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Despite the collapse of BlackRobe Capital Partners last May, third-party litigation finance is steadily attracting more investors. Corporate America, meanwhile, is taking notice.
Gerchen Keller Capital, the newest major player among litigation funders, announced on Jan. 13 that it had secured $260 million in new investor money, bringing its total arsenal of funds to $310 million. That instantly puts the Chicago-based litigation financier, which was founded just nine months ago, on a par with its best-known rivals, including Burford Capital Ltd. and Juridica Investments Ltd.
The announcement comes as litigation finance—or at least the concept of litigation finance—appears to be gaining traction in the United States. In a study released by Burford on Jan. 15, 58 percent of CFOs surveyed said their companies had a matter that could benefit from litigation finance, almost triple the percent a year earlier.
But the survey, of 430 in-house and outside counsel as well as financial executives, also noted that only 2 percent of in-house counsel reported having actually tapped third-party litigation funding.
Acceptance by state judges is also on the increase. In the U.S., courts in roughly half of U.S. states have explicitly found third-party litigation finance to be permissible under champerty laws, according to Anthony Sebok, a professor at the Benjamin N. Cardozo School of Law who has advised litigation funders.
Burford, which is listed on the London Stock Exchange’s Alternative Investment Market, said it had currently committed some $266 million in investor funds to 29 ongoing litigation matters. In late November, the funder, which calls itself the “largest provider of investment capital and risk solutions for litigation,” reported an additional $40 million in investment by institutional investors. Burford posted a 41 percent increase in earnings last year.
Juridica, meanwhile, reported $161 million in funding commitments on 21 matters, with nearly two-thirds the funds committed to antitrust and competition matters, according to its most recent annual report.
Newcomer GKC was launched in April 2013 by a group of former bankers and lawyers from Bartlit Beck Herman Palenchar & Scott and Gibson, Dunn & Crutcher. The firm says its investors include large public pension and university endowments, and that it focuses on lawsuits between institutions, including IP and contract disputes. GKC says it’s already committed to funding a dozen matters, but none have yet become public.
In addition to announcing its latest capital infusion, GKC also said last week that it had added two new members to its team. Former Kirkland & Ellis litigators Adam Gill and David Spiegel joined GKC as a principal and as an analyst, respectively.
Rivals, meanwhile, are increasingly committing their funds to high-profile international disputes. Some, like Burford, specialize in investment treaty arbitration. Burford attracted scrutiny recently when its funding of the multi-billion dollar Ecuadorian toxic torts case against Chevron Corp. became public in related U.S. litigation.
Juridica, another publicly traded commercial litigation funding company, also drew some unwelcome attention when its $3 million funding of an ICSID dispute against Romania became the focus of a fraud claim.
Such turbulence hasn’t deterred the funders from taking on more high-profile international cases. A recent study in the Georgetown Law Journal noted several ICSID awards in the past few years where third-party funding played a role, including disputes against the Hashemite Kingdom of Jordan; Grenada; and the Republic of Georgia. In 2012, Oxus Gold plc announced that it had tapped seven-year-old Calunius Capital LLP, a UK litigation financier, to fund an arbitration against the Republic of Uzbekistan. The co-founder of Calunius, Mick Smith, estimated in December that just the best-known six third-party funders have raised more than $1 billion since 2007, with more than half used for arbitrations.