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Key Takeaways from LFJs Special Digital Event: Mass Torts and Litigation Funding 

March 28, 2023

Key Takeaways from LFJs Special Digital Event: Mass Torts and Litigation Funding 

On Thursday March 23rd, Litigation Finance Journal hosted a special digital event: Mass Torts and Litigation Funding. Panelists included Michael Rozen (MR), Founder and Managing Partner at TRGP Investment Partners, James Romeo (JR), Managing Partner at Greenpoint Capital, Brian Roth (BR), Chief Executive Officer and Chief Investment Officer of Rocade Capital, and Michael Guzman (MG), Partner at Kellogg, Hansen, Todd, Figel and Frederick. The discussion was moderated by Ed Truant (ET), Founder of Slingshot Capital.

The panel discussion spanned a range of topics, including claims origination, financing/underwriting, plaintiff and defense-side strategies and tactics, the impact of ABS regulation and much more. 

Below are some key takeaways: 

ET: How does the industry originate claims and identify and validate claimants? And how has origination industry evolved over the years from the time of mass TV advertising to the current omni-channel world of advertising? 

MG: First, all of the old traditional methods still work.  Networking, late night TV, radio, advertising – all of that still works. But what I am seeing is a number of firms have either affiliated with or own social media marketers, who are using social media in targeted ways. It’s a lot cheaper depending on how you use it, and it can be a lot faster. So people are using the old techniques, plus a number of new ones.  I’ve had some really good success with that, because you’re not just blanketing the airwaves, the people that you get back are much more focused and more interested in what it is you’re trying to recruit them for. 

JR: I think it’s helpful to go back and think about the history of legal advertising, which started in the late 70’s when two lawyers started advertising, it led to some fighting in the state bar, but ultimately it was decided that legal ads are a form of free speech and that they provide consumers valuable information. 

We’ve now seen this huge evolution around what’s possible. There is very targeted social media and paid search advertising that is driven by analytics. At Triton we’re doing a lot of this, we’ve developed our own in-house marketing team, and we’re using things like intake forms and chatbots to help pre-screen potential claimants. We’re using different identify verification tools and we’re experimenting with different medical retrieval tools to help with the intake of potential claimants. 

ET: Describe the ‘fall-out rate’ of claimants and what are typical fall-out rates evidenced in the market and reasons therefor? Has there been an improvement in fall-out rates as a result of enhanced data analytics and technological sophistication?

MR: Access to justice is always a goal for those who think that corporate America has long gotten away with unequal justice because they have a lot of money and the individual claimants don’t. So having better ways of reaching people who may have been impacted by a drug that’s been pulled from the market or a product that didn’t work as advertised is obviously a good thing. The flip side is, in tougher economic times, you see higher claim rates from people who may not be good claimants, because there is an expectation there may be some quick money to be obtained. 

So I think the fall-out rate is really a function of whether or not you’re in the right economic time with the right kind of claim. Camp Lejeune is an example of that. 3M earplugs is an example of that. We’re talking about hundreds of thousands of claimants, whereas in an ordinary mass tort you may have tens of thousands of claimants. And this is something defendants don’t like, and they push back on litigation finance in particular, and argue that somehow specious claims are being promoted. What is really at the base of that is a desire to create an unequal footing between the haves and the have nots. If you are on the have side, it is obviously to your benefit to have either lower claim rates, fewer number of plaintiffs, and/or a higher fallout rate where you can allege later on that these were not valid claimants, that they were somehow propped by third party financing. 

Nobody who has or will speak on this panel will tell you that investing in non-meritorious claims is a good thing. Yet what the other side of this argument will claim is that somehow the fall-out rate as an individual metric is indicative of whether or not there are valid claims in a particular litigation. I would say you to it is irrelevant—the more claims you have in a litigation, the higher the fall our rate is going to be. 

ET: Given the high fall-out rates and the potential for false claimants, is this sector ripe for the application of blockchain to minimize duplication of claimants and decrease fall-out rates as well as tracking the transactions and pay-outs? 

 BR: Fall out impacts the litigation strategy and settlement strategy. When a litigation starts, nobody really knows what will be a settle-able case, so there’s always going to be some level of origination that’s not going to result in a paid claim at the end of the day. I do think the technology will help with some areas like de-duplication and dual representation, whether it’s blockchain or other smart contracts. We’re seeing billions of dollars transact in the space and there’s very little transparency across the different players in the space. I see that changing over time, and that will impact the fall out rates as well. 

ET: What is the nature of the prototypical plaintiff litigation firm? Why do so called “White Shoe” law firms not get involved in mass tort plaintiff litigation work? 

MG: When I started my career, there was this perception that there were defense-side firms and plaintiff-side firms. Lines were pretty well drawn, people crossed over from time to time. But for the most part, if you did plaintiff’s work you did plaintiff’s work, and you didn’t go back and forth. My firm and lots of others defy that model, and at this point, I’m not sure there is a prototypical plaintiff’s firm. My firm is a litigation boutique, and very early on we realized some of our clients wanted us to be plaintiffs for them, and it was enormously challenging and lucrative to play that role for them.

I think why so many of the so-called ‘white shoe’ law firms have found it difficult to be a plaintiff-side firm is because they have corporate departments or longstanding institutional clients, and some of those clients just don’t like the idea that one of those partner is representing them, but at the same time someone else is off pursuing a mass action or class action, so it gets to be an institutional conflict—it’s hard to manage from a client standpoint, and we’ve dealt with that over the years. 

ET: How has the US mass tort industry evolved in terms of the size of the industry, the quantum of cases and the number of claimants over the years? 

