Heavyweight Investors Line Up for Law Firm Ownership Ventures

Big capital providers are flocking to Arizona to pour money into “alternative” law firms as investors become comfortable with risk in the fledgling space.

Investors testing the waters include credit-focused alternative asset manager Benefit Street Partners, owned by Franklin Templeton, and Crossbeam Venture Partners, a joint venture between Treville Capital and Moelis Asset Management. Crispin Passmore, who advises law firms and investors, said he receives about 10 queries each week about new projects.

“It’s been a massive increase of investors in law firms this year,” Passmore said. “They’re getting bigger, from venture capital to family offices to big asset managers to investment banks.”

The ramp up in investment reflects Wall Street’s growing confidence in the practice of directly funding litigation and the possibility of gaining returns that are uncorrelated to the stock and bond markets. Arizona opened a path to such investments by approving non-lawyer ownership of law firms about four years ago.

Prominent firms stepped forward, including Fortress Investment Group, which owns part of a personal injury law firm. Big Four accounting firm KPMG in February won approval to operate a firm, which the state calls an alternative business structure (ABS) to differentiate the model from the vast majority of states that require lawyers to own legal operations.

In the experiment’s first year in 2021, the Arizona Supreme Court approved 15 alternative structures, according to an annual report. It approved 25 in the following two years and 51 in 2024. There are currently 153 approved structures in Arizona.

A handful of other states have similar models, but none as permissive as Arizona’s. Puerto Rico opened the door to the model in June. California just pushed back against it, banning its attorneys and firms from sharing contingency fees with an out-of-state ABS.

The New Entrants

A Bloomberg Law review of approved ABS applications shows details of the business models of new entrants gaining a foothold in Arizona. This article is based on documents received via a public records request to the Arizona Supreme Court.

Benefit Street Partners has $82 billion under management. The firm, as well as a managing director Matthew Winkler, are listed as authorized persons for Copper State Legal Services LLC. The application says the firm will focus on tort litigation, contract claims, intellectual property and bankruptcy.

“BSP is an active participant in the litigation funding marketplace,” the firm’s application said. Litigation funders provide capital to law firms in exchange for a portion of the proceeds from a successful resolution. The industry has grown to $16.1 billion in assets under management.

Benefit Street Partners declined to comment for this article.

Crossbeam Venture Partners is behind ABS Justpoint Law. Crossbeam, a 2020 joint venture between Treville and Moelis Asset Managment, invests in seed and series A startups of the “next-gen economy,” according to its website.

In its application, Justpoint Law said it will provide the capital and services to create a new model for representing victims of “harmful FDA-regulated products” that allows for a “significantly faster administration of justice.”

Ali Hamed, a founder at Treville Capital and Crossbeam, said the fund was attracted to the ABS model because nonlawyers could have more involvement in creating the law firm. He also said it’s a more efficient way to utilize artificial intelligence, which Justpoint uses to identify potentially harmful products that could end up in litigation.

“If you could build a law firm with the technology that’s available today, it probably wouldn’t look like the law firms that exist,” he said.

Moelis did not provide comment.

Mustang Litigation Funding is listed as an “authorized person” for Constant Legal Group. Mustang provides pre-settlement funding for plaintiffs as well as law firm loans.

Co-founder and president Jimmy Beltz said Mustang became interested in investing in an ABS because it allows investors to have a direct relationship to the law firm.

“The alternative business structure removes one layer where we can bring the capital directly into the law firm,” he said.

In a description of its business objectives Constant Legal said, “Having access to these resources will encourage an independent, strong, diverse, and effective legal profession.”

Constant Legal described itself as representing clients in and outside of Arizona in mass tort and non mass tort litigation. Beltz said the firm won’t alter its investment strategy but the ABS could open it up to things it hasn’t been able to do.

Aside from establishing Constant, Mustang has dispersed $10 million across their portfolio and has financed more than 3,000 unique cases.

“The legal world is kind of one of the last industries that has prevented outside involvement of capital, frankly, to its detriment,” Beltz said. “I think litigation finance is just a construct that allows an industry to operate more efficiently.”

Lake Whillans, a Texas-based commercial funder, is involved with ABS Amborella Law PLLC. Amborella provides legal and third-party recovery services to clients on complex and large loss claims, according to its website. SubroSmart, a tech driven subrogration management company, is an affiliate.

Lake Whillans did not respond to a request for comment.

Nera Capital, a UK funder, is behind the ABS law firm Mayfair Legal. The ABS focuses on mass arbitration against large corporate defendants and offers an attractive contingency arrangement: 22% as opposed to the typical 25% to 40%.

Aisling Byrne, director at Nera Capital, said in an email that the funder is affiliated with Mayfair because it sees significant opportunity in the state’s legal industry.

“By working closely with a trusted legal partner on the ground, we’re able to deepen our presence in the US market, support great cases and expand access to justice through sustainable, well-governed funding models,” Byrne wrote.