Litigation Funding Picking Up, but Not Quite for Defense, Lawyers Say
At a litigation funding conference, panelists from Big Law said they were making use of such financing in certain offensive and defense cases in arbitration, intellectual property, bankruptcy and other disputes.
May 01, 2019 at 05:55 PM
3 minute read
While the litigation finance industry is picking up steam, plaintiffs are still the focus, with defense cases and in-house lawyers a small share of the industry, lawyers and dispute financiers said Wednesday.
At the General Counsel Forum on Litigation Finance in New York, panelists from Big Law said Wednesday they were making use of such financing in certain offensive and defense cases in arbitration, intellectual property, bankruptcy and other disputes.
Fred Fabricant, a Brown Rudnick partner, said his firm has gotten funding for portfolios of IP claims that might take $5 million to $8 million each to advance. And Reed Oslan, who chairs the Kirkland & Ellis special fee committee, said his firm has put “hundreds of millions of dollars of time” into cases with nonstandard billing arrangements.
Some clients have funded their defense in one case in exchange for a share of proceeds from their claims in another, said Scott Mozarsky, a regional managing director of litigation funder Vannin Capital. Oslan described a similar scenario for a Kirkland client that happened several years ago.
But defense cases—half the potential market for funders, as Andrew Langhoff of Red Bridges Advisors LLC pointed out—are still relatively rare.
Michael German, a managing director at Vannin Capital, said the reaction from in-house counsel and potential defendants to outside funding was “a mixed bag” and said such clients were still a relatively small share of his company's business. He noted that the litigation funding industry was relatively young, especially in the U.S., and the use of such funds for defense work was even newer.
Providing an in-house lawyer perspective, Linda Zabriskie, a vice president and associate general counsel at the video game developer Take-Two Interactive Software Inc., said “the accounting implications would be important” to any decision her company might make about whether to seek outside funding for defense work.
But she suggested the notion that Take-Two might seek outside funds to go on the offensive—to use litigation financing to file a raft of suits against potential patent infringers—was unlikely. She said there was a “reticence” to sue other companies in the industry and said she had seen such legal behavior from companies that were “winding down” instead of growing. “We really want to focus on our core business of making video games,” she said.
Litigation finance hardly existed 20 years ago, but major players today like Burford Capital and Bentham IMF have funded billions of dollars of lawsuits globally. Australia and the U.K. are major markets for such companies, and the industry is still finding its footing in the U.S., where rules vary from state to state and lawyers have for decades taken on contingency-fee cases without a need for an external financier.
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