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Key Takeaways from LFJ’s Special Digital Event “Litigation Finance: Investor Perspectives”

April 8, 2024

Key Takeaways from LFJ’s Special Digital Event “Litigation Finance: Investor Perspectives”

On Thursday April 4th, 2024, Litigation Finance Journal hosted a special digital event titled “Litigation Finance: Investor Perspectives.” The panel discussion featured Bobby Curtis (BC), Principal at Cloverlay, Cesar Bello (CB), Partner at Corbin Capital, and Zachary Krug (ZK), Managing Director at NorthWall Capital. The event was moderated by Ed Truant, Founder of Slingshot Capital. Below are some key takeaways from the event: If you were to pinpoint some factors that you pay particular attention to when analyzing managers & their track records, what would those be? BC: It’s a similar setup to any strategy that you’re looking at–you want to slice and dice a track record as much as possible, to try to get to the answer of what’s driving returns. Within litigation finance, that could be what sub-sectors are they focused on, is it intellectual property? Is it ex-US deals? What’s the sourcing been? How has deployment been historically relative to the capital they’re looking to raise now? It’s an industry that is starting to become data rich. You have publicly-listed companies that have some pretty interesting track record that’s available. I’m constantly consuming track record data and we’re building our internal database to be able to comp against. Within PE broadly, a lot of people are talking about DPI is the new IRR, and I think that’s particularly true in litigation finance. If I’m opening a new investment with a fund I’ve never partnered with before, my eyes are going to ‘how long have they been at it, and what’s the realization activity?’ There is also a qualitative aspect to this–has the team been together for a while, do they have a nice mix of legal acumen, investment and structuring acumen, what’s the overall firm look like? It’s a little bit art and science, but not too dissimilar from any track record analysis with alternative investment opportunities. Zach, you’ve got a bit more of a credit-focus. What are you looking for in your opportunities?  ZK: We want to understand where the realizations are coming from. So if I’m looking at a track record, I want to understand if these realizations are coming through settlements or late-stage trial events. From my perspective as an investor, I’d be more attracted to those late-stage settlements, even if the returns were a little bit lower than a track record that had several large trial wins. And I say that because when you’re looking at the types of cases that you’ll be investing in, you want to invest in cases that will resolve before trial and get away from that binary risk. You want cases that have good merit, make economic sense, and have alignment between claimant and law firm, and ultimately are settleable by defendants. That type of track record is much more replicable than if you have a few outsized trial wins. What are things that managers generally do particularly well in this asset class, and particularly poorly?  CB: I don’t want to paint with a broad brush here. With managers it can be idiosyncratic, but there can be structuring mistakes – not getting paid for extension risks, not putting in IRR provisions. Portfolio construction mistakes like not deploying enough and being undercommitted, which is a killer. Conversely, on the good side, we’ve seen a ton of activity around insurance, which seems to be a bigger part of the landscape. We also welcome risk management optionality with secondaries. Some folks are clearly skating to where the puck is going and doing more innovative things, so it really depends who you’re dealing with. But on the fundamental underwriting, you rarely see a consistent train wreck – it’s more on the other stuff where people get tripped up. How do you approach valuation of litigation finance portfolios? What I’m more specifically interested in is (i) do you rely on manager portfolio valuations, (ii) do you apply rules of thumb to determine valuations, (iii) do you focus your diligence efforts on a few meaningful cases or review & value the entire portfolio, and (iv) do you use third parties to assist in valuations?  CB: If you’re in a fund, you’re relying on the manager’s marks. What we do is not that – we own the assets directly or make co-investments. We see a lot of people approach this differently. Sometimes we have the same underlying exposure as partners and they’re marking it differently. Not to say that one party is rational and the other is not, it’s just hard to do. So this is one we struggle with. I don’t love mark-to-motion. I know there’s a tug toward trying to fair value things more, but as we’ve experienced in the venture space, you can put a lot of valuations in DPI, but I like to keep it at cost unless there is a material event. Check out the full 1-hour discussion here.

