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Key Takeaways from LFJ’s Virtual Town Hall: 2024 Recap & 2025 Outlook

By John Freund |
December 16, 2024

Key Takeaways from LFJ’s Virtual Town Hall: 2024 Recap & 2025 Outlook

Last week, LFJ hosted its final virtual town hall of the year which covered an array of key developments and trends in the legal fundng sector. Panelists included Tets Ishikawa (TI), Managing Director of LionFish, Boris Ziser (BZ), Co-Head of the Finance Group at Schulte Roth and Zabel, William Marra (WM), Director at Certum Group, and Sarah Johnson (SJ), Head of the Litigation Investing Team at The D.E. Shaw Group. The panel was moderated by Rebecca Berrebi (RB), Founder and CEO of Avenue 33, LLC.

Below are the key takeaways from the event.

RB: What are the key changes that have effected the regulatory landscape of litigation finance in 2024, and how do you think those changes have affected deals in the industry this year?

TI: There’s been quite a few symbolic moments over the past two years. There was a proposal [The Voss Report] saying that litigation funding should be regulated and there should be a cap on fees. In the UK, there as a Supreme Court decision in the case of PACCAR that considered litigation funding agreements to be damages-based agreements, basically making a lot of litigation funding agreements unenforceable. And that has triggered an industry-wide review of the litigation funding industry in the UK by the Civil Justice Council. And that is ongoing, with a report expected next year, and the government may act on those recommendations and enact legislation.

In addition to all of that, there was a report written by the European Law Institute, which is probably the most interesting thing to focus on. Rather than the usual high level narratives of what’s good and bad about litigation funding, it actually proposed principles on the back of research and feedback that it got on all sides of the argument. And it was written by some really highly regarded judges and academics. And the report was quite balanced. But what was really interesting about the report was that it set a tone for the direction of how the UK should really be thinking about litigation funding. The key themes coming out of it are that 1) there is no one size fits all solution-litigation funding has many different parts to it, and 2) that regulation is not just something one does, but there needs to be a real identifiable problem that regulation resolves, otherwise there could be a lot of adverse consequences, and that recognition is key. There is also the recognition that funders do run commercial businesses, so there has to be an economically viable solution.

RB: Deal structures evolve as time goes on, and certainly have evolved in our industry. Boris, can you speak to any particular deal structures that have become less popular this year than they were before, or have started to fall by the wayside?

BZ: I wouldn’t say any have fallen by the wayside, I think that there has been a little bit of a shift – if you go back a number of years, you would see there were more debt deals than equity deals, and that was for various reasons, some of it was preference, some was tax-driven, some was based on an analysis of whether you would be splitting legal fees and things like that – and I think over the last couple of years, you have seen more of a shift where more parties are comfortable with equity deals, particularly with the introduction of alternative business structures in Arizona and Utah. So I don’t think that anything has gone by the wayside, but there has been more comfort and more development on the equity side of the business.

RB: Will, do you see that too? What do you think about that?

WM: Yeah I think that’s right. What’s interesting is, there hasn’t been that much development on the question of which provisions in litigation funding contracts may or may not be enforceable, or the big question of tax clarity. I think Boris makes a very good point about Rule 5.4, the debate around that has largely settled. So you do see an increase around law firm deals. I think this question is also tied up with the increasing diversification of products available, and if you start too think about insurance, and insurance-backed debt, and debt plus equity in these deals, we’re seeing a lot of that. We’re also seeing an increase in acquisitions to the extent that claims are alienable and can be acquired. I think that a lot of claim holders are seeing a lot of benefits entering into those sorts of arrangements.

RB: Sarah, what deal structures do you think are growing in popularity, and why do you think that is happening?

SJ: We’ve seen something similar in the shift from debt to equity. I might characterize it though as a move away from debt to law firms, where your collateral is a lot of cases. I think we’ve seen those deals – especially the ones that happened before Covid – there were a lot of different risks that were introduced rather than just the underlying litigation. The amount of OpEx that the law firm needed to survive, and when you’re debt financing for the whole firm, it gets very complicated. So we’ve seen a shift away more to – I won’t say single cases – but perhaps smaller portfolios with a law firm, so you can target your exposure and share more of the risk and OpEx with the law firms themselves.

