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Recent Developments in Litigation Finance (Part 2 of 2)

Recent Developments in Litigation Finance (Part 2 of 2)

By Mauritius Nagelmueller This article aims to provide an overview of the most significant recent developments in the litigation finance industry. Part 2 of this 2-part series discusses the rapid growth of litigation finance across the globe, as well as its multi-dimensional expansion into diverse markets. If you’d like to reference Part 1 of this series, you can find it here. Growth The most significant overall trend in litigation finance is simply put: growth – a vibrant and ongoing increase in the use and acceptance of the industry. Litigation finance has emerged from a promising niche into a mainstream alternative asset class. The use has multiplied in the recent years, and among many other characteristic features, investors are attracted by the chance to diversify their portfolios with uncorrelated assets. The demand in the legal world is still much higher than the supply of litigation finance – an indicator that normally only the best cases are receiving financing. By now, the business spans the financing of both plaintiffs and defendants, single cases and portfolios, at practically every stage of the dispute, for example also at the enforcement phase. As litigation finance has become a multi-billion-dollar business, surveys and reports by universities and journals, as well as financing providers point to its continued growth, with no signs of stopping any time soon. While detailed data grows increasingly available, it is hard for reporters or councils to keep pace with the industry, which continues to evolve before initial research can proffer valid conclusions. While this powerful forward movement promotes access to justice in the eyes of many, the impact on the civil justice system concerns others. Calls for more rules and regulation regarding inter alia, disclosure and conflicts of interest remain loud. Whichever side one chooses, the market for this service is growing, the demand enormous, and high-quality cases tend to find high-quality finance providers. Expansion For all the reasons stated above, as well as in the Part 1 of this series, 2017 has been the year of expansion for litigation finance firms. New offices in multiple jurisdictions, new funds that are larger or have innovative structures, and broader services providing the full spectrum of finance and risk management related to legal disputes. A wave of new office launches took place in multiple directions internationally. Litigation finance firms from the U.K. entered the U.S. market, and are eager to establish their business in New York City, Washington D.C., Philadelphia, California, and a number of other locales across the U.S. Strategic recruiting, e.g. of former U.S. judges and biglaw partners, builds strong teams in a constantly growing environment, and makes a career in litigation finance a more and more attractive option. Following the developments in Asia described previously, litigation finance firms have opened their first offices in Singapore. The market is also growing in Canada, where local courts have increasingly embraced litigation finance for the past 15 years. International litigation finance and insurance firms seem attracted, and have ventured into Canada this year. And funds are growing bigger accordingly. The largest players have billions of dollars committed to the legal market, able to invest hundreds of millions in a short period of time. The biggest single litigation investment fund in North America has been raised this year, at $500 million. An increase in size is not the only development, however, since crowdfunding and innovative online platforms play a progressively important role, opening the market to an even broader range of participants. Litigation finance has never been one-dimensional, but has included tailored financing concepts and related services like asset tracing for some time. The progress of portfolio financing shapes the market thoroughly. More recently, the range of available insurance options has developed in the U.S., bringing a new variety of sophisticated services, such as contingency fee insurance and attorney fee insurance solutions which can offer a cheaper hedge compared to financing. All in all, it will be fascinating to watch how things play out in the years ahead. Whatever the outcome, 2017 will certainly be remembered as a transformative year for the nascent industry of litigation finance.   Mauritius Nagelmueller has been involved in the litigation finance industry for more than 10 years. This 2-part article is for general information purposes only and does not purport to represent legal advice. The views and opinions expressed are those of the author and do not necessarily reflect the position of his employer. No reader should act or refrain from acting on the basis of any information related to this 2-part article without seeking the appropriate advice from a lawyer licensed in the recipient’s jurisdiction.

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Legal-Bay Urges Caution on Quick-Pay Option in Proposed $800 Million Archdiocese of New York Settlement

Pre-settlement funder Legal-Bay has welcomed the proposed $800 million abuse settlement involving the Archdiocese of New York while warning claimants that the plan's fast-track payment option may undervalue their claims.

