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Outside of publicly traded litigation funders, it is uncommon for the wider public to gain insight into the wins and losses of these businesses. However, a prominent litigation funding platform has provided a rare snapshot into the performance of its own business, as well as the outcomes of cases funded through its platform.

An article in Alternative Credit Investor which discusses the current state of the legal funding market features insights into the investments and returns for litigation finance platform, AxiaFunder. In the article, AxiaFunder’s chief executive, Cormac Leech shares that the firm’s funded volumes in the first half of 2024 had risen by 150% year-on-year. This growth has now seen the AxiaFunder platform reach a total of 17 fully funded commercial lawsuits to date.

However, Leech also shared that despite the impressive year-on-year growth in funded volumes, AxiaFunder has now also seen its first loss. Of the 17 funded cases, nine of these lawsuits have been won, two have been lost and the remaining six cases are still ongoing. Leech also revealed that for investors who have engaged with these cases through the AxiaFunder platform, their returns have varied from -96% to 175% depending on which cases they invested in.

Discussion of the litigation funding market often focuses on established funders who have become household names in the business of investing in high-value commercial litigation. However, outside of these traditional funders, there are global institutional investors whose involvement in the legal funding market has often remained out of the spotlight.

An article in Bloomberg Law provides an in-depth look at the involvement of Fortress Investment Group in the litigation finance market, providing a new window into their strategy and featuring insights from key leadership figures. 

The breadth of Fortress’ involvement in the legal market is demonstrated in the sheer scale of the numbers involved, with the firm having committed $6.6 billion in legal assets and another $2.9 billion to intellectual property assets. Fortress differentiates itself from a traditional funder like Burford Capital, whose approach to investing often centres around commercial litigation, whilst Fortress is mainly focusing on a ‘credit-like approach’ via its lending to law firms. 

Fortress has particularly targeted the mass tort market with loans exceeding $100 million, and the list of law firms invested in including Onder Law, Johnson Law Group, The Smith Law Firm, Weitz & Luxenberg and Napoli Shkolnik. Fortress managing partner and co-CIO, Jack Neumark explains how the firm’s size and resources allow it to succeed with mass torts, explaining that “one of the major traps that people get sucked into is not having the resources internally to do a thorough review of the files.” Burford Capital’s vice chair, David Perla describes Fortress’ dominance in this space and recounted that when Burford approaches mass tort firms “the name we hear frequently as to where they have financed their portfolios today or historically, you’ll hear Fortress more often than any other”.

In the world of patent monetization, Fortess’ head of intellectual property, Eran Zur argues that the firm “pioneered the patent lending business”, which had only existed conceptually before Fortress’ put its capital and resources behind it. Fortress’ patent-assertion entities include VLSI Technology LLC, owner of a portfolio of patents formerly belonging to NXP Semiconductors NV, notable for cases brought against Intel with billions sought in damages. In a case brought in Delaware before District Judge Colm F. Connolly, VLSI dropped the case against Intel following Connolly’s order to disclose the identity of VLSI’s investors. In response to being asked by Bloomberg whether the disclosure order caused Fortress to drop the Delaware case, Zur questioned whether “the identity of the plaintiff or the characteristics of the plaintiff matter in a patent claim?”

When looking to place Fortress in the litigation funding space alongside other market-leading names, Zur seemed to differentiate their own practice, saying: “We do not invest passively as opposed to litigation funders. It’s private equity. We sit on the board, we advise”. However, Jonathan Stroud, general counsel at Unified Patents argues against this delineation, arguing: “Because you have more control of the entities, it doesn’t mean you’re not a funder, you’re a super funder. […] You’re funding the case and you’re a client.”

