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Key Takeaways from LFJs Digital Event: Litigation Finance: What to Expect in 2024

February 12, 2024

Key Takeaways from LFJs Digital Event: Litigation Finance: What to Expect in 2024

On February 8th, 2024, Litigation Finance Journal hosted a special digital event titled ‘Litigation Finance: What to Expect in 2024.’  The event featured Gian Kull, Senior Portfolio Manager at Omni Bridgeway, David Gallagher, Co-Founder of LitFund, Justin Brass, Co-CEO and Managing Director of JBSL, and Michael German, Co-Founder and CIO at Lex Ferenda. The event was moderated by Peter Petyt, founder of 4 Rivers. The discussion covered a range of topics pertinent to the litigation funding space. Below are some key takeaways from the event: Which areas are you particularly interested in investing in over this coming year?  MG: There is a supposition that this industry will continue to grow in 2024. All of the indicators suggest that the industry will continue to grow–nearly all of the funders are funding bankruptcy-related cases, and three quarters are funding patent cases. Those are areas of interest to us, and I think that will continue to make sense, given the types of commercial cases they are – complex cases that require significant amounts of attorney time and defendant time,  and yield significant costs to the litigaiton. JB: We’re going to see a continued expansion into the mass arbitration space. That is something that has been coming up with more frequency. Mass torts has been staying quite busy. And where we see a lot of potential is with the evolution of the secondary market. There are a lot of funders coming up with maturing cases, and it makes sense for those funders to redeploy that capital into other opportunities – not necessarily exit that case – but just sell a minority stake or a portion of it. We that in traditional fixed income classes, so we think that is going to continue in the funding market as well. Are you seeing any kind of appetite to invest in jurisdictions you haven’t previously invest in? Have some jurisdictions matured to the point where you now will give them a serious look?  GK: That’s a hard question to ask Omni Bridgeway as a whole, because we try to be in a lot of places. But from my own experience in Europe, we’ve gotten quite comfortable in the Netherlands, we have a very large investment in Portugal. Spain is next on the list. Italy is after that. The jurisdiction I’ve been most disappointed in – aside from the UK with the regulatory issues there – is Germany. For such a large economy, from a commercial collective redress perspective that is a dead end. As we move through Europe, I’ll be watching the regulatory regimes and how those are tested over the coming years. Are you seeing many requests for monetization of judgements or awards, or is that not an area that you are particularly interested in?  DG: We’re especially interested in that, largely because my partners have spent a lot of their careers making those types of investments. And just speaking from my own experience, that has always been an important part of the market, and continues to be an important part of the market. I think the availability of judgement preservation insurance makes funding more available and appropriate both on the funder’s side and the client’s side. In my view, it’s very interesting to see the number of people in the market moving into the insurance space. In my view quite a surprising number – it’s certainly indicative of a trend. LFJ just announced today that Ignite has launched a capital protection insurance resource. So there are a lot of interesting things happening here. Is it still early days for this space, because there are a lot of people moving into it with interest?  MG: I share the sentiment of having a general level of surprise with how many folks from the litigation finance industry insurance has drawn. From the Lex Ferenda perspective, insurance has proven to be a very expensive option, that ultimately my clients and I don’t feel is worth the cost. But the vast majority of our investments – from an insurer’s perspective – are probably the least good fit, so that’s probably why it’s reflecting in the price. JB: I think the insurance aspect of litigation finance is here to stay. There will be growing pains along the way. I think even as recently as last week, there were disclosures in the Affordable Care Act fee dispute where the law firm got an insurance policy related to its fee award. What was interesting there, was the law firm was seeking disclosure about the policy, and in essence how it worked. So not only is it new and here to stay, we’re seeing it become public. The risk to early-stage cases is the pricing can be expensive, but what will happen over time, is like anything else, the insurers will be tracking the progress on those cases, and as funders come back as repeat customers, they’ll be looking at you and factoring that relationship into their pricing, just like how a bank factors that into a credit score. I think the best path forward is figuring out how to work together and create a level of transparency and trust, because it’s not going away. For the full recording of the event, click here.

