The Pyrrhic Victory: Won at Trial, Lost Money

LexShares Case #310: When Winning Still Loses Money

UKnight v. Knights of Columbus — a $100 million lawsuit wins at trial, but the $500,000 verdict doesn’t cover the litigation funding

The Numbers

Invested $170,000
Returned $149,937
Net Profit ($20,063)
MOIC 0.88x
IRR -4.41%
Holding Period 1,018 days

The Case

List Interactive v. Knights of Columbus (D. Colorado, 1:17-cv-00210)

In 2009, UKnight began building websites for local Knights of Columbus councils in Dallas. The platform was so successful at increasing membership, improving communications, and boosting insurance sales that KC Supreme — the parent organization — invited UKnight to pitch a national rollout.

On September 10, 2011, KC Supreme allegedly told UKnight they were the “designated vendor” for all 15,392 local councils. UKnight would handle subscriptions; KC Supreme just had to make the announcement.

The announcement never came.

Instead, according to UKnight’s complaint:

  • KC Supreme repeatedly promised the announcement was “imminent” — for years
  • UKnight spent thousands upgrading servers, email capacity, and payment systems in anticipation
  • KC Supreme demanded UKnight’s proprietary strategies, design data, and trade secrets under the guise of “understanding the system”
  • In January 2016, KC Supreme suddenly claimed there was “never any contractual relationship”
  • Three months later, KC Supreme sent an RFP to competing vendors — using UKnight’s design elements

UKnight also alleged something more explosive: KC Supreme was running an “elaborate conspiracy” to inflate membership numbers. With $105 billion in life insurance policies backed by only $22 billion in assets, KC Supreme allegedly needed growing membership to maintain viability. UKnight’s platform would have exposed the true numbers.

Note: LexShares’ involvement in funding this case is publicly documented.

Timeline

Date Event
Sept 2011 KC Supreme allegedly designates UKnight as sole vendor
Jan 2016 KC Supreme claims “no contractual relationship ever existed”
Apr 2016 KC Supreme sends RFP to competing vendors
Jan 2017 Lawsuit filed (RICO + 7 other claims)
Jul 2017 Motion to dismiss — RICO & defamation dismissed, 6 claims survive
Aug 30, 2017 My investment — $170,000
Apr 2018 Additional LexShares funding ($150K)
Oct 2018 Plaintiff’s counsel (Condit Csajaghy) withdraws
Jan 2019 New counsel (G. Stephen Long) enters
Mar 2019 Additional LexShares funding ($350K)
May 2019 Summary judgment denied — case proceeds to trial
Aug 2019 Additional LexShares funding ($200K); 12-day jury trial begins
Sep 12, 2019 Jury verdict for UKnight — but only $500,000
Oct 2019 UKnight moves for new trial; Condit Csajaghy asserts fee lien
Dec 2019 New trial denied; prejudgment interest granted
Mar 2020 Fee lien mediation before Magistrate Judge Varholak
Apr 2020 Fee lien dispute settled; funds released
Jun 12, 2020 Distribution received — $149,937

What Went Wrong

The jury believed UKnight — but not their damages. After 12 days of testimony, the jury found that KC Supreme breached their contract. But they awarded only $500,000, a tiny fraction of the $100 million claimed. Speculative lost profits from a platform that was never rolled out to 15,000 councils didn’t resonate.

$925,000 was invested across four funding rounds. LexShares funded this case in September 2017 ($225K), April 2018 ($150K), March 2019 ($350K), and August 2019 ($200K). Even with prejudgment interest, the recovery couldn’t return full principal.

Three different law firms. UKnight went through multiple counsel changes — the original firm, Condit Csajaghy (who later asserted a fee lien), and finally G. Stephen Long who took it to trial. Turnover like this often signals problems.

The fee lien fight. After the verdict, Condit Csajaghy claimed a portion of the judgment. With $754,359 in the court registry and multiple claimants, Judge Jackson ordered mediation. This delayed distribution by months.

The “accidental overcommitment” hurt. Due to a DocuSign glitch, I accidentally invested $170,000 — making this my largest single-case exposure. When the case underperformed, it cost me more than it should have.

The Math Problem

Item Amount
Total LexShares funding (4 rounds) $925,000
Jury verdict $500,000
+ Prejudgment interest & costs ~$254,000
Court registry total $754,360
– Fee lien settlement & expenses ~($522,000)
Net to LexShares investors ~$232,000
Principal recovery rate 88%

What I Learned

Winning at trial doesn’t mean winning money. The jury agreed UKnight was wronged. But “$100 million in lost profits” is a hard sell when the platform was never rolled out. Speculative damages rarely survive jury scrutiny.

Funding escalation can backfire. Each additional funding round signaled confidence. But it also raised the breakeven point. By the time $925K was invested, even a win couldn’t cover principal.

Attorney turnover is a red flag. Three law firms in one case is unusual. When Condit Csajaghy withdrew and later asserted a fee lien, it signaled deeper problems. Watch for counsel changes.

Position sizing matters more than conviction. My accidental $170K commitment turned a portfolio annoyance into my biggest single-case loss. Never let a glitch determine your allocation.

Fraternal organizations fight hard. The Knights of Columbus — with $105B in insurance assets and reputational stakes — litigated to the end. They don’t settle when their integrity is questioned.

88% recovery is actually a good outcome. In litigation finance, many losses are total. Recovering 88 cents on the dollar from a case that “won” but underperformed beats zero.

Sources

This was my 8th LexShares investment and my largest position. The jury believed UKnight, but not their damages. After 2.8 years, I got back 88% of my money. It’s not a win, but it’s not the disaster it could have been.