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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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UK’s Global Rivals Capitalize as PACCAR Funding Reform Stalls

By John Freund |

The United Kingdom's long-promised overhaul of litigation funding regulation has stalled again, and rival jurisdictions are moving to capture the investment that uncertainty is pushing offshore. Nearly three years after the Supreme Court's 2023 decision in *PACCAR* rendered most litigation funding agreements unenforceable by treating them as damages-based agreements, the government has yet to deliver the corrective legislation it pledged.

As reported by The Times, the continued delay is undermining the competitiveness of England and Wales as a global hub for commercial litigation and arbitration. The Ministry of Justice announced in December 2025 that it intended to clarify that litigation funding agreements are not damages-based agreements, with legislation to follow "when parliamentary time allows." But the 2026 King's Speech omitted any litigation funding bill from the legislative programme, leaving funders and claimants without the statutory certainty they had been promised.

Industry participants have voiced deep disappointment, warning that the absence of reform creates an opening for offshore centers that have already implemented clearer rules on funder involvement. While those jurisdictions compete for capital, the UK continues to develop its framework largely through case law, with little appetite for comprehensive statutory change.

The practical effect, observers note, is that funders weighing where to deploy capital may increasingly look beyond London. For a market that has long marketed itself as the world's premier venue for high-value disputes, the prolonged *PACCAR* limbo carries real economic stakes.

Commercial

New York Ruling Opens Litigation Funding to Discovery in Fraud-Tainted Injury Suits

By John Freund |

A New York appellate ruling, paired with the state's newly enacted consumer litigation funding law, is giving defendants fresh tools to scrutinize the financing behind personal-injury claims they suspect are fraudulent. Together, the developments mark a notable shift toward transparency in a market that has historically operated outside the view of courts and opposing parties.

As reported by Law360, the Appellate Division, First Department, held in *Lituma v. Liberty Coca-Cola Beverages LLC* that defendants may obtain discovery into a plaintiff's third-party litigation funding where they present evidence suggesting the underlying claims arose from systemic fraud. The November 2025 decision was the first time the court affirmed an order compelling a personal-injury plaintiff to produce funding-related discovery, vacating the note of issue to allow further inquiry.

The ruling lands alongside New York's Consumer Litigation Funding Act, signed by Governor Kathy Hochul on December 19, 2025, and effective 180 days later. The law caps a funder's recovery at 25% of a case's gross proceeds, requires plain disclosure of all charges and cumulative repayment amounts, and gives consumers a 10-business-day right to cancel without penalty. Attorneys are barred from accepting referral fees or holding financial interests in funding companies.

Notably, the statute stops short of mandating disclosure of funding arrangements during active litigation. For now, defendants seeking to expose questionable financing must rely on rulings like *Lituma* to pry those agreements into the open.

Commercial

Burford Capital Asks Supreme Court to Reverse Third Circuit Arbitration Ruling

By John Freund |

Burford Capital has urged the U.S. Supreme Court to overturn a Third Circuit decision that dismissed, on jurisdictional grounds, the litigation funder's bid to arbitrate a dispute tied to German antitrust litigation. Burford contends the appeals court committed what it called a "fundamental error" in concluding that federal courts lacked authority over the matter.

As reported by Law360, Burford told the justices on June 16 that the Court's own decision earlier this year in Jules v. Andre Balazs Properties is reason enough to undo the Third Circuit's ruling. In Jules, the Court held that a federal court which compels arbitration of federal claims under Section 4 of the Federal Arbitration Act retains subject-matter jurisdiction to confirm or vacate the resulting award, even without an independent basis for federal jurisdiction over the post-award proceeding.

Burford argues that principle squarely governs its case, and that the appeals court's contrary conclusion cannot stand in light of the new precedent. The funder is asking the justices to take up the matter and correct what it describes as a clear jurisdictional misstep.

The stakes extend beyond a single dispute. For funders, the ability to confirm and enforce arbitral awards in federal court is central to monetizing cross-border claims, and a jurisdictional dead-end at the enforcement stage raises both cost and risk. A decision to hear the case could bring welcome clarity for funders pursuing international, arbitration-related recoveries.