Hedge funds are no stranger to litigation, which may be why they recognize there is money to be made by investing in it. The American Lawyer reports that ever since the High Court of Australia ruled Aug. 30 that so-called litigation fund companies are legal, U.S. hedge funds have been clamoring for a piece of the action Down Under. Not as active participants, mind you, but as backers who help pay the expenses of the litigation in exchange for a nice slice of the money recovered at the outcome – like a hunk of the one-third to two-thirds of the total share the LFC receives. The latest excursion into law-law land is a further extension of what hedge funds are already doing in the U.S. and Great Britain. “Hedge funds that have funded plaintiffs’ lawyers already have an idea about the returns they can make,” Michael Legg of the Sydney, Australia, law firm Clayton Utz told American Lawyer. And that worries defendants, which claim that infusion of money by hedge funds – an even private equity firms – into the LFCs will lead to excessive litigation and excessive damage awards. Worse, in the interest of gaining an even bigger pay-off, says consultant Joanne Rees of the Melbourne-based law firm Slater & Gordon, “Funders will now start trying to get people interested in becoming part of the actions. And people will start coming forward and looking for actions to start.”
