The CJC’s Review of Litigation Funding Will Have Far-Reaching Effects

As the legal funding industry continues to mature and grow, funders are keen to explore new opportunities to commit their capital to legal disputes, either through direct or indirect routes. One example of the latter approach can be found in law firm funding, with funders looking to embrace opportunities in jurisdictions that allow for outside investment or ownership of law firms.

An article in Bloomberg Law examines the influx of capital into Arizona from litigation funders and private equity firms who are seeking to acquire stakes in law firms, following the state’s reforms of rules governing law firm ownership and alternative business structures (ABS). The article states that of the 76 applications for an ABS that have been approved since 2020, at least 15 of these applications have involved litigation funders or private equity firms.

Bloomberg Law’s reporting reveals that the litigation funders behind these moves into ABS ownership models of Arizonan law firms include: Pravati Capital, Virage Capital Management, Counsel Financial, Bespoke Capital Consulting and 777 Partners. 

One example given is the 1787 legal group, which was formed in 2023 by Pravati Capital’s CEO Alexander Chucri, who owns 80 percent of the company through Arizona Legal Ventures LLC. Similarly, the article covers an ongoing venture pursued by Armadillo Litigation Funding alongside the Houston-based Johnson Law Group, the ABS Bay Point Legal Partners, and ARCHER Systems settlement administrator. In this case, both Armadillo and Johnson Law Group are already owned by the same individuals.

Boris Ziser, based partner and co-head of the finance group and global leader of the litigation funding practice at Schulte Roth + Zabel, told Bloomberg that Arizona’s reform of the ABS rules “didn’t introduce a new concept in terms of funding or financing of a law firm’s business, what it did was changed the way one can provide that funding.” Ziser goes on to explain that “what the Arizona ABS enables the law firm to do is actually funding, or investing, in an equity form rather than debt and that could have a lot of appeal.”

The article goes on to explain that despite these firms being based in Arizona, the ABS model still allows them to pursue case opportunities nationwide, as the lawyers at the firm can co-counsel with firms based in other states.

Supporting access to justice remains one of the core benefits that litigation funding brings to legal systems all around the world, with third-party funders providing the desperately needed resources for smaller litigants to fight against well-resourced defendants. This is epitomized in a case where a funder is supporting a Paralympic athlete’s fight for justice against the sport’s governing body.

An announcement from Deminor Litigation Funding revealed that it is funding a lawsuit brought against the International Paralympic Committee (IPC) by Brazilian Para swimmer André Brasil. The lawsuit has its origins in World Para Swimming’s (WPS) revision of its classification system for the Paralympic Games in 2018, which led to André Brasil being reclassified as ineligible to compete. Following this decision, Brasil and the Brazilian Paralympic Committee (CBP) initiated legal proceedings against the IPC in Germany, arguing that the classification system violates both human rights, and German and European antitrust laws. 

At first, the Cologne Regional Court rejected these arguments and sided with the IPC, but this was eventually overturned by the Düsseldorf Court of Appeal, ruling that the IPC’s position as a monopoly meant that it ‘had an obligation to grant the Athlete a sufficient grace period in order to prepare him for the rule change and his potential ineligibility.’ The court ordered the IPC to pay André Brasil damages, but the IPC is now seeking to appeal the decision at the Federal Court of Justice.

André Brasil is being represented by Counsel Alexander Engelhard and a team of attorneys from Arnecke Sibeth Dabelstein. Engelhard expressed gratitude to have “a reliable and value-driven litigation funder in Deminor” supporting the lawsuit, and said that “together we will do what it takes to allow the Federal Court of Justice to decide in the Athlete’s favour.”

Dr. Malte Stübinger, General Counsel Germany at Deminor said, “By supporting André, we are advocating for a broader change that champions the rights and fair treatment of all athletes. It's essential that we address these systemic issues to ensure that the spirit of competition remains just and equitable for everyone.”