Suing corporations can be extremely lucrative; just ask John Edwards. Unfortunately, it is only available to those with legal standing and actionable claims. And who's got enough of those to produce impressive risk-adjusted returns over time?
No one, but no matter: It's getting easier and easier to buy your way in.
A new generation of investors is plunging into "litigation finance," putting up millions of dollars to fund lawsuits in hopes of collecting when verdicts come down. Established financiers are expanding into new areas, including loans to law firms, and finding clients among the biggest American companies.
Law firms themselves are starting to jump on the bandwagon, too. They are seeking funding arrangements for clients who need help going after opponents with deeper pockets, or simply want to keep litigation costs off their balance sheets.
And the newest of the generation go both ways.
But he says Gerchen Keller will offer new approaches, too. "One of the thing we're doing differently is investing in financing on both sides of litigation—both defendants and plaintiffs," Mr. Gerchen says.
"This turns the courts into a stock market of sorts," one lawyer who charges in the low three figures to read an e-mail said. What's so objectionable about that?
"If investors are getting that sort of return," Mr. Beisner says, "either defendants are paying a lot more or claimants are receiving a lot less."