As reported by The Mountaineer, the proposal would be paid in two installments — roughly $615 million up front and a further $185 million within about 15 months — covering an estimated 1,300 claims brought under New York's Child Victims Act. Claimants would be able to accept a flat quick-pay amount of $250,000 or submit to an individual evaluation under a points-based matrix that has not yet been released publicly.

Legal-Bay chief executive Chris Janish said the figure represents meaningful progress. "For survivors who have waited years to be heard, an $800 million proposal is an important step toward resolution," he said. He cautioned, however, that the quick-pay election may not deliver fair value for claimants whose circumstances would score higher under individual review, and noted that the matrix remains unpublished, leaving claimants to weigh a certain sum against an unknown alternative.

Janish added that non-recourse funding advances can help plaintiffs avoid accepting an early payment for liquidity reasons alone. Legal-Bay provides pre-settlement advances that are repaid only if the underlying claim resolves successfully.

The company has tracked the Archdiocese proceedings closely, having flagged in April that the case had reached what it described as a critical crossroads for claimants awaiting resolution.

Aperture Portfolio Manager Says Litigation Finance Has Reached an Institutional Inflection Point

Litigation finance is moving from a niche alternative allocation to a recognised corner of specialty private credit, according to Luke Darkow, a portfolio manager at Aperture Investors.

As reported by ABF Journal, Darkow argues that institutional investors are no longer treating legal assets as an exotic curiosity but as a potential source of returns uncorrelated with public markets. "Litigation finance is no longer merely an alternative curiosity," he writes. "It is increasingly viewed as a potential diversifier within their current portfolios."

The case rests partly on the sheer size of the underlying market. U.S. legal services generated roughly $375.7 billion in revenue in 2024 and are projected to reach $427.9 billion by 2029, a compound annual growth rate of 2.64%. Darkow, who says he has personally deployed more than $1.25 billion into litigation finance over his career, frames that spend as a large and persistent financing need rather than a cyclical opportunity.

Aperture's own approach is built around lending to law firms rather than backing individual cases. The firm structures direct loans secured by diversified pools of legal fee receivables, blending post-settlement receivables with near-settlement matters. Darkow contends that this structure reduces the binary outcome risk that has historically made single-case investments difficult for institutional allocators to underwrite, because repayment depends on the performance of a portfolio of claims rather than one verdict.

Aperture, which reported roughly $600 million in litigation finance assets under management earlier this year, is among a group of credit managers positioning law firm lending as a distinct private credit strategy.

New York’s Usury Cap Still Shadows Litigation Funders Despite the State’s New Consumer Funding Statute

New York's new consumer litigation funding statute has not removed the risk that a funding agreement will be recharacterised as a usurious loan, according to a commentary published this week by three lawyers at Glenn Agre Bergman & Fuentes.

As reported by Bloomberg Law, partners Reid Skibell and Joseph Gallagher, with associate Colleen Piasenti, argue that the Consumer Litigation Funding Act — effective 17 June 2026 — gives funders a statutory framework but not a safe harbour. The Act defines consumer litigation funding as non-recourse and caps the funder's total recovery at 25% of the claimant's proceeds. Non-recourse treatment is what keeps a funding agreement outside New York's 16% civil usury ceiling, and the authors contend that courts will look past the label to the economics of the deal.

They point to the July 2026 decision in *Denemark v. New Chapter Capital, Inc.* as the cautionary example. There, a funder advanced legal fees to a party in a matrimonial dispute at a stated 12% interest rate, secured by a UCC-1 lien on marital property and supported by a guaranty that triggered repayment if the spouses reconciled or if either spouse died. The court concluded the structure left the funder recovering in virtually every realistic scenario, making the arrangement a loan in substance at an effective rate of roughly 19%, and voided it.

The practical lesson, the authors suggest, is that risk-reduction devices meant to protect a funder's downside can be the very features that strip away non-recourse status.