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Hedge Funds Showing Increased Interest in Litigation Claims

January 15, 2019

Hedge Funds Showing Increased Interest in Litigation Claims

It’s no secret that over the last several years, Wall Street has been pouring money into the litigation space – whether indirectly by capitalizing litigation funders, or directly via their own investments into the space. However the recent revelation of Baupost Group’s $1 billion purchase of legal claims against utility company PG&E illustrates both the scope and scale of the hedge fund world’s interest in the legal sector. As reported in Yahoo News, billionaire Seth Karman’s Baupost Group has long been one of the titans of the hedge fund world. Now Baupost is spreading its wings, having purchased $1 billion of legal claims against utility giant PG&E. Interestingly, Baupost appears to have purchased the claims as a hedge on its investment in PG&E stock. Klarman’s fund invested in PG&E, which subsequently plummeted over 80% after the California wildfires left the utility company $30 billion in debt and facing imminent bankruptcy. However, in a process known as subrogation, Baupost also purchased legal claims against PG&E, held by the utility company’s insurer. The hedge fund reportedly paid 35 cents on the dollar for those claims, and now maintains the right to sue PG&E, the very same company it invested in. Insurance claims are repayable in a bankruptcy proceeding, however Baupost may be in for a bumpy ride to recoupment, given their status as a general unsecured creditor. That classification essentially places them last in line. This is not the first subrogation claim Baupost has pursued, and it is currently engaged with another similar claim. Sometimes the hedge fund purchases a partial subrogation, and partners with an insurer in the litigation of an entity. All of this shows how far Wall Street is willing to go when it comes to capitalizing legal claims.

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Commercial

ProLegal Unveils Full-Stack Legal Support Beyond Traditional Funding

By John Freund |

ProLegal, formerly operating as Pro Legal Funding, has announced a strategic rebrand and expansion that reflects a broader vision for its role in the legal services ecosystem. After nearly a decade in the legal finance market, the company is repositioning itself not simply as a litigation funder, but as a comprehensive legal support platform designed to address persistent structural challenges facing plaintiffs and law firms.

The announcement outlines ProLegal’s evolution beyond traditional pre-settlement funding into a suite of integrated services intended to support cases from intake through resolution. Company leadership points to longstanding industry issues such as opaque pricing, misaligned incentives, and overly transactional relationships between funders, attorneys, and clients. ProLegal’s response has been to rethink its operating model with a focus on collaboration, transparency, and practical support that extends beyond capital alone.

Under the new structure, ProLegal now offers a range of complementary services. These include ProLegal AI, which provides attorneys with artificial intelligence tools for document preparation and case support, and ProLegal Live, a virtual staffing solution designed to assist law firms with intake, onboarding, and administrative workflows.

The company has also launched ProLegal Rides, a transportation coordination service aimed at helping plaintiffs attend medical appointments that are critical to both recovery and case valuation. Additional offerings include a law firm design studio, a healthcare provider network focused on ethical referrals, and a centralized funding dashboard that allows for real-time case visibility.

Central to the rebrand is what ProLegal describes as an “Integrity Trifecta,” an internal framework requiring that funding advances meet standards of necessity, merit, and alignment with litigation strategy. The company emphasizes deeper engagement with attorneys, positioning them as strategic partners rather than intermediaries.

Case Developments Commercial

Litigation Funder Sues Client for $1M Settlement Proceeds

By John Freund |

A Croton-on-Hudson-based litigation financier has filed suit against a former client following a roughly $1 million settlement, alleging the funded party failed to honor the repayment terms of their litigation funding agreement. The dispute highlights the contractual and enforcement challenges that can arise once a funded matter reaches resolution.

According to Westfair Online, the financier provided capital to support a plaintiff’s legal claim in exchange for a defined share of any recovery. After the underlying litigation concluded with a significant settlement, the funder alleges that the plaintiff refused to authorize payment of the agreed-upon amount. The lawsuit claims breach of contract and seeks to recover the funder’s share of the settlement proceeds, along with any additional relief available under the agreement.

The case underscores a recurring tension within the litigation funding ecosystem. While funders assume substantial risk by advancing capital on a non-recourse basis, they remain dependent on clear contractual rights and post-settlement cooperation from funded parties. When those relationships break down, enforcement actions against clients, though relatively uncommon, become a necessary tool to protect funders’ investments.

For industry participants, the lawsuit serves as a reminder that even straightforward single-case funding arrangements can result in contentious disputes after a successful outcome. It also illustrates why funders increasingly emphasize robust contractual language, transparency around settlement mechanics, and direct involvement in distribution processes to reduce the risk of non-payment.

Commercial Regulatory Issues

New Southeastern Laws Bring Litigation Funding Rules and Liability Insurance Changes

By John Freund |

New state laws taking effect across the Southeast at the start of 2026 include significant changes for insurers and litigation finance, with Georgia’s new restrictions on third-party funding standing out as particularly consequential for the legal funding industry.

Insurance Journal reports that in Georgia, newly effective legislation imposes a formal regulatory framework on litigation funders operating in the state. Funders are now required to register with the Georgia Department of Banking and Finance and disclose ownership information, including details related to foreign affiliations. The law also restricts funders from exercising control over litigation strategy, barring involvement in decisions such as attorney selection, settlement authority, or expert witness engagement. In addition, litigation funding agreements must be disclosed during discovery in civil cases, increasing transparency around third-party capital in litigation.

Beyond litigation finance, the Georgia law package includes changes affecting insurers, including provisions preventing auto insurers from canceling coverage or increasing premiums solely due to a failure to wear a seat belt. Other updates require certain home warranties, including heating and air-conditioning systems, to transfer automatically to new homeowners.

Elsewhere in the region, Florida enacted new requirements for pet insurers to provide clearer explanations of coverage terms and claim denials. Florida also implemented a law creating a public registry of individuals convicted of animal cruelty, which could influence liability and insurance disputes. South Carolina revised its liquor liability framework by reducing coverage requirements and limiting exposure for businesses found less than 50 percent at fault.