Judge Shira A. Scheindlin Delivers the Keynote Address at LF Dealmakers
Public
September 29, 2021
Judge Shira A. Scheindlin Delivers the Keynote Address at LF Dealmakers
The LF Dealmakers conference kicked off this morning with a keynote address from Judge Shira A. Scheindlin. The address was titled “Litigation Finance: Survey of a Shifting Landscape,” and covered four main issues: ethics, fee sharing, disclosure regulations and privileged communications between funder and attorneys. Judge Scheindlin began on the topic of ethical issues, the three most common of which boil down to competence, confidentiality and truthfulness. She explained the common pitfalls that funders need to be aware of, including how different states treat confidentiality issues, for example. Scheindlin asserted