and bought litigation claims, it's also been known to extend credit to other litigation funders, including Vannin Capital.
Tenor Capital has $5.4 billion and has used some of that money to back several mining companies in their claims against foreign governments. Led since 2004 by Robin Shah, a JPMorgan alumnus, with Blair Wallace, formerly of Och Ziff, managing a portfolio of litigation, the firm has backed Crystallex, which is trying to seize Citgo in order to collect a $1.2 billion award against Venezuela; Eco Oro, which has sued Colombia; and Gabriel Resources, which seeks to hold Romania liable for scuttling its operations there.
The brokers and bankers
Westfleet Advisors and its founder, Charles Agee, are one of two names that regularly spring from the lips of lawyers and funders in the litigation-finance industry. He and his colleagues Gretchen Lowe and Barry Kamar connect claimants, lawyers, and investors. They also regularly conduct and publish surveys of the industry.
Andrew Langhoff is also regularly cited as a trusted source of perspective and opportunities by people in the industry. A former Big Law litigator who went on to hold roles at Burford and at Gerchen Keller, Langhoff now runs Red Bridges Advisors.
Stifel Financial made headlines in 2019 when it hired Justin Brass and Sarah Lieber from Jeffries. Brass, a former bankruptcy lawyer, and Lieber, who worked for an insurer after years at Jones Day, are both Burford alumni. While many commentators said a lack of standardization has made litigation-finance investments hard to flip, Stifel said Brass and Lieber have syndicated more than $1 billion in litigation investments since joining in 2019.
"If I'm playing checkers, they're really playing three-dimensional chess," one lawyer who's worked with them said.