The U.S. legal industry is vast. The combined value of all verdicts, settlements, attorneys’ fees, and billings for non-lawyer legal services would easily eclipse the GDP of Switzerland. Within its courtrooms each year are tens of millions of cases – a good proportion of the civil docket comprised of torts and commercial lawsuits – and hundreds of billions of dollars change hands. Attorneys occupy a dichotomized position within the sector, both celebrated and hated for their important role in the legal system. Arbitration, settlement, and other out-of-court forms of resolution represent a substantial proportion of tort and commercial claims – as much as 40 percent by some estimates – that are never formally initiated, and thus unfold in addition to courtroom statistics. A market of this staggering size and magnitude cannot help but offer a compelling investment proposition.

Tort Law

Tort law is a body of law that is used to apportion responsibility for damages that occur as a result of negligence, accidents, and personal injury. A person who suffers an injury is entitled to receive damages, usually monetary compensation, from the person held responsible for those injuries. Tort law defines what constitutes a legal injury and whether a person may be held liable for an injury they have caused. In addition to physical injuries, legal injuries may also include emotional, economic, or reputational injuries, as well as violations of privacy, property, or constitutional rights. Damages that result from torts can include wage losses, medical expenses, fire losses, and property damage, among others. Estimates place the number of tort cases brought every year in the United States at around 1.2 million for state courts and approximately 100,000 in federal courts. While the median award for all tort cases is $24,000, the largest and often most complicated cases can involve stratospheric awards.

Commercial Lawsuits

There are many causes for business litigation, but the most common is breach of contract. More than 12 million contract disputes are filed every year. In addition, there are thousands of lawsuits covering such broad areas as intellectual property, antitrust, real estate, banking, securities, insurance, and many others. While the confidential settlements that most business lawsuits result in make assessing the size of the market difficult, the total value of all judgments and settlements for commercial lawsuits is estimated at hundreds of billions of dollars per year. Contract disputes where the plaintiff is the buyer have the lowest awards with a median jury award of $17,000. In contrast, awards for employment discrimination and tortious interference are significantly higher. In 2005, the median award won by successful plaintiffs in employment discrimination and tortious interference claims in state courts was $175,000 and $169,000, respectively. Like torts, the largest lawsuits can result in awards approaching billions of dollars, such as the $919.9 million judgment E.I. du Pont de Nemours and Co. received against Kolon Industries for the theft of several Kevlar-related trade secrets.

Lawyers and Law Firms

The emergence of third-party litigation finance has come about at a time when the legal industry is undergoing a titanic transformation. The insular and conservative disposition of lawyers has contributed to the stresses that are now affecting its ranks in the wake of the financial crisis, causing unprecedented changes and producing a painful restructuring in the way legal services are delivered. Trends like greater client control, legal self-help and outsourcing, as well as jurisdiction shopping force attorneys and law firms to become more proactive and flexible in competing in the marketplace. Despite these challenges, that marketplace is thriving: there are currently tens of thousands of plaintiffs’ lawyers who advertise for clients, find cases, and marshal their rights in court. Every year, approximately 180,000 law offices generate nearly $250 billion in revenue.


Arbitration is a market of substantial size that runs parallel with the traditional court system. Like courtroom litigation, arbitration is a process in which the plaintiff and defendant present their case to a third party, usually an arbitrator or panel of arbitrators. Arbitration has become increasingly common for resolving international business disputes, especially for parties that prefer not to use their own courts because they are expensive, function poorly, or may be susceptible to graft. International arbitration provides the parties with a neutral forum, leveling the playing field for litigants. Many international contracts specify that arbitration should be used to resolve any disputes that arise from that agreement. The types of cases brought before established arbitration organizations vary, but generally include complex commercial matters, often involving multiple jurisdictions. These matters are often large and the amounts in dispute often run into hundreds of millions or even billions of dollars.

Do Most Cases Settle?

A recent study by the U.S. Department of Justice found that as little as two percent of cases that reach a conclusion are decided by juries. The vast majority are either dismissed, fail to proceed, or are privately resolved among the parties through settlement. By some estimates, nearly 40 percent of all tort claims and a similar percentage of commercial cases in the United States are never filed in court. Millions of cases are not counted by the legal system because they are never formally commenced, whether due to the cost-prohibitive nature of litigation or the uncertainty of prevailing in court.