Litigation Funders - Not Quite Rock Stars, But the Cover of AmLaw's Litigation 2010 is Pretty Good for Lawyers
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It's not quite the rock star niche Dr. Hook described when he sang about the status achieved from appearing on the cover of Rolling Stone, but litigation funders Selvyn Seidel and Rick Fields did make the cover of American Lawyers' supplement magazine, Litigation 2010. The related article is titled "London Calling," a reference to Messrs. Seidel and Fields leading litigation funding businesses which are public companies registered on the UK's AIM market.
The article, by Richard Lloyd, is preceded by this teaser:
"Two publicly listed funds are investing in early-stage commercial litigation. Is this the start of a revolution, or a sideshow for a few former Am Law 100 lawyers?"
The answer, in my view, is pretty plain. Over time, litigation funding will cause as much of a revolution as can possibly occur in the already massive litigation industry that is tied up in hundreds of years of precedent and balkanized legal systems. In saying that, I'll admit to some possible bias because my professional life brought me into contact with both gentlemen, and Selvyn Seidel was kind enough to accept an invitation to speak at a litigation seminar I chaired last year in London.
On the merits of the debate about what will happen with litigation funding, start with Mr. Lloyd's article. For more depth, the relevant past GlobalTort posts are collected under the links to the right for the topics Litigation Funding, and Litigation Funding - Litigation industry. Also take a look at the papers related to the 2009 and 2010 seminars hosted by RAND as it has focused on litigation funding. Finally, make sure to consider also this recent post on the impact litigation funding is having in Australia.
We recently did an article about litigation financing in the U.S. We interviewed several companies and we found that most companies in the United States aren't willing to fund commercial lawsuits. We spoke to one company, LawLeaf and they explained while some companies in the U.S. used to fund commercial lawsuits, most have backed away.
"Most companies here in the United States will only consider personal injury advances. They tend to be much less riskier and cost a lot less. Most companies aren't willing to have their investment sit stagnant for several years. Commercial cases tend to take more time and if an underwriter is not experienced in reviewing these types of cases, one or two bad investments could be detrimental."
LawLeaf admitted it's much harder today compared to several years ago to get a commercial case approved. They decided to take a different approach and partnered with several funds outside of the U.S. that approve their clients.
We are told that most companies that specialize in commercial litigation financing are funds outside of the states. In the UK and Australia litigation financing is considered an asset class, where here in the U.S. it's not. Most of these funds are also traded on their respected exchange.
There are about 2-3 hedge funds here in the states that will only consider commercial litigation financing if a case is already settled.
I expect more funds will begin looking at opportunities here in the states, but for now, it may be tough finding a company willing to consider this type of funding.