Beginning Next Week: InsideCounsel will become part of Corporate Counsel. Bringing these two industry-leading websites together will now give you comprehensive coverage of the full spectrum of issues affecting today's General Counsel at companies of all sizes. You will continue to receive expert analysis on key issues including corporate litigation, labor developments, tech initiatives and intellectual property, as well as Women, Influence & Power in Law (WIPL) professional development content. Plus we'll be serving all ALM legal publications from one interconnected platform, powered by, giving you easy access to additional relevant content from other InsideCounsel sister publications.

To prevent a disruption in service, you will be automatically redirected to the new site next week. Thank you for being a valued InsideCounsel reader!


Litigation funding proves risky

Two recent cases point to the downfalls of lawsuit funding

It’s been a growing trend for some years now—the idea of litigation funding. It’s the practice of hedge funds or individual investors floating the financing for lawsuits for companies or people who are unable to do so, taking the chance that the investors will see a nice return on investment as a result of a settlement or victorious decision.

A recent article in the Wall Street Journal (WSJ) points to two cases that may underscore the growing risks that come along with litigation funding. One such suit involved U.S.-based Excalibur Ventures, which was pursuing more than $1.5 billion in its suit against two oil and gas companies over an interest in oil fields in Iraq. While the investors expected a handsome payout at the end of the three-year litigation, a U.K. judge last week dealt the parties a harsh blow when he dismissed all of Excalibur’s claims. Excalibur, it appears, may end up owing tens of millions of dollars in court costs as a result.

Another case involved a copyright suit involving Walt Disney Co. and comic book characters owned by artist Stan Lee. In that suit, Stan Lee Media claimed Disney made $5.5 billion off of movies and products using Stan Lee’s characters. A federal judge in California dismissed that suit earlier this month, to the dismay of the litigation investors backing Stan Lee Media.

While litigation funding has been growing in popularity over the past few years—there are at least five litigation finance firms worldwide with $100 million or more under management—it hasn’t come without its challenges. And critics believe funding high stakes litigation could give outside investors undue influence over legal decisions and may even encourage frivolous lawsuits—causing litigation costs to skyrocket.

Read more from the WSJ’s report of this growing practice.

For more recent InsideCounsel stories about litigation, see:

Proportionality, text messages and smartphones on appeal

Bracelet kit maker sues another for patent infringement

US Airways defends American Airlines merger

Canadian law complicates potential Blackberry sale

Lawyer calls Yelp’s suit against him retaliation



Cathleen Flahardy

Bio and more articles

Join the Conversation

Advertisement. Closing in 15 seconds.