A Prognosis for Civil Litigation in the U.S.

A Prognosis for Civil Litigation in the U.S.

The following piece was contributed by Eric Blinderman, Chief Executive Officer (U.S.) at Therium Capital Management. This piece was originally published on Mr. Blinderman’s LinkedIn page.  To learn more about Therium and their U.S. operations, visit them at their website Approximately two weeks ago, the world as we know it changed. Every assumption that governed our daily lives was uprooted. Grabbing a bite to eat with friends stopped. For most, commuting to work ceased. Touching an elevator button became tinged with the fear of contracting an unknown disease. Riding a subway and hearing the person next to you cough caused panic. Stock markets collapsed and businesses across the country simply shut their doors, laying off millions. Courts shut down.
Those who were merely frightened but kept their jobs were the lucky ones. The unlucky ones lost their jobs, or worse, were infected with this mysterious disease called COVID-19 and began an unthinkable journey from which many have recovered but others have not. In spite of these upheavals, businesses are attempting to adapt. Those with jobs are continuing to perform their duties, albeit in large part from home. And life continues. Making sense of these changes and their impact remains challenging but is also important so that people can plan, take steps to minimize harm, and protect themselves and their livelihoods from continued disruption to the extent possible. That is where we are today. But it may help to keep in mind, as California Governor Gavin Newsom has said, that this pandemic occupies only a moment in time. At some point, we will come out the other side. For those who find solace in contemplating that future, here is our prognosis for the short-and longer-term effects of COVID-19 on litigants, law firms, and the litigation finance industry.

Litigants

In the short term: Already, the coronavirus outbreak has given rise to lawsuits tied directly to the disease or to the economic disruptions that have followed. Restaurants and other business simply seeking to survive have filed suit against their insurers to recover some portion of their losses. Class action lawyers have filed suit against Norwegian Cruise lines which allegedly told sales reps to lie about passengers’ risk of contracting the virus. Investors have also sued a biotech company for claiming it could develop a COVID-19 vaccine in three hours, while other class action lawyers have filed suit against Germ X, which made advertising claims that its hand sanitizer protected against coronavirus. These claims represent the smallest fraction of suits that will likely get filed and which lawyers will litigate for years to come. Beyond this immediate burst of litigation, the judicial system needs to begin functioning anew. At present, dozens of federal courts throughout the country are closed or have delayed trials while approximately 30 state court systems and the District of Columbia have followed suit. Indeed, the Supreme Court postponed oral arguments on more than a dozen cases for the first time since the 1918 Spanish flu pandemic. Once the judicial system restarts (and it will), the new normal of how lawyers and clients litigate will change at least for the short term to medium term. Already, courts, arbitration tribunals, and mediators are requesting that litigants refrain from attending in-person hearings or trials in favor of video proceedings. Ignoring the ramification of these closures on the criminal justice system for a moment and focusing on civil litigation, every practitioner has to ask whether such alterations in how the practice of law is conducted will become regularized and how such disruptions might impact the cases they are presently prosecuting. In the longer term: When COVID-19 reached America, half a trillion dollars in M&A deals were waiting to close. All of those deals are now imperiled, with buyers as deep-pocketed as Volkswagen (which had inked a deal for U.S. truck maker Navistar) expressing reservations about going through with them. It appears a near certainty that a massive wave of disputes over the duty to consummate these deals and perform other contracts will occupy the courts for years. Fewer than 10% of force majeure clauses contain a carve out for pandemics, leaving ample room for argument over that doctrine, as well as defenses like impossibility, impracticability, and frustration of purpose. Conventional wisdom holds that economic slowdowns are accompanied by a compensating increase in litigation, which smooths out the economic ride for those connected to the legal profession. These contractual disputes could bear that wisdom out. But they aren’t likely to if courts remain closed for an extended period. Also, while remaining humble about my ability to predict the future, I will point to this unfortunately prescient piece about the impact of a recession on BigLaw, which I wrote in late December. There, I discussed that conventional wisdom did not hold in the Great Recession; demand for litigation was down in 2008, 2009, and 2010. The most likely reason was fear: “As corporate resources become more precious in a recession, general counsel may have been spooked by the thought of spending them on cases – even strong and valuable ones – only to lose.”

