The U.S. is the most litigious country in the world, with millions of lawsuits filed each year. Litigation spending increases each year, climbing to $23.7 billion among large companies in 2021. With bigger budgets for litigation come heftier payouts—like Meta's $3 billion legal expense budget and the $550 million settlement they paid in 2020's privacy violation lawsuit—and you could be cashing in on some of it.
According to a new report, litigation funding is becoming more popular in the United States, with investments totaling $3.2 billion last year. This surge in funding has been driven by investors who are looking for alternative investments and higher returns than traditional investments can offer.
Litigation funders are providing capital to plaintiffs in lawsuits, allowing them to pursue legal action they otherwise would not be able to afford. This investment provides an opportunity for those who have been wronged but lack the financial resources to seek justice.
Companies that finance U.S. commercial lawsuits in exchange for a cut of any recoveries upped their investments last year, committing $3.2 billion.
This represents a 16% increase in capital committed to new U.S. litigation funding deals, marking the largest annual increase in the past three years.
Litigation funders provide financing for individual lawsuits or case portfolios in exchange for a share of any settlement or court judgment. The report offers a rare look into the scope of an often opaque industry since details about specific investments are not typically publicized.
In 2022, the average size of the transactions of all types that we analyzed was $8.6 million ($6.5 million in 2021). Single-matter deals averaged $4.3 million ($3.5 million in 2021), while portfolio deals averaged $10.5 million ($8.5 million). Thus, across all deal types, the average size of the capital commitments increased in 2022 versus 2021. However, we believe 2021 may have been an aberrational year since the 2022 figures are more reflective of averages in prior years.
The Chamber and a group of Republican state attorneys general have also recently argued that unspecified foreign actors could compromise national security by investing in U.S. lawsuits.
The International Legal Finance Association, a global trade group currently representing 19 commercial litigation funders, called the Chamber's report on purported national security threats "light on substance and heavy on speculation and pre-conceived notions."
Industry advocates and opponents should acknowledge that litigation funding "is still a very, very small percentage of total commercial litigation in the U.S."