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New York Court of Appeals affirms Burford-style litigation finance transactions

  • Christopher Bogart

The New York Court of Appeals, New York’s highest court, today released its decision in Justinian Capital SPC v. WestLB AG, No. 155 (N.Y. 2016).  The court held that the doctrine of champerty (from “feudal France or merry old England”) has no application whatsoever in New York when a payment or investment exceeds $500,000, as is the case with all of Burford’s investments.

In its opinion, the Court came out squarely in support of New York and its “leadership as the center of commercial litigation” and “emphasized” that the Court “finds no problem” with parties structuring “complex transactions” under New York law.

The Court also recognized that commercial funders are not interested in bringing frivolous litigation.  “[T]he Legislature took comfort that buyers of claims would ‘not invest large sums of money’ to pursue litigation unless the buyers believed in the value of their investments.”  The decision reaffirms New York’s support of significant litigation finance.  Indeed, the dissent (on unrelated grounds) would go even further and laud the role of litigation financiers as “fostering accountability in commercial dealings”.

The specific facts in the Justinian case go well beyond conventional litigation finance.  Justinian did not merely finance the underlying litigation, but it actually took over the claims and sued in its own name.  Even that would be fine, in the Court’s view, as long as Justinian invested at least $500,000 in so doing.  However, in the case at hand, it held that Justinian did not make the requisite investment, and thus Justinian’s case failed.  The narrow facts of Justinian’s transaction take nothing away from the broad endorsement of New York’s highest court of substantial litigation finance transactions.

Burford is not only pleased with the Court’s reaffirmation of New York as a leading jurisdiction for litigation finance transactions, but was happy to have been the sole amicus curiae in the case and to have assisted the Court in providing perspective from the litigation finance industry.