Law firm litigation departments

Short term: At the moment, law firms do not have the luxury of thinking far into the future. They are busy staying operational in our current, locked-down state. With so many lawyers and staff working from home, multiple AmLaw 50 firms have experienced network capacity issues. Normally, the impact of slowing economic activity takes time to hit law firms, but this situation appears different. While law firm mergers did not fall off in 2008 or 2009, for instance, the current disruption to the M&A market appears to have hit firms with full force. The merger between Troutman Sanders and Pepper Hamilton, for instance, has been delayed to July 1. Longer term: The expected boom in contractual disputes may provide a cushion of sorts for litigation-focused law firms. But most litigation departments, particularly at AmLaw200 firms, are sitting in a life raft with any number of other practice groups, some of which could get heavy in a recession or depression. This experience will prove a stiff test of how well law firms learned the lessons of the Great Recession. Many responded by diversifying their practice mix and improving their balance sheets. Already, however, law firms are asking banks for credit line increases at a rate six times higher than this time last year. That’s a warning sign that law firms, like their clients, are experiencing cashflow challenges. The biggest outgoing flow, of course, is compensation. Law firms had just begun to loosen the spigot a bit, with promotions increasing 20% between 2018 and 2019. Now, it seems clear that if and when COVID-19 impacts stretch into their fourth, fifth, and sixth month—if not sooner—layoffs will occur and firms that do not maintain strong balance sheets will not survive 

Litigation funding

Short term: For corporate plaintiffs and law firms with claims to prosecute and who are facing immediate and pressing cash flow needs, litigation finance offers a potential to relieve at least some degree of uncertainty. That’s not to say that litigation finance will emerge from the pandemic as the answer to every problem. To this point, investors have been attracted to litigation finance in part because its returns are not correlated to the broader economic cycle. The value of a products liability case, after all, does not depend on what happened to the Dow last week. We’re realizing now, however, that there is a limit on that lack of correlation. The disruption from COVID-19 is so severe—shuttering courts, stopping trials—that it is pausing returns on lawsuits as it pauses the rest of the economy. Longer term: The legal industry has been incorporating novel ways to manage risk while seeking to redefine the billable hour business model for decades. Without doubt, the economic impact of recent events will likely accelerate this shift and provide litigation finance companies an opportunity to partner more robustly in this process with law firms and corporate entities large and small. For example, large firms that had to lay off attorneys may consider litigation funding as a way to further diversify their workload and keep cashflow coming to stave off additional cuts in the future. Similarly, attorneys lacking the security of a big law job and failing to qualify for conventional recourse capital will likely turn to litigation finance companies to seed their practices and to develop entirely new firms. Equally as important, larger corporate entities may begin to see the value of entering into more long-term dedicated facility arrangements with litigation finance companies as a hedge against lean economic times while small mom and pop business rely upon such arrangements to free up cash flow for recovery, growth, and expansion. Ultimately, this is all speculation. COVID-19 has already laughed at the plans many of us had for this year. We know only this: that the virus will pass, and that until then, we very much look forward to the day when lawsuits are our biggest concerns.
Secure Your Funding Sidebar

Commercial

View All

Omni Bridgeway Posts Strong FY25 After ‘Transformational’ Year

By John Freund |

Omni Bridgeway has reported a step-change year, pairing robust investment performance with a balance sheet reset that positions the platform for its next growth phase. The ASX-listed funder highlighted headline income of $651.3 million, a $3.6 billion portfolio (up 29% year over year), and A$5.2 billion in assets under management. Returns were anchored by a 2.5x MOIC across 60 full and partial completions, while operating discipline showed through with a 6.2% reduction in cash opex. Management framed FY25 as both a consolidation of strategy and a proof point for the firm’s fair value marks.

