Big Law Cuts Back on Investor-Funded Lawsuits as Scrutiny Grows

Big Law is backing away from investor-funded lawsuits, as the practice adds potential complications at firms and comes under attack on Capitol Hill.

The 200 largest US law firms accounted for just under a quarter of investors’ new case commitments as of June 30 2025, down from 37% in the same period in the previous year, according to a Westfleet Advisors report released Wednesday.

The firms also took fewer investor dollars that backed portfolios of cases, possibly because such groups of lawsuits could create tension between attorneys handling the various suits, said Charles Agee, Westfleet’s chief executive officer. “Partner A feels that his really good, strong, high-value case is being weighed down by Partner B’s weaker case,” he said.

The pullback reverses the trend in recent years that saw the biggest firms grow comfortable with third-party investments for the cost of lawsuits, a practice known as litigation finance. The investors in return for financing get a piece of any successful court awards or settlements.

Litigation finance grew to $16.1 billion of assets under management in the year ending mid-2024, an increase from less than $10 billion five years earlier, according to Westfleet. The money flow drew the ire of businesses who were alarmed by the prospect of frivolous lawsuits. Some US lawmakers last year pushed aggressively—though ultimately unsuccessfully—for legislation to curtail the practice.

“It definitely had an impact,” said Agee, whose firm advises funders, law firms, and clients on deals and transactions. “We were advising on transactions that should have closed in May or June of last year, but because of all the uncertainty wound up closing in July, August.”

Market Mystery

Westfleet, which for years has been the main source of information of the size of the commercial litigation finance market, has ceased publishing estimates of assets under management with its new report.

“That number has been the only number that opponents of the industry, I think in bad faith, have used to try to scare the public about how large the industry is,” Agee said.

The estimate also contained stale, irrelevant data from funds winding down or no longer operating, he said. It’s difficult to assess the amount allocated from multi-strategy funds managing billions of dollars in assets, Agee said.

“We want to preserve the intellectual integrity of this research,” he said.

Active Funders

The Westfleet report identified 39 active commercial litigation funders, including one new entrant to the space. A small group of those funders contributed to the majority of deal flow, however.

“It’s more like 12 to 15 that are really driving the market today,” Agee said. For “those funders that have the ability to access capital, the market conditions are very favorable.”

The Westfleet report showed an increase in new case commitments, up to $2.8 billion. Agee said there were some funders included in the 39 that are deploying capital even if it “slowed to a trickle,” but he excluded funders that were winding down.

The number of new entrants declined from previous years he said, but he’s optimistic for the coming year. “We’re going to see more new entrants in the year ahead,” Agee said.