Rocade Capital Aids UK Litigation Funder With $126.7 Million (1)

Rocade Capital, a litigation funder spun off from EJF Capital LLC last year, is investing $126.7 million (100 million pounds) in a new London-based firm that will finance legal actions with the goal of generating a return for investors.

The new firm, Winward Ltd., will deploy capital in about 18 commercial cases over the next three years in common law jurisdictions in Europe, as well as in Australia and Canada. It will focus on matters in the fields of antitrust, arbitration, contract, group action, insolvency and tort.

Arlington, Virginia-based Rocade, which specializes in loans to plaintiff law firms involved in mass torts and complex litigation, is backing Winward. Last year, Rocade closed on it’s fourth fund for $470 million to back mass tort law firms.

The litigation finance industry has been growing in popularity as a source of returns that are uncorrelated to equity markets. Forty-four funders managed $13.5 billion in US commercial litigation investments in 2022, up 9% from the previous year, according to Westfleet Advisors.

Parabellum Capital, spun off 12 years ago from Credit Suisse, announced in January that it has closed on a $754 million fund—among the largest private pools raised for litigation finance.

Winward’s launch comes at a time when the UK litigation finance market is in flux. A Supreme Court decision last year in a class action involving truck manufacturer PACCAR found that litigation funding agreements are unenforceable in cases where funders try to recover a percentage of damages in a cases they successfully backed.

Providing loans to law firms may be a way around the PACCAR decision since the funder’s agreement would not be tied to specific case outcomes, said Jeremy Marshall, chief investment officer and managing director for Winward. “Law firm lending may actually be an area that is very popular shortly in the UK because it’s going to be a route around the PACCAR-type problem,” he said in an interview.

Marshall’s Role

Marshall is the former chief investment officer of Bentham Europe, now known as Innsworth Advisors. He was also a senior investment manager with litigation funder Omni Bridgeway.

Marshall for now will be Winward’s sole employee and will select cases. “The need in this business is efficiency,” he said. “You need commitments and you need trust and you need confidence and that’s going to be a lot easier to get with one person than it is with 10.”

An advisory committee of professionals in the funding and legal markets with expertise in different jurisdictions will review Marshall’s choices. Stephen Auld KC, a barrister with London’s One Essex Court, will chair the advisory committee.

There’s been a push particularly in the UK for investing in class actions with opt-out claims. These are cases in which claims are brought on behalf of every person falling within a class without identifying all members or obtaining authorization and individuals can opt out of receiving compensation.

The opt-outs are not the types of cases Winward plans to fund, Marshall said. “Everybody thinks that fortunes are going to be made overnight with these opt-out claims,” he said. “That in my view is leaving behind some potential market share that we might be able to take.”

Rocade has looked at ventures outside its typical jurisdictions and core investments and sought a firm with a sound structure, sector expertise and risk adjusted profile, said Brian Roth, the company’s chief executive officer. Winward checked all those boxes, he said.

Since its predecessor was founded in 2014, Rocade has funded approximately $1.1 billion of investments. EJF is still a shareholder and has a seat on the board at Rocade. Winward will receive insurance coverage for adverse costs from Arcadian Risk Capital and Litica Ltd.