By Justin Wise

Law360 (November 5, 2020, 9:49 PM EST) --

Sarah Williams

Henry Jones

Validity Finance said Thursday it is adding a Kirkland & Ellis LLP partner to its Houston office and a former federal judge to its investment team, as it continues to expand amid a surge in demand for litigation funding sources during the coronavirus pandemic.

Sarah Williams joins the organization as portfolio counsel following a four-year stint at Kirkland, where she spent the final half of her tenure as a litigation partner. Henry Jones, a former magistrate judge who served more than three decades on the U.S. District Court of the Eastern District of Arkansas, will become the latest member of the investment committee.

Litigation funding is a practice where a third party can provide capital to a plaintiff in return for a portion of any financial recovery won from a lawsuit. Validity CEO Ralph Sutton told Law360 that the company's list of funding opportunities is up by more than 40% compared with 2019, a rise he attributed at least in part to the pandemic.

"What the increased demand requires is we have the manpower to be able to look at these cases with the same critical eye," added Laina Hammond, the head of Validity's Houston office. "It's why we're growing our team."

Validity's clients are primarily involved in commercial business disputes, but the company said it expects to see a rise in bankruptcy opportunities. In addition to single cases, the company funds law firms directly in exchange for a fraction of contingent fees recovered in a packaged group of cases, Hammond said. She noted that the company rejects roughly 90% of its funding opportunities, a rate that has remained steady during the pandemic.

Williams told Law360 she'll focus on Texas and the Southwest and that she's hoping to use her 10-plus years of litigation experience to help potential clients think "creatively" about legal disputes. Pointing to COVID-19, she said that cost constraints are even more of a concern than they previously were.

"There's really never been a time that the justice system has been more in demand," Williams said.

The Texas Judiciary has reported a substantial increase in civil lawsuits filed in state district court over the previous five years. Hammond and Sutton said they've also seen data indicating significant jumps in lawsuits at both the state and federal level, which has helped spur a sizable uptick in company activity. The office in Houston is now handling several different matters before the courts in Texas.

Sutton said that in some months, funding opportunities have represented a 70% year-over-year increase, calling it "unbelievable."

"Funding can fill in gaps for clients and law firms that [COVID-19] and the economy's contraction have caused," he said. "It can help lead the way to greater risk-sharing for clients and law firms with their clients, which might have not been so obviously needed [before the pandemic]."

Validity in July announced that it had most recently raised $100 million in capital from investors. The announcement came around the same time Parabellum Capital LLC, another litigation finance firm, said it had raised $465 million in its latest private investment fund.

Looking ahead, Sutton said he expects in the next few quarters to see financing becoming more "fundamental" to the way law firms think about funding the types of cases Validity backs — commercial disputes such as breach of contract, business torts and intellectual property, according to Hammond and Sutton.

The rise in investing may be partly due to lawyers becoming more comfortable with the practice. A July survey found that attorneys, in-house counsel and independent practitioners with firsthand experience with litigation funding jumped by 30% compared with 2019.

Leslie Perrin, the chairman of London-based legal finance firm Calunius Capital, earlier this year described litigation funding as "one of the fastest-growing finance sectors in the world." Perrin is also the inaugural chair of the International Legal Finance Association, a trade association formed in September that counts Validity as a member.

The industry appeared bullish about its prospects before the coronavirus pandemic, and investors have poured billions of dollars into different companies. A 2019 survey from broker Westfleet Advisors found private litigation financiers had access to about $9 billion.

Validity's new hires follow the July addition of former Fried Frank Harris Shriver & Jacobson LLP associate Jason Listhaus as in-house counsel. In March, the company also hired former Boies Schiller Flexner LLP counsel Joshua Libling and ex-Kirkland patent partner James Amend to its investment team.

--Additional reporting by Andrew Stickler, Kevin Penton and Mike LaSusa. Editing by Alanna Weissman.

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