Contingency Capital is suing ACAP Litigation Fund, seeking the return of more than $8.8 million that Contingency says it loaned to the Houston-based Dunken Law Firm. Contingency says ACAP and Dunken defrauded the company into lending money to the firm to pay off its debts to ACAP.
ACAP allegedly lied to Contingency that the loan would cover Dunken’s debt to ACAP. The company later declared Dunken in default of a new loan that it had agreed not to extend, according to the complaint.
Contingency and ACAP declined to comment on the suit, while Dunken didn’t respond to requests for comment.
The case highlights a growing trend in which litigation funders, known for betting on lawsuits, provide more general loans to lawyers and firms. The loans are often used to pay off existing debts.
“It’s not like the old days where one hundred percent of the capital is going to be used to pursue a case in a one-off way where the results turn into a multiple return,” said Rebecca Berrebi, a litigation funding broker and consultant. “It’s really because mass torts have become so popular, all of these funds and the new funds springing up have become much more flexible in the way that they’re giving capital.”
Dunken, which is being sued by ACAP in a separate case in Texas, has not been named as a defendant in the Contingency lawsuit. The personal injury law firm is also facing accusations of fraud and breach of contract over its handling of transvaginal mesh and talcum powder cases.
Contingency, which was formed in the Cayman