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Key Takeaways from LFJs Special Digital Event: Key Trends and Drivers for Litigation Funding in 2023

January 27, 2023

Key Takeaways from LFJs Special Digital Event: Key Trends and Drivers for Litigation Funding in 2023

On January 25, 2023, Litigation Finance Journal hosted a special digital event: Key Trends and Drivers for Litigation Funding in 2023. The hour-long panel discussion and audience Q&A was live-streamed on LinkedIn, and featured expert speakers including William Farrell, Jr. (WF), Co-Founder, Managing Director and General Counsel of Longford Capital, Laina Hammond (LH), Co-Founder, Managing Director and Senior Investment Officer of Validity Finance, and Louis Young (LY), Co-Founder and CEO of Augusta Ventures. The discussion was moderated by Rebecca Berrebi (RB), Founder and CEO of Avenue 33, LLC. The discussion spanned a broad spectrum of key issues facing the litigation funding industry in 2023. Below are some key takeaways from the event: RB: How does your underwriting change, given the varied risks across different legal sectors? Do you have different IRR requirements for different case types or jurisdictions?   LH: At various points in time in our process, we are going to be assessing the risk of total loss. Antitrust, treaty arbitration, patent cases are riskier. When we’re calculating expected risk of loss, we take into account the various factors that make a case more risky—jurisdiction, collectability, other factors that dictate the IRR range. That is how we tie the risk factor to IRR, so the returns reflect the risk commensurate for any situation. WF: At Longford, our underwriting process remains the same across all legal sectors.  But risk assessment is unique across opportunities.  We look at 50 different characteristics for risk assessment.  At Longford, and I imagine the same is true at funders like Validity and Augusta, there is a very strong demand for our financing, so we are able to pick only the most meritorious cases, rather than pricing risk for a range of cases. LY: We have a very controlled process in our underwriting, and it’s conducted in a very stock-standard framework. But that framework is a continual iterative process. Our underwriting changes as we resolve cases through wins and losses, where you learn things that you didn’t know in underwriting. If we had to build a portfolio like we did for our first portfolio, which was 60-70 investments with $200MM invested—if that took us three years to build at the time, it would take us four or five years now, given the fact that we’ve learned so many other things as we’ve invested. Changes in financial modeling have become far more complex and nuanced as to the particular cases, so the outcomes and scenarios that we run now are far more detailed. RB: The last prolonged recession helped jumpstart the litigation funding industry in the US. If we do have a prolonged recession, what do you see as the prospects for the industry this time around? Can we expect the same growth post-recession?  LH: I think it’s tricky to accurately predict the impact of recessions on specialty industries like Litigation Finance, especially when the recession arises out of complicated geopolitical factors. That said, it’s entirely likely that a recession provides a boost for demand.  Legal services will always be in demand, and the cost of legal disputes is going to continue to rise. In tough economic conditions, companies might be pushed to consider litigation finance as an alternative to the self-funding that they historically use for their litigation. This could also lead to an infusion of capital into the market, as investors look for ways to diversify into alternative assets that are uncorrelated to the broader market. LY: I don’t know if the last recession did jump start the industry. I remember one of the first trips I did across the U.S. – this was around 2014 or so. And there were a whole set of law firms who didn’t know about litigation funding, so they were taking on the risk themselves—they were in effect acting as litigation funders. I think what really spurred litigation funding was the entrepreneurial bent of these law firms, who said to themselves ‘ok we’ve been taking this risk on for our clients, and here is a way we can de-risk ourselves.’ It was that mindset, and it happened so quick. In 2014, I introduced myself, and it was like, ‘Nice to meet you, here’s the door.’ Then two years later, it was happening. You just had very savvy, sophisticated people within the law firms who saw litigation funding for what it was, and they’ve become champions of it. And those same law firms are championing litigation funding even more now, and that will spur the industry forward. RB: What insurance products look most interesting right now, and are there any you’d like to see in the future? WF: Over the past two years, the insurance industry seems to have identified our industry as a new and attractive source of business for the insurance industry. There are significant synergies and similarities between litigation finance investments and insurance products, and for the moment, insurance markets seem to be most comfortable placing insurance on judgement preservation, and that is because they perceive cases at that stage of the lifecycle to be more easily understood, evaluated, and priced. But other products are popping up every day—insurance wrappers, which can be around an entire fund, or offer judgement preservation or principal protection, or they could be more bespoke and wrapped around particular subsets of investments. Offering insurance products for individual investors within a fund, uniquely designed for that particular investor’s risk tolerances is on the horizon, and will be made available to investors and funds in our industry. At the end of the day, the costs of these products will be most important in determining whether the Litigation Finance industry will be able to find a way to work with the insurance industry. The cost of these products will be taken directly from the returns that might otherwise be achieved without insurance, and the evaluation of these costs against the risk that is being protected against, is what will determine whether insurance becomes a meaningful part of our business. RB: What are your thoughts on the 60 Minutes piece, and the resulting publicity for the industry? Is this a net-positive—all publicity is good publicity, or would the industry benefit from being more under-the-radar, as there might be a mainstream outcry over a single bad actor that could malign the entire industry? WF: The Litigation Finance industry has made great strides over the past 10 years, particularly when it comes to awareness and acceptance of our offerings among all of the effected constituencies. Litigation Finance also levels the economic playing field, to where disputes among companies are resolved on the merits, rather than on the financial wherewithal and strengths/weaknesses of the litigants. So it’s good for the legal system. I think that the more awareness we can achieve, the more acceptance and more use we will see. I am opposed to flying under the radar—I like the idea that the more that people know about our industry, the more they will see that we are doing good, because we are helping people access justice which might not otherwise be there for them.
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Omni Bridgeway Secures EU Victory as Commission Declines Regulation

By John Freund |

Litigation funders scored a major win in Europe this week as the European Commission confirmed it will not pursue new regulations targeting third-party funding. In a decision delivered at the final session of the Commission's High-Level Forum on Justice for Growth, Commissioner Michael McGrath announced that the EU executive will instead focus its efforts on implementing the recently adopted Representative Actions Directive (RAD), which governs collective redress actions brought by consumers and investors.