JR: If you look at the federal docket, it took something like 59 years to reach the first 250,000 cases in MDLs, and over the subsequent seven years, from 2007-2014, we hit a total of half a million cases, and then by 2021, we topped 1 million cases. So that’s an additional 500,000 case jump from 2014 to 2021. And there’s currently something like 360,000 cases that are still pending in the federal docket. So there’s definitely been an acceleration of cases, and that’s continued. And I don’t see that sopping any time soon. 

ET: Can you describe the various ways in which finance intersects with the mass tort industry?

BR: Financing is an ever changing landscape, but at the front end, you’re seeing it for case origination, a lot of times it’s done on a non-recourse basis. We see a lot of law firm loans, where you’re financing the whole process from origination to settlement. We’re also seeing capital enter for service providers in the space – lead origination or working up cases, ordering records on a contingent basis. We’re also starting to see some post-settlement finance develop, where firms are basically able to factor their claims. 

As we think about the space, we expect this to continue to evolve and develop, and this matures as an asset class, and we develop more data and track records, you’ll see more segmentation I think. But that should translate into more flexible options for the firm. The space currently is shaped by the rules around fee sharing and the ethical rules for law firms which prevent non-lawyers from having ownership in the firm. Obviously, Arizona and other jurisdictions are changing that, so the landscape of how finance intersects with firms is changing as well. 

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Pogust Goodhead Seeks Interim Costs Payment

By John Freund |

Pogust Goodhead, the UK law firm leading one of the largest group actions ever brought in the English courts, is seeking an interim costs payment of £113.5 million in the litigation arising from the 2015 Mariana dam collapse in Brazil.

According to an article in Law Gazette, the application forms part of a much larger costs claim that could ultimately reach approximately £189 million. It follows a recent High Court ruling that allowed the claims against BHP to proceed, moving the litigation into its next procedural phase. The case involves allegations connected to the catastrophic failure of the Fundão tailings dam, which resulted in 19 deaths and widespread environmental and economic damage across affected Brazilian communities.

Pogust Goodhead argues that an interim costs award is justified given the scale of the proceedings and the substantial expenditure already incurred. The firm has highlighted the significant resources required to manage a case of this size, including claimant coordination, expert evidence, document review, and litigation infrastructure. With hundreds of thousands of claimants involved, the firm maintains that early recovery of a portion of its costs is both reasonable and proportionate.

BHP has pushed back against the application, disputing both the timing and the magnitude of the costs being sought. The mining company has argued that many of the claimed expenses are excessive and that a full assessment should only take place once the litigation has concluded and overall success can be properly evaluated.

The costs dispute underscores the financial pressures inherent in mega claims litigation, particularly where cases are run on a conditional or funded basis and require sustained upfront investment over many years.

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Litigation Capital Management Faces AUD 12.9m Exposure After Class Action Defeat

By John Freund |

Litigation Capital Management has disclosed a significant adverse costs exposure following the unsuccessful conclusion of a funded Australian class action, underscoring the downside risk that even established funders face in large-scale proceedings.

An article in Sharecast reports that the AIM-listed funder revealed that the Federal Court of Australia has now quantified costs in a Queensland-based class action brought against state-owned energy companies Stanwell Corporation and CS Energy. The court ordered costs of AUD 16.2 million in favour of each respondent, resulting in a total adverse costs award of AUD 32.4 million. The underlying claim was dismissed earlier, and the costs decision represents the next major financial consequence of that loss.

While LCM had after-the-event insurance in place to mitigate adverse costs exposure, that coverage has now been exhausted. After insurance, an uninsured balance of AUD 19.9 million remains. LCM expects to contribute AUD 12.9 million of that amount directly, with the remaining balance to be met by investors in its Fund I vehicle.

The company has emphasized that the costs awarded were standard party-and-party costs, not indemnity costs, and stated that the outcome does not reflect adversely on the merits of the claim or the conduct of the proceedings. Nonetheless, the market reacted sharply, with LCM’s share price falling by more than 14% following the announcement.

LCM also confirmed that it has already lodged an appeal against the substantive judgment, with a two-week hearing scheduled to begin in early March. In parallel, the funder is considering whether to challenge the costs quantification itself, alongside an appeal being pursued by the claimant. The company noted that discussions with its principal lender are ongoing and that its previously announced strategic review remains active, with further updates expected in the coming months.

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Avoiding Pitfalls as Litigation Finance Takes Off

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The litigation finance market is poised for significant activity in 2026 after a period of uncertainty in 2025. A recent JD Supra analysis outlines key challenges that can derail deals in this evolving space and offers guidance on how industry participants can navigate them effectively.

The article explains that litigation finance sits at the intersection of law and finance and presents unique deal complexities that differ from other private credit or investment structures. While these transactions can deliver attractive returns for capital providers, they also carry risks that often cause deals to collapse if not properly managed.

A central theme in the analysis is that many deals fail for three primary reasons: a lack of trust between the parties, misunderstandings around deal terms, and the impact of time. Term sheets typically outline economic and non-economic terms but may omit finer details, leading to confusion if not addressed early. As the diligence and documentation process unfolds, delays and surprises can erode confidence and derail negotiations.

To counter these pitfalls, the piece stresses the importance of building trust from the outset. Transparent communication and good-faith behavior by both the financed party and the funder help foster long-term goodwill. The financed party is encouraged to disclose known weaknesses in the claim early, while funders are urged to present clear economic models and highlight potential sticking points so that expectations align.

Another key recommendation is ensuring all parties fully understand deal terms. Because litigation funding recipients may not regularly engage in such transactions, well-developed term sheets and upfront discussions about obligations like reporting, reimbursements, and cooperation in the underlying litigation can prevent later misunderstandings.

The analysis also underscores that time kills deals. Prolonged negotiations or sluggish responses during diligence can sap momentum and lead parties to lose interest. Setting realistic timelines and communicating clearly about responsibilities and deadlines can keep transactions on track.