One of the most significant recent developments in the commercial litigation arena has been the recent rise of litigation funding. Though it remains controversial in some quarters, litigation funding is, in the words of a recent Above the Law post, “here to stay.” One reason that litigation funding is likely to remain an important factor in the litigation environment is that litigation funding in general has proven to be a lucrative investment, as I have previously noted (here). But while litigation funding in general may be profitable, that does not mean that investment success is assured. Indeed, while there are several very successful litigation funding firms, other firms have stumbled.
Among the higher profile litigation funding ventures that have failed was the short-lived BlackRobe Capital Partners, whose partners included securities litigation plaintiffs’ attorney Sean Coffey and former Simpson Thacher & Bartlett LLP partner Michael Chepiga. BlackRobe, which never really got going, closed its doors in May 2013.
Now, another litigation funding firm announced it was shutting down. In a November 18, 2015 statement (here), Juridica Investments Limited announced that it was not making any further litigation investments and would be returning its capital to investors. Juridica is a publicly traded company; its shares trade on the London stock exchange, so its closure is something of a public event.
In her November 19, 2015 American Lawyer article about Juridica’s closure (here, subscription required), Julie Triedman reports that what may have tripped up the firm is its concentration on a narrow range of areas of the law. The firm focused half its investments in antitrust claims, a quarter in patent cases, and the remainder in commercial claims. In its November 18 statement, the company acknowledged that “scale and diversity” are required to “invest successfully in this asset class.”
According to Treidman, the firm’s fortunes slumped in June, when the company was forced to write off approximately $30 million in expected return on a claim involving alleged overseas price-fixing in the market for liquid crystal displays.
In her November 23, 2015 WSJ Law Blog post about Juridica’s closure (here), Sara Randazzo notes that while Juridica may have stumbled, other litigation funding firms are expanding. Randazzo linked to the November 16, 2015 announcement by litigation funding firm Bentham IMF (here) regarding its new funding in which the firm, rather than investing in individual cases,is investing in portfolios of cases at some law firms “based on their existing track record” and the types of cases they handle. As I noted in a recent post (here), litigation funding firm Burford Capital recently announced a similar funding venture with the plaintiffs’ law firm Hausfield; under this arrangement, Burford provided the law firm with €30 million to fund claims in Germany and to allow the law firm to open a Berlin office.
So while litigation funding success is not guaranteed, and though some firms may stumble, litigation funding continues to attract investors and is permeating the litigation arena in an increasing diversity of ways. Among other things, litigation funding firms are leading the way in the development of investor claims outside the U.S. As I noted in recent posts on this blog, litigation funding firms are leading efforts to mount claims in the U.K. and Germany on behalf of aggrieved investors in Tesco (about which refer here) and Volkswagen (here), respectively.
In his November 24, 2015 post on Above the Law (here), David Lat summarizes his observations from a recent NYU Law School conference about Litigation Funding.
March 2016 C5 D&O Liability Conference in London: This blog’s readers will be interested to know that on March 8 and 9, 2016, C5 will be hosting its 25th D&O Liability Conference in London. The March conference, which will include alternative afternoon sessions on FI and Cyber Liability Insurance, will feature an all-star lineup of speakers and panelists. I will be participating in a session on the class action litigation developments in Europe and the U.S. Information about the conference including the full agenda and registration information can be found here. Readers of this blog are eligible for a 15% discount. To receive this discount, please use the following code when registering: P15-999-DOD16.