Chicago-based litigation finance firm GLS Capital is formally launching with $345 million in capital commitments to invest in lawsuits.
The fund is managed by three former employees of Burford Capital. Two were the first employees hired in 2013 at Gerchen Keller Capital—which was acquired by Burford in 2016.
GLS Capital is the latest entrant in a burgeoning asset class that has grown in the U.S. to include more than 40 investment companies wielding nearly $10 billion in capital, according to a recent survey from Westfleet Advisers.
Litigation finance firms invest in cases by paying lawyers’ fees and expenses in exchange for a portion of the lawsuit’s monetary awards. They receive nothing if the lawsuit earns no money. The industry found its footing in the U.S. in the mid-2000s after taking off in the UK and Australia.
Having worked in the industry for six years, GLS Capital founders David Spiegel and Adam Gill have been reviewing, executing, and managing litigation investments for nearly half the industry’s stateside existence. Jamie Lynch, the new fund’s third founder, joined Gerchen Keller in 2016.
The trio left Burford in 2017, less than a year after it acquired Gerchen Keller in a $160 million deal that solidified Burford’s place as the largest player in the industry. Gerchen Keller had $1.3 billion in assets under management at the time of the sale.
“The marketplace has changed. It’s not 2013 anymore,” Lynch said. “New players have emerged and there is new competition out there. But there is also more knowledge and awareness of this product. Because there are other people who provide capital, we want to be user-friendly and have that customer-service edge.”
Speed and Independence
GLS Capital will primarily invest in commercial claims, patent lawsuits, and pharmaceutical cases. The founders said they do not have a minimum or maximum investment and have reviewed cases that would require as little as $1 million in capital and as much as $70 million. While deals are structured for each case, funders often receive between a third and 40% of monetary awards.
As one of the relatively few litigation finance firms still structured as an independent fund, GLS Capital founders have final say over which cases they opt to back. Some litigation finance firms are bankrolled by hedge funds that have input or the last word. GLS Capital founders said their structure allows them to close deals in a faster time frame.
“Speed is important,” Gill said.
GLS Capital has also hired two former partners from global law firm Kirkland & Ellis, Jeffery Lula and Joel Merkin, as principals to help review cases.
Kirkland announced in 2019 it intends to increase the amount of plaintiff-side contingency work it handles by up to 10 times.
That type of litigation has not traditionally been the domain of the world’s largest law firms, but litigation finance capital has helped Big Law adapt the billable hour model to investments in plaintiff-side cases. Funders can pay a portion of the firm’s legal fees upfront.
Still, there is room to grow the use of third-party capital among those large firms. About 30% of the $2.3 billion spent on U.S.-centric litigation finance between July 2018 and July last year went to the nation’s 200 largest firms, according to Westfleet Advisors.
“Just like we’ve seen growing demand across the legal industry for the product, we have also seen growing demand among the largest AmLaw firms as well,” Spiegel said.