NY Law Journal, June 4, 2010
Ask Louis M. Solomon where his fees are coming from these days, and you will get a complicated answer.
Solomon, who joined Cadwalader, Wickersham & Taft earlier this year, counts corporations such as Bristol-Myers Squibb and PepsiCo as part of his book of business. Yet while companies like those still are generally paying his fees, lately the source of funds is not just his clients’ corporate war chests but money they received from investors looking to take stakes in the lawsuits he files for them.
Solomon, 54, is among a handful of corporate litigators handling commercial disputes with outside, third-party litigation funding. Two litigation funds have in the last three years launched initial public offerings, and both are on the lookout for U.S. litigants who would allow them to finance their cases in return for a portion of any settlement or judgment.
Juridica Investments Limited, which launched in 2007, last month reported that through March it had committed almost $123 million to 15 investments in 22 cases, one of which is in New York, according to a spokesman. Burford Capital Ltd., which went public in October, has so far invested $40 million across 10 cases, many of them international arbitrations.
But the practice of allowing outside investors into lawsuits is not without its critics. The U.S. Chamber of Commerce in October called for the prohibition of third-party litigation financing at all levels.
Selvyn Seidel, a former Latham & Watkins partner who is chairman of the investment advisor side of Burford, said the concern is understandable given the relative newness of the investment funds in the United States.
“The industry’s biggest enemy is unawareness,” he said. “And most of the lawyers in the U.S. are unaware of it.”
Third-party litigation funding is a relatively recent phenomenon in the United States, after establishing itself in Australia, then later in the United Kingdom. Until recently, in the United States it tended to focus on consumer disputes like personal injury claims, with advances of $1,750 to $4,500 in exchange for a percentage of the recovery, according to a Juridica-funded report by RAND Corporation released last month.
The newer phenomenon has been the emergence of investors like Juridica and Burford, which finance commercial claims brought by companies against other companies. While not alone in the field — Credit Suisse has a unit that invests in litigation — Juridica and Burford are two of the largest funds dedicated solely to litigation finance. Both are publicly traded on the Alternative Investment Market in the United Kingdom, where investors are likely more familiar with these types of funds.
Burford raised about $130 million in an October IPO and is looking to invest in commercial disputes. It plans to make average investments exceeding $3 million, and expects to have its capital fully committed by October 2011. Seidel declined to provide details on a suit in which Burford has invested.