An article in PR Newswire notes the year also brought 52 new investments totaling A$517 million in commitments and A$525.9 million added to fair value. Crucially, Omni executed its Fund 9 transaction with Ares—fully deleveraging and “significantly derisking” the balance sheet—while also validating its model with third-party institutional capital. CEO Raymond van Hulst called FY25 “a positive year with excellent investment returns and a transformative transaction,” adding that the platform is well placed for continued growth.

For a sector navigating evolving regulation and disclosure debates, the numbers matter—but so does capital formation. Omni’s ability to recycle capital, expand AUM and originate across jurisdictions reinforces the durability of legal assets as an alternative class.

Apex Litigation Finance Appoints Gabriel Olearnik as Head of Legal

By John Freund |

Apex Litigation Finance has strengthened its leadership team with the appointment of Gabriel Olearnik, a highly experienced litigation funding professional with a global track record in high-value dispute resolution and complex commercial matters.

Over the past five years, Gabriel has originated and reviewed more than 451 litigation funding cases worldwide with an aggregate value exceeding $116 billion, closing deals worth over $700 million. His recent work includes the successful settlement of a high-profile BIT matter as well as executive employment claims in the UK.

Gabriel’s career spans senior roles in UK, US and European litigation funders, where he was instrumental in structuring high-value transactions, securing strategic court orders and conducting multi-jurisdictional investigations. In 2023, he closed a £268 million litigation funding deal in just three weeks, underscoring his ability to deliver results under tight timelines.

Recognised by Lexology as one of only 66 lawyers worldwide to receive the Thought Leaders in Third Party Funding accolade, Gabriel has been involved in matters that have attracted daily media coverage and required innovative dispute strategies. His experience extends to training legal teams, advising on politically sensitive disputes, and executing complex enforcement actions.

“Gabriel brings exceptional global experience, deep sector knowledge, and a proven ability to deliver in high-stakes environments,” said Maurice Power, CEO of Apex Litigation Finance. “His appointment further enhances Apex’s market position and it’s ability to originate, evaluate and fund complex commercial claims for our clients.”

“I am delighted to join Maurice and the team at Apex,” said Gabriel. “Apex’s strong financial backing and their speed of execution make this a natural alignment. I look forward to building on the strong foundation set out by my predecessor, Stephen Allinson, and contributing to the future success of the business.”

Gabriel’s appointment reflects Apex’s ongoing growth in funding small to mid-sized UK commercial disputes and builds on the company’s commitment to delivering fast, fair, and competitive non-recourse litigation funding solutions to claimant’s who may be prohibited from pursuing meritorious cases due to cost and/or financial risk.

Cartiga’s $540M SPAC with Alchemy

By John Freund |

Cartiga, a long-standing player in consumer and attorney funding, is heading to the public markets. The company agreed to combine with Alchemy Investments Acquisition Corp. 1 in a transaction pegged at $540 million in equity consideration, positioning the platform to scale its data-driven approach to underwriting and portfolio management. Management frames the move as about reach and efficiency: tapping a listed currency, broadening investor access to the asset class, and accelerating inorganic growth.

An article in MarketWatch reports that the proposed business combination would take Cartiga public via Alchemy’s SPAC, with the parties emphasizing how a listing could support growth initiatives and acquisitions. The piece notes the strategic rationale—public-market transparency and capital flexibility—as the platform seeks to deepen its footprint in funding for legal claims and law firms.

While final timing remains subject to customary steps (including the shareholder vote and regulatory filings), the announcement marks one of the most significant U.S. litigation-finance capital-markets events of the year.

Cartiga’s trajectory reflects a broader institutionalization of legal finance: more data, more discipline, and more diversified funding channels. The company’s model—providing non-recourse advances to plaintiffs and working capital to law firms—relies on proprietary analytics and scale to manage risk and returns across cycles. A public listing, if completed, would put Cartiga alongside other listed peers globally and provide investors with another pure-play exposure to the asset class’s uncorrelated return profile.