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Commercial

Bailey Glasser International Replaces Pogust Goodhead on the Mariana Dam Litigation

Bailey Glasser International has taken over conduct of the multi-billion pound group claim against BHP arising from the 2015 collapse of the Fundão Dam in Mariana, Brazil, replacing Pogust Goodhead as solicitors for the claimants.

According to a press release from Bailey Glasser International, the firm was appointed in *Município de Mariana and others v BHP Group (UK) Ltd and another* following a decision of the Client Committee dated 28 August 2026, with Hausfeld & Co LLP supporting the conduct of the litigation in London. The vote to terminate Pogust Goodhead's retainer and appoint BGI was unanimous among the Committee's members.

The release states that the decision followed "confidential matters identified by the Client Committee about Pogust Goodhead's conduct of the case," which were "repeatedly communicated to Pogust Goodhead, including by way of a formal notice."

The claim is one of the largest group actions in English legal history, brought for more than 420,000 Brazilian claimants. Liability was established at the Stage One trial, and after the Court of Appeal refused BHP permission to appeal in May 2026 it can no longer be challenged. The Stage Two trial on causation and quantum is listed from April 2027 to March 2028.

Faranak Ghajavand, Partner and Head of Commercial Disputes at BGI, said the firm's priority is "continuity for the claimants, with the case proceeding without disruption," adding that senior members of the existing counsel team will return to the matter.

The terms of the claimants' representation are unchanged, with fees payable only if the case succeeds. BGI is the first international venture of US firm Bailey & Glasser LLP, and is a trading name of Edward McCourt & Company LLP.

Commercial

GLS Capital’s Biehl Proposes Baseball Arbitration to Curb Discovery Costs

A principal at commercial litigation funder GLS Capital has argued that courts should resolve document discovery disputes using baseball arbitration, the winner-takes-all format used to settle professional baseball salary disputes, as a way of containing a cost that routinely strains case budgets.

As reported by Bloomberg Law, Mick Biehl explains that in baseball arbitration each side submits a proposed figure and the arbitrator selects one of them outright, without splitting the difference. Because the decision-maker picks the more reasonable of the two positions, both parties have an incentive to moderate their submissions rather than anchor at extremes.

Applied to discovery, the mechanism would work the same way. Rather than conventional motion practice, each side would submit its last written position on the disputed request or response, and the court would adopt one party's position in full instead of crafting a middle path.

Biehl, a former litigator, identifies three ways the format would reduce spend. Parties would draft narrower initial requests and avoid boilerplate objections, knowing aggressive positions are unlikely to be selected. Negotiations starting from more reasonable positions would be likelier to resolve without judicial involvement. And the all-or-nothing risk would deter marginal motions to compel.

The savings, on his account, come less from the hearings themselves than from what precedes them: the rounds of meet-and-confer conferences, emails, amended requests and discovery hearings that accumulate before a dispute reaches a judge.

Commercial

UK Consultation Would Let Funders Be Paid at Judgment Rather Than Wait for Distribution

Among the proposals in the UK government's overhaul of the opt-out collective actions regime is a change to when litigation funders actually get paid, a mechanic that has drawn less attention than the certification debate but bears directly on funder economics.

As reported by Legal Futures, the Department for Business and Trade's consultation would introduce a presumption that funders receive their return "at the point of a damages award being ordered or a settlement sum approved, without needing to wait for the outcome of distribution." Payment would follow the waterfall arrangements set out in the litigation funding agreement, with the Competition Appeal Tribunal retaining discretion where that would risk "an unjust outcome."

The consultation, "Swifter and Simpler Competition Redress, Regulatory Appeals, and Competition Enforcement," was published on 21 July 2026. It would also require the CAT to indicate the "reasonableness in relation to the return and order of payment at the point of certification," giving funders an earlier read on whether their commercial terms will survive.

Alongside that, the government proposes lifting the ban on damages-based agreements in opt-out proceedings. It points to Victoria, Australia, where contingency fees were introduced in 2020, as evidence that "funding rates have decreased and claimants have received superior returns."

The counterweight is a tougher certification test, under which the CAT would assess the "absolute suitability" of a claim for collective proceedings and give greater weight to case costs measured against the benefits likely to reach the class.