Rees Morrison's blog on litigation funding...

An article in Fortune, May 11, 2009 at 20, adds some details to what I wrote about previously on funding of litigation by third parties (See my post of April 11, 2009: litigation financing; Jan. 6, 2009: law suit financing offshore; March 20, 2009: a firm in hedge-fund financed litigation; and March 27, 2009: hedge funds and the secondary market for patents.)Juridica was launched in December 2007 by two lawyers, Richard Fields and Timothy Scramtom. It has raised money by selling shares on the London Stock Exchange’s small-companies market. According to the Fortune article, "insurance companies like Allianz in Germany and several independent investors have launched funds to invest in suits.” Credit Suisse likewise has a litigation finance unit. The business model of these groups doesn’t sound complicated: "Like Juridica, these funds invest amounts typically between $1 million and $5 million in cases where companies sue each other for anticompetitive behavior, contract breaches, and so on."Other people also invest in lawsuits, most notoriously so-called patent trolls (See my post of Jan. 20, 2006: trolls and litigation costs; Oct. 29, 2006: Qualcomm’s business model; May 13, 2007: Microsoft’s litigation against trolls; and June 25, 2008: advice against troll litigation.).
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Investing in Lawsuits, for a Share of the Awards

Richard W. Fields says he has come up with a win-win financial strategy for the downturn. He is investing in lawsuits. Not in trip-and-fall cases, mind you, but in disputes that are far larger, more costly and potentially more lucrative, often pitting major corporations against each other. Mr. Fields is chief executive of Juridica Capital Management, which runs a fund that invests in one side of a lawsuit in exchange for a share of any winnings. “It’s always a good time to invest in litigation,” Mr. Fields said, though he added that the weak economy helped. “When the recession started to bite, the phones started ringing off the hook. Last year, we looked at 122 cases and we made 17 investments.” A small but growing number of investors are exploring this idea, helping companies avoid some of the risks and costs of litigation in exchange for part of any money paid out when the case is settled or resolved by a court. After all, it can be costly to hire lawyers, who may charge close to $1,000 an hour at the most elite firms.
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Juris Capital provides $500,000 to $3 million per case for litigation funding...

Fellow litigation investor David Desser, the managing director of Chicago-based Juris Capital, said his company typically provides $500,000 to $3 million to fund a case. In return, investors are earning "well in excess" of 20 per cent annually on their overall portfolio. “Given the conditions in the economy, you have a set of circumstances that are pushing both clients and law firms to look for outside investor help,” said Desser. The investing companies say that because they do not take control of the lawsuit from the company and lawyers waging it, their most important task is identifying cases likely to produce a substantial return. That means, for example, rejecting claims that raise novel legal questions or that will probably end up before a jury.
juriscapitalcorp.com

From 2007 - Litigation Funding - The New Growth Area

Litigation funding has recently hit the headlines, in particular through news reports that an accountancy firm is facing a £90 million negligence claim brought with the help of outside funders. In addition, the Privy Council has very recently had to consider the extent to which claimants can sell their litigation claims to others, which in theory represents an attractive model for those wishing to invest in litigation. All this reflects the growing trend towards litigation funding which litigators have been seeing for some time.
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Litigation funding: an overview of a contentious area of growth

Third-party funding is certainly provoking debate. Tony Guise, of costs specialists Guise, says there has been a lot of ‘hot air’ about third-party funding over the last 18 months. ‘Some funders are drawing in their horns because the recession means recoverability is in doubt, while others are becoming more aggressive. There is no shortage of funding available – people are putting together capital funds of £20m-£30m – but it is not clear how many cases are actually being funded this way.
Everyone is watching the InnovatorOne case, where Addleshaw Goddard is representing several hundred investors backed by third-party funding. Everyone is after the big commercial action but they are inherently risky and they don’t provide a good business model. But the litigation funding market is attracting international interest. John Rossos is principal of Canadian BridgePoint Financial Services, which funds both law firms and individual cases. He has been in the UK researching opportunities and likes what he sees. ‘While the US market is huge, we feel we have a better cultural and legal fit with the UK. I also believe that the Legal Services Act will be the “big bang” for legal services. Sam Eastwood, partner in Norton Rose’s dispute resolution team, has first-hand experience of the market in one of the largest independently funded cases – the Stone & Rolls £69.5m professional negligence claim against accountancy firm Moore Stephens, bankrolled by IM Litigation Funding
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World Bank to help recover $2 billion in stolen money

President Mohamed Nasheed said he would be seeking the help of the World Bank’s Stolen Asset Recovery Initiative (StAR) to retrieve more than US$2 billion in embezzled funds. Speaking to international journalists yesterday, Nasheed said recovering the money was essential to help the government plug its gaping budget deficit, currently 34 per cent of GDP. “Usually countries start worrying when they go over 14 [per cent],” he said. Nasheed established a commission in May to investigate allegations of rampant corruption in more than 30 audit reports of state institutions under the former president, Maumoon Abdul Gayoom. The main opposition Dhivehi Rayyithunge Party (DRP) have denounced the reports as biased and not based on fact. Asset recovery is an essential part of StAR, a joint UN and World Bank project, and obtains help from developed countries to locate the proceeds of corruption, often stashed away in international financial centres. Speaking yesterday, Nasheed said international help was needed due to an absence of forensic investigative and forensic accounting skills in the country.
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Follow the money: the world's sharpest fraudbusters

This article was taken from the October issue of Wired UK magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content by subscribing online. The first sign of trouble was the 911 call from Susan Lok's Glendora home. It was March 2003, and the currency trader had just taken an overdose. The ambulance crew was greeted by a suburban Los Angeles house where Lok had been living with her Cambodian father - and secretly passing millions of dollars from a sophisticated Ponzi fraud through the family bank account.
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Juridica Investments

Third-party litigation funding has jumped into the mainstream of financial investments with the first admission to AIM of a specialist litigation fund.
Juridica Investments, founded by two US lawyers, will invest in claims of more than $2m (£1.01m), mainly focusing on US-based litigation and international arbitrations.
Norton Rose dispute resolution partner Sam Eastwood said: "The launch serves as further reinforcement that the litigation market's going to be going through quite a change - and not just in the UK." Juridica has an investment management arm that will locate and vet cases that could be funded. It will
also use around half of its £78.4m IPO proceeds to make loans to firms where direct investment is not permitted or wanted by plaintiffs. One such firm is Washington DC-based Fields & Scrantom, owned by Juridica's founders Richard Fields and Timothy Scrantom. The biggest single investment or loan it will make will be $10m (£5.06m), unless its board gives special approval. Although initial cases will be US, the company hopes to invest in cases in other jurisdictions.
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Patent Pirates

Hedge funds and institutional investors are financing the latest wave of IP lawsuits.
This deal was dreamed up by Robert Kramer, who founded Altitude in 2005, raising $250 million from hedge funds and others to invest in intellectual property. So far Kramer has put $100 million to work in nine investments. He's got plenty of company in this new game. Coller Capital, a London private equity firm with a $2.6 billion fund, quietly formed Coller IP Capital with an eye toward investing $200 million a year. Rembrandt IP Management, a Bala Cynwyd, Pa. firm, has raised $150 million, and Northwater Capital, a $9 billion Toronto manager of funds of hedge funds, put together NW Patent Funding last year. Both exist solely to exploit patent lawsuits in the U.S.
Sounds a lot like patent trolling...
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