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Highlights from the 6th Annual LF Dealmakers Conference

October 5, 2023

Highlights from the 6th Annual LF Dealmakers Conference

From September 26th-28th, LF Dealmakers hosted its sixth annual event in New York City. The three-day conference kicked off with a workshop on navigating the Mass Torts landscape, and an opening reception at the James Hotel. Days two and three featured panel discussions and networking opportunities between key stakeholders in the litigation finance space. Wendy Chou, founder of LF Dealmakers, was extremely pleased with the outcome of the event: “For six consecutive years, LF Dealmakers has sold out, a testament to the growing interest and importance of litigation finance in today’s legal landscape. We are immensely proud to have created a platform where the best minds in the litigation finance and legal sectors can come together for powerful connections and productive discussions.” Day two began with a pair of panels on the overall state of the industry and an insider’s approach to getting the best deal. The latter included a panel of experts, including Fred Fabricant, Managing Partner of Fabricant LLP, Molly Pease, Managing Director of Curiam Capital, and Boris Ziser, Partner at Schulte Roth and Zabel. The discussion revolved around the following topics:
  • Getting up to speed on funding & insurance products
  • How to fast track diligence and deal with exclusivity
  • Negotiating key terms and spotting red flags
  • Benchmarking numbers & making the waterfall work for you
One interesting point arose on the issue of judgement preservation in the IP space, where Fred Fabricant explained that he hasn’t seen a lot of insurance products in the pre-judgement section. “There are too many uncertainties, and it is very hard to assess the risk in this phase of the case.”  Fabricant is looking forward to insurance products in this phase. “In post-judgement, much easier for insurance to assess the risk, because you’ve eliminated lots of uncertainties.” Click here for the full recap of this panel discussion. The featured panel of Day 2 was titled: “The Great Debate: Trust and Transparency in Litigation Finance.” The panel consisted of Nathan Morris, SVP of Legal Reform Advocacy at the U.S. Chamber of Legal Reform, Charles Schmerler, Head of Litigation Finance at Pretium Partners, and Maya Steinitz, Professor of Law at Boston University. The panel was moderated by Michael Kelley, Partner at Parker Poe. This unique panel was structured as a pair of debates (back-to-back), followed by an open forum involving panelists and audience questions. On the topic of ‘what is a litigation funder?’ what perhaps seems like an obvious question sparked a passionate back-and-forth between moderator Michael Kelley and Charles Schmerler over whether entities such as legal defense funds and the Chamber of Commerce should technically be classified as litigation funders. After all, the Chamber accepts donations and then uses its capital to file claims—so would donors to the Chamber be considered litigation funders? One interesting point came from Schmerler, who noted that causal litigation is different from commercial litigation—especially from a public policy perspective. So conflating them under the semantic of ‘litigation funding’ isn’t as useful, even if they can each be technically classified as litigation funding. Click here for a full recap of this panel discussion. Day three offered four panels and three roundtable discussions, followed by a closing reception. One panel focused on opportunities in Mass Torts and ABS, and consisted of Jacob Malherbe, CEO of X Social Media, Sara Papantonio, Partner at Levin Papantonio Rafferty, and Ryan Stephen, Managing Partner of Pine Valley Capital Partners. The panel was moderated by Steve Nober, CEO of Consumer Attorney Marketing Group (CAMG). The wide-ranging discussion covered the following topics:
  • Who’s doing what in mass torts? How about funding?
  • How funders are evaluating and working with firms
  • Examples of the ABS framework in action & challenges
  • Pre- and post-settlement funding and time to disbursement
One key point for funders to consider, is that as more funders enter the mass torts space, they need to be cognizant of ethical considerations around marketing, PR, claimant communications—all aspects of a case that are unique to class actions and mass torts. Congress is now taking a look at how law firms market to prospective claimants, and should any lawsuits arise, funders will no doubt be corralled into the mix. Given that, it is critical for funders to mitigate the inherent risks by asking more questions at the outset of case diligence: What kind of advertising is being used, where are the clients coming from, how do I know that the clients are real (ad tracking)?  Funders need to be proactive about managing risk, rather than getting caught on the wrong side of a PR headache. Click here for a full recap of this panel discussion. Additional panel discussions covered topics such as successful models of cost and risk sharing, managing IP risk, and a CIO roundtable featuring investors in the space. In addition to the knowledge-sharing, attendees were able to network with founders, CEOs, C-suite officers, thought leaders and other key stakeholders in the litigation finance space. All of which makes the LF Dealmakers event the ongoing success that it is. Founder Wendy Chou spoke to the core ethos of the event: “At Dealmakers, we believe that connections and conversations are the keys to progress. At this year’s LF Dealmakers Forum, we were honored to host a number of critical conversations, including a thought-provoking debate on trust and transparency. It was a historic moment as we welcomed a representative from the US Chamber of Commerce to our stage, marking their first-ever appearance at a litigation finance industry event. It speaks to our commitment to open dialogue and advancing important discussions within our community.”

