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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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Commercial

UK Government Signals Funding Crackdown in Claims Sector Reform

By John Freund |

The UK government has signalled a renewed regulatory focus on the claims management and litigation funding sectors, as part of a broader effort to curb what it characterises as excessive or speculative claims activity. The move forms part of a wider review of the consumer redress and claims ecosystem, with third-party funding increasingly drawn into policy discussions around cost, transparency, and accountability.

An article in Solicitor News reports that ministers are examining whether litigation funding and related financial arrangements are contributing to an imbalance in the claims market, particularly in mass claims and collective redress actions. While litigation funding has historically operated outside the scope of formal regulation in England and Wales, policymakers are now considering whether additional oversight is required to protect consumers and defendants alike. This includes potential scrutiny of funding agreements, funder returns, and the role of intermediaries operating between claimants, law firms, and capital providers.

The renewed attention comes amid political pressure to rein in what critics describe as a growing “claims culture,” with the government keen to demonstrate action ahead of future legislative reforms. Industry stakeholders have cautioned, however, that overly restrictive measures could limit access to justice, particularly in complex or high-cost litigation where claimants would otherwise be unable to pursue meritorious claims. Litigation funders have long argued that their capital plays a stabilising role by absorbing risk and enabling legal representation in cases involving significant power imbalances.

While no formal proposals have yet been published, the article suggests that funding models linked to claims management companies may face particular scrutiny, especially where aggressive marketing or fee structures are perceived to undermine consumer interests. Any regulatory changes would likely build on existing reforms affecting claims management firms and contingency-style legal services.

Case Developments Commercial

Litigation Lending Funds Woolworths Shareholder Class Action

By John Freund |

Litigation Lending Services Limited has agreed to fund a large-scale shareholder class action against Woolworths Group Ltd, adding another high-profile Australian securities claim to the growing docket of funded investor litigation. The proceeding has been filed in the Federal Court of Australia by Dutton Law and focuses on Woolworths’ alleged failure to properly disclose the financial impact of widespread employee underpayments over a lengthy period.

Litigation Lending's website notes that the claim covers shareholders who acquired Woolworths shares between 26 February 2010 and 8 September 2025. It alleges that Woolworths did not adequately record and account for employee entitlements owed to salaried staff, resulting in financial statements that understated expenses and overstated profits. According to the pleadings, these accounting issues had the effect of artificially inflating Woolworths’ share price, causing losses to investors once the extent of the underpayments began to emerge through company disclosures.

Woolworths has previously acknowledged underpayment issues across its workforce, announcing remediation programs and provisions running into the hundreds of millions of dollars. The class action contends that the company’s disclosures came too late and failed to provide the market with an accurate picture of its true financial position during the relevant period. Investors who purchased shares while the alleged misstatements were in place are now seeking compensation for losses suffered when the share price adjusted.

Participation in the class action is open to eligible shareholders on a no-cost basis, with Litigation Lending covering the legal costs of running the claim. Any funding commission or reimbursement payable to the funder would be subject to approval by the court, consistent with Australia’s regulatory framework for funded class actions.

Commercial Regulatory Issues

Federal Legislation Targeting Foreign Litigation Funders Raises Industry Alarm

By John Freund |

A new federal bill seeking to restrict foreign investment in U.S. litigation is drawing sharp criticism from international litigation funders who warn the measure could significantly disrupt the industry. The legislation, introduced by Rep. Ben Cline (R-Va.), would prohibit sovereign wealth funds from backing U.S. lawsuits and impose disclosure requirements on overseas investors participating in American litigation.

According to Bloomberg Law, the proposed bill (H.R. 2675) has major implications for prominent funders including Burford Capital, Fortress Investment Group, Omni Bridgeway, Ares Management, and BlackRock. Susan Dunn of UK-based Harbour Litigation Funding characterized the current political climate as increasingly "anti-foreign," suggesting that international funders are now reassessing their U.S. growth strategies in light of the legislative push.

The bill advanced from the House Judiciary Committee with a 15-11 vote in favor of recommending it to the full House. Supporters of the legislation argue that foreign investment in U.S. litigation raises national security concerns and could allow hostile nations to influence American legal proceedings. Critics counter that the measure unfairly targets legitimate business practices and could reduce access to justice by limiting available capital for plaintiffs pursuing meritorious claims.

The legislation represents the latest effort in a years-long campaign by insurance industry groups and business organizations to increase regulation of third-party litigation funding. If enacted, the restrictions on foreign investment could reshape the competitive landscape of the U.S. litigation finance market, where international funders currently play a significant role.