We’ve also seen a bifurcation in terms of the size of deals. We’re seeing some more very large deals, like $100MM+ deals, and also small single cases, than perhaps we saw in previous years. We’re just seeing a lot of one-off single case deals where funders can share the risk, vs. entire portfolio monetizations.

To view the entire discussion, join the event page on LinkedIn (you must register for the event to view).

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John Freund

John Freund

Commercial

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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.

Commercial

Court of Appeal’s First UPC Panel Draws Attention from Litigation Funders

By John Freund |

Litigation insurers and third-party funders across Europe are closely monitoring the first case heard by a newly constituted panel of the Unified Patent Court’s Court of Appeal, as the matter could offer early signals on how appellate judges will approach procedural and cost-related issues in the UPC system. The case, Syntorr v. Arthrex, is the inaugural appeal to be considered by the third Court of Appeal panel, making it an important early data point for stakeholders assessing litigation risk in the young court.

An article in JUVE Patent explains that the appeal arises from a dispute over European patent rights and follows contested proceedings at the Court of First Instance. While the substantive patent issues are central to the case, the appeal has attracted particular interest from insurers and funders because of its potential implications for security for costs and the treatment of insurance arrangements in UPC litigation. These questions are of direct relevance to how litigation risk is underwritten and financed, especially in cross-border patent disputes where exposure can be significant.

The establishment of additional appeal panels is itself a sign of the UPC’s increasing caseload, and early rulings from these panels will play a key role in shaping expectations around procedural consistency and predictability. For funders, clarity on whether and how courts scrutinise insurance coverage, funding structures, and security applications is critical when deciding whether to deploy capital into UPC matters. Insurers, meanwhile, are watching closely to see how appellate judges view policy wording, anti-avoidance provisions, and the extent to which coverage can be relied upon to satisfy cost concerns raised by opposing parties.

Although no substantive appellate guidance has yet emerged from this first hearing, the case underscores how closely financial stakeholders are tracking the UPC’s evolution. Even procedural decisions at the appellate level can have downstream effects on pricing, structuring, and appetite for funding complex patent litigation.

For the legal funding industry, the UPC Court of Appeal’s early jurisprudence may soon become a reference point for risk assessment, influencing both underwriting practices and investment strategies in European IP disputes.

Commercial

UK Government Signals Funding Crackdown in Claims Sector Reform

By John Freund |

The UK government has signalled a renewed regulatory focus on the claims management and litigation funding sectors, as part of a broader effort to curb what it characterises as excessive or speculative claims activity. The move forms part of a wider review of the consumer redress and claims ecosystem, with third-party funding increasingly drawn into policy discussions around cost, transparency, and accountability.

An article in Solicitor News reports that ministers are examining whether litigation funding and related financial arrangements are contributing to an imbalance in the claims market, particularly in mass claims and collective redress actions. While litigation funding has historically operated outside the scope of formal regulation in England and Wales, policymakers are now considering whether additional oversight is required to protect consumers and defendants alike. This includes potential scrutiny of funding agreements, funder returns, and the role of intermediaries operating between claimants, law firms, and capital providers.

The renewed attention comes amid political pressure to rein in what critics describe as a growing “claims culture,” with the government keen to demonstrate action ahead of future legislative reforms. Industry stakeholders have cautioned, however, that overly restrictive measures could limit access to justice, particularly in complex or high-cost litigation where claimants would otherwise be unable to pursue meritorious claims. Litigation funders have long argued that their capital plays a stabilising role by absorbing risk and enabling legal representation in cases involving significant power imbalances.

While no formal proposals have yet been published, the article suggests that funding models linked to claims management companies may face particular scrutiny, especially where aggressive marketing or fee structures are perceived to undermine consumer interests. Any regulatory changes would likely build on existing reforms affecting claims management firms and contingency-style legal services.