Bloomberg’s article also makes clear that whether it considers itself to be a funder or not, Fortress has been actively involved by investing in and even acquiring other funders such as Vannin Capital and Affiniti Capital Management. In describing Fortress’ engagement with the market, one former employee at an unnamed litigation funder said they didn’t accept money from Fortress because “they choke you to death and then put you out of business”, referencing the fact that Fortress takes a very active role in its investments from regular monitoring of cases to tracking bank accounts. However, Neumark pushed back on the suggestion that Fortress operate as ‘pirates’ in the industry, instead explaining their business practice by saying: “We’re a tough counterparty if you don’t do what you say you’re gonna do […]We see where funds go. If you do something you’re not supposed to do, we’re gonna be upset.”

Looking towards the future of the funding market, Neumark believes that “the asset class is going to grow for sure over time.” However, he also pushed back against the common criticism that funders are “ambulance chasers” and argued that when investing in large-scale and complex antitrust or product liability cases, “there’s really no margin for doing stuff that’s frivolous.” Neumark was also quick to dismiss the idea of third-party funding as a vehicle for malign foreign actors, and said that litigation funding “might be the most inefficient way possible for a foreign entity to try to gain access to confidential information.”

As the litigation funding industry has matured and the practice become more commonplace across the US legal system, most contentious debates revolve around issues of transparency or funder control over lawsuits. However, a recent complaint in New Jersey attempted to argue that a series funding agreement should be considered loans, only to have both the trial and appeals court reject these arguments in their entirety.

An article in Bloomberg Law highlights a decision handed down by the New Jersey Superior Court Appellate with the court ruling that litigation funding arrangements do not constitute ‘loans’ under state law. The ruling arose out of three funding agreements entered into between Covered Bridge Capital (CBC) and plaintiff Christine Ivaliotis between 2016 and 2019, before Ivaliotis filed suit against CBC claiming that it had engaged in “fraudulent lending practices and impermissibly purchasing an interest in prejudgment personal injury proceeds.” The appeals court affirmed the original trial court’s decision, which dismissed Ivaliotis’ complaint “because plaintiff has not shown she sustained a compensable "ascertainable loss" as the result of a CFA violation by CBC”.

The court’s ruling considered the plaintiff’s assertion that funding agreements were loans and therefore required the funder to be licensed by the Department of Banking and Insurance, with the court stating clearly that “this premise is wrong.” The appeals court cited federal precedent and noted that the “distinction between loans and the proceeds of litigation funding agreements has been judicially recognized.” In the damming conclusion to its ruling, the court found that Ivaliotis “lacks standing to call herself an "aggrieved consumer," both as a matter of law, a matter of equity, and common sense.”The full decision from the New Jersey court can be read here.

Whilst there is constant debate and discussion over the level of transparency and disclosure that should be required for the involvement of litigation funders in cases, the state of New Jersey is demonstrating how these rules work in practice after a plaintiff disclosed that it anticipated using litigation funds in an ongoing series of lawsuits.

Reporting by Reuters highlights a recent court filing in the United States District Court for the District of New Jersey, where the plaintiff, Atlas Data Privacy Corporation, informed the court that it would soon be using funding provided by Parabellum Capital. The litigation funding was secured by Atlas Data Privacy to support over 140 lawsuits that it has been assigned and brought against businesses who have allegedly breached New Jersey’s Daniel’s Law, which allows public officials to protect against the release of their personal information to the public.

In its filing to the court, Atlas Data Privacy said that as New Jersey’s rules on funding disclosure “requires that a statement be filed promptly following the use of third-party litigation funds”, and because the firm “anticipates utilizing such funds shortly”, it was filing the letter to comply with Local Civil Rule 7.1.1. The two-page letter does not provide many details of Atlas’ funding arrangement with Parabellum Capital but confirmed that it was “non-recourse financing provided to Atlas, collateralized by litigation proceeds”. Unsurprisingly, the letter also confirmed that “the funder’s approval is not necessary for any litigation or settlement decisions in these actions.” 

Reuters’ article also includes comments from spokespersons for both Atlas and Parabellum, with the funder’s spokesperson saying that it was acting as “a passive financial partner of Atlas, which is playing an important role in enforcing compliance with one of the most meaningful privacy laws on record.”Atlas’ letter of disclosure to the court can be read in full here.