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Singapore Court Declines to Revive $14 Million Third-Party Funding Cost Recovery Bid

By John Freund |

A Singapore court has affirmed an arbitral award denying a successful litigant's attempt to recover more than $14 million in third-party funding costs, reinforcing the principle that funding expenses are generally not recoverable from the losing side. The decision offers important guidance for funded parties weighing the economics of dispute resolution in one of Asia's leading arbitration hubs.

As reported by Law360, the dispute arose from an arbitration over control of a fintech joint venture. The prevailing party sought reimbursement of the substantial fees it had paid to its litigation funder, arguing those costs should be shifted to its opponent as part of the award.

The court rejected that argument, characterizing the funding expense as "simply the product of a risk any party engaged in dispute resolution takes." By framing the cost as an inherent risk of pursuing a claim rather than a recoverable disbursement, the court declined to allow the funded party to pass its financing burden to the other side.

The ruling underscores a recurring tension in funded disputes: while third-party funding can make claims viable, the cost of that capital typically remains with the party that engaged the funder, even in victory. Counsel in the matter included Providence Law Asia, Rajah & Tann, and Duxton Hill Chambers, with the proceedings tied to the Singapore International Arbitration Centre. For funders and funded parties alike, the decision is a reminder that recovery of funding costs cannot be assumed and must be carefully assessed when structuring the economics of a case.

Commercial

Op-Ed Urges New York to Close the ‘Champerty Loophole’ Exploited by Litigation-Funding Hedge Funds

By John Freund |

A new opinion piece is pressing New York lawmakers to close what the author calls a "champerty loophole," arguing that gaps in the state's centuries-old prohibition on financing others' lawsuits have allowed hedge funds and litigation funders to profit from the court system. The commentary adds to a broader policy debate over how, and whether, third-party litigation funding should be constrained.

As reported by the New York Daily News, the author contends that most New Yorkers have never heard of the champerty doctrine, yet its weakened application has helped turn the state's courts into what the piece describes as a playground for well-capitalized financial actors. Champerty, historically, refers to an arrangement in which an outside party funds litigation in exchange for a share of the proceeds, a practice long disfavored under New York law but now widely worked around.

The op-ed argues that the current framework permits hedge funds and litigation funders to bankroll claims for financial return while escaping meaningful regulation, raising concerns about the influence of outside capital over litigation strategy and outcomes. The author calls on the legislature to tighten the rules and restore limits the doctrine was originally designed to impose.

The piece lands amid intensifying scrutiny of third-party litigation funding nationwide, from federal disclosure proposals to state-level efforts to regulate consumer funding and non-lawyer ownership of law firms. As New York weighs its approach, the champerty debate underscores the enduring tension between expanding access to the courts and guarding against the commercialization of litigation.

Commercial

Litigation Funder Rocade Capital Acquires Law Finance Group, Creating $2.3 Billion Platform

By John Freund |

Rocade Capital has acquired litigation funder Law Finance Group LLC, the company announced Wednesday, combining the two firms into a platform with more than $2.3 billion in deployed capital. The deal marks a notable consolidation in a litigation finance market that continues to attract institutional interest as an emerging asset class.

As reported by Bloomberg Law, Arlington, Virginia-based Rocade Capital specializes in credit-style funding for mass tort and contingency-fee law firms. Law Finance Group brings a more diversified portfolio spanning appellate, commercial, and single-case investments. Financial terms of the transaction were not disclosed.

The acquisition broadens Rocade's reach well beyond its traditional mass tort niche. By absorbing Law Finance Group's book of business, Rocade gains exposure to additional practice areas and case types, positioning the combined firm to compete across a wider segment of the funding landscape.

Rocade Chief Executive Officer Brian Roth framed the transaction as a growth opportunity. "This is a great opportunity for us to grow and that's why we're bringing on the whole team and the whole portfolio," Roth said, indicating that Rocade retained Law Finance Group's personnel as well as its existing investments.

The deal reflects a broader pattern of consolidation within litigation finance, which Bloomberg Law characterized as "a niche but growing asset class." As funders scale their balance sheets and diversify across case types, combinations of this kind may become increasingly common, allowing established players to deepen their capital base and expand the range of claims they can support.