An article in Law.com notes that the move is being hailed as a significant victory by litigation funders, particularly Omni Bridgeway. Kees de Visser, the firm's Chair of the EMEA Investment Committee, described the decision as a clear endorsement of the litigation funding model and a green light for continued expansion across European jurisdictions. Funders had grown increasingly concerned over the past year that the EU might impose strict rules or licensing requirements, following persistent lobbying by industry critics and certain member states.

Supporters of the Commission’s stance, including the International Legal Finance Association, argue that additional regulation would have harmed access to justice. They contend that third-party funding helps balance the playing field, especially in complex or high-cost litigation, by enabling smaller claimants to pursue valid claims that would otherwise be financially out of reach.

Although concerns around transparency and influence remain part of the wider policy debate, the EU’s current position sends a strong signal that existing legal tools and the RAD framework are sufficient to safeguard the public interest. For funders like Omni Bridgeway, this regulatory reprieve opens the door to deeper engagement in consumer and mass claims across the bloc.

Commercial

Daily Caller Slams Third Party Funding as Funders Face Mounting Media Attacks

By John Freund |

In a harsh opinion piecd, the conservative outlet The Daily Caller blasts third party litigation funding (TPLF), casting the practice as a “scam” that feeds frivolous lawsuits, burdens the economy, and unfairly enriches hidden investors at the expense of all Americans.

The op-ed, penned by Stephen Moore, draws a dire picture: trial lawyers allegedly “suck blood out of the economy” through class action suits that generate millions for attorneys but little for the plaintiffs. The piece points to numbers — a projected $500 billion hit annually to the U.S. economy, and tort cost growth more than double the inflation rate — to argue that the scale of litigation has outpaced any legitimate quest for justice.

Where TPLF comes in, according to Moore, is as the lubrication for what he sees as a booming lawsuit industry. He claims that unknown investors donate capital to lawsuits in exchange for outsized shares of any settlement, not the injured party. These hidden financial interests, he argues, distort the incentives for litigation, encouraging suits where there is no “real” corporate villain, a concern especially pointed at class action and litigation targeting major media or tech firms.

Moore cites roughly $2 billion in new financing arranged in 2024 and a fund pool of $16.1 billion total assets as evidence TPLF is growing rapidly. He endorses the Litigation Transparency Act, legislation introduced by Darrell Issa, which would require disclosure of such funding arrangements in federal civil cases. In Moore’s view, transparency would strip the “cloak of secrecy” from investors and curb what he describes as “jackpot justice,” lawsuits driven less by justice than by profit.

But the tone is unmistakably critical. Moore frames the practice as a parasitic industry that drains capital, discourages investment, and suppresses wages. He cites recent reforms in states like Florida under Ron DeSantis as evidence that limiting litigation can lead to lower insurance premiums and greater economic growth.

For legal funders, this op-ed and others like it underscore a growing media trend: skepticism not just of frivolous lawsuits but of the very model of third party funding. To preserve reputation and legitimacy, funders may need to do more than quietly finance cases. They may need to publicly engage, explain their business model, and advocate for regulatory standards that ensure transparency while preserving access to justice.

Commercial

Global Litigation Funding Thrives, Yet Regulation Still Looms

By John Freund |

The global litigation funding market is experiencing strong growth, yet lingering regulatory uncertainties continue to shadow its trajectory. According to the Chambers Global Practice Guide, the market was valued at approximately US $17.5 billion (AUD $26.9 billion) in March 2025 and is projected to surge to US $67.2 billion (AUD $103 billion) by 2037.

An article in LSJ states that major drivers of this expansion include rising legal costs, complex cross-border commercial litigation, and increased demand from small and mid-sized law firms seeking external funding to build out specialist teams. While funders embrace the growth opportunity, critics raise concerns around transparency, claimant autonomy, and potential conflicts of interest.

In Australia, a notable development occurred on 6 August 2025 when the High Court of Australia in Kain v R&B Investments Pty Ltd clarified that federal courts may make common fund or funding equalisation orders for the benefit of third-party funders (but not for solicitors) in class actions—except in Victoria, which still allows contingency fees. This decision is seen as a win for litigation funders, providing greater clarity across most Australian jurisdictions. Australia also saw regulatory reform in December 2022 when the Corporations Amendment (Litigation Funding) Regulations came into force, exempting litigation funding schemes from the MIS/AFSL regime under specific conditions and emphasising the mitigation of conflicts of interest as a compliance feature.

On the regulatory front, the Australian Securities and Investments Commission (ASIC) is considering extending relief instruments that exempt certain litigation funding arrangements from the National Credit Code and financial services licensing until March 2030. Meanwhile in the UK, the proposed Litigation Funding Agreements (Enforceability) Bill 2024 seeks to remove the classification of third-party funding agreements as “damages-based agreements” under the Courts & Legal Services Act – a move which proponents say will enable greater access to justice and clear the path for global funders.