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Commercial

Litigation Financiers Organize on Capitol Hill

By John Freund |

The litigation finance industry is mobilizing its defenses after nearly facing extinction through federal legislation last year. In response to Senator Thom Tillis's surprise attempt to impose a 41% tax on litigation finance profits, two attorneys have launched the American Civil Accountability Alliance—a lobbying group dedicated to fighting back against efforts to restrict third-party funding of lawsuits.

As reported in Bloomberg Law, co-founder Erick Robinson, a Houston patent lawyer, described the industry's collective shock when the Tillis measure came within striking distance of passing as part of a major tax and spending package. The proposal ultimately failed, but the close call exposed the $16 billion industry's vulnerability to legislative ambush tactics. Robinson noted that the measure appeared with only five weeks before the final vote, giving stakeholders little time to respond before the Senate parliamentarian ultimately removed it on procedural grounds.

The new alliance represents a shift toward grassroots advocacy, focusing on bringing forward voices of individuals and small parties whose cases would have been impossible without funding. Robinson emphasized that state-level legislation now poses the greater threat, as these bills receive less media scrutiny than federal proposals while establishing precedents that can spread rapidly across jurisdictions.

The group is still forming its board and hiring lobbyists, but its founders are clear about their mission: ensuring that litigation finance isn't quietly regulated out of existence through misleading rhetoric about foreign influence or frivolous litigation—claims Robinson dismisses as disconnected from how funders actually evaluate cases for investment.

Commercial

ISO’s ‘Litigation Funding Mutual Disclosure’ May Be Unenforceable

By John Freund |

The insurance industry has introduced a new policy condition entitled "Litigation Funding Mutual Disclosure" (ISO Form CG 99 11 01 26) that may be included in liability policies starting this month. The condition allows either party to demand mutual disclosure of third-party litigation funding agreements when disputes arise over whether a claim or suit is covered by the policy. However, the condition faces significant enforceability challenges that make it largely unworkable in practice.

As reported in Omni Bridgeway, the condition is unenforceable for several key reasons. First, when an insurer denies coverage and the policyholder commences coverage litigation, the denial likely relieves the policyholder of compliance with policy conditions. Courts typically hold that insurers must demonstrate actual and substantial prejudice from a policyholder's failure to perform a condition, which would be difficult to establish when coverage has already been denied.

Additionally, the condition's requirement for policyholders to disclose funding agreements would force them to breach confidentiality provisions in those agreements, amounting to intentional interference with contractual relations. The condition is also overly broad, extending to funding agreements between attorneys and funders where the insurer has no privity. Most problematically, the "mutual" disclosure requirement lacks true mutuality since insurers rarely use litigation funding except for subrogation claims, creating a one-sided obligation that borders on bad faith.

The condition appears designed to give insurers a litigation advantage by accessing policyholders' private financial information, despite overwhelming judicial precedent that litigation finance is rarely relevant to case claims and defenses. Policyholders should reject this provision during policy renewals whenever possible.

Commercial Regulatory Issues

Valve Faces Certified UK Class Action Despite Funding Scrutiny

By John Freund |

The UK Competition Appeal Tribunal (CAT) has delivered a closely watched judgment certifying an opt-out collective proceedings order (CPO) against Valve Corporation, clearing the way for a landmark competition claim to proceed on behalf of millions of UK consumers. The decision marks another important moment in the evolution of collective actions—and their funding—in the UK.

In its judgment, the CAT approved the application brought by Vicki Shotbolt as class representative, alleging that Valve abused a dominant position in the PC video games market through its operation of the Steam platform. The claim contends that Valve imposed restrictive pricing and distribution practices that inflated prices paid by UK consumers. Valve opposed certification on multiple grounds, including challenges to the suitability of the class representative, the methodology for assessing aggregate damages, and the adequacy of the litigation funding arrangements supporting the claim.

The Tribunal rejected Valve’s objections, finding that the proposed methodology for estimating class-wide loss met the “realistic prospect” threshold required at the certification stage. While Valve criticised the expert evidence as overly theoretical and insufficiently grounded in data, the CAT reiterated that a CPO hearing is not a mini-trial, and that disputes over economic modelling are better resolved at a later merits stage.

Of particular interest to the legal funding market, the CAT also examined the funding structure underpinning the claim. Valve argued that the arrangements raised concerns around control, proportionality, and potential conflicts. The Tribunal disagreed, concluding that the funding terms were sufficiently transparent and that appropriate safeguards were in place to ensure the independence of the class representative and legal team. In doing so, the CAT reaffirmed its now-familiar approach of scrutinising funding without treating third-party finance as inherently problematic.

With certification granted, the case will now proceed as one of the largest opt-out competition claims yet to advance in the UK. For litigation funders, the ruling underscores the CAT’s continued willingness to accommodate complex funding structures in large consumer actions—while signalling that challenges to funding are unlikely to succeed absent clear evidence of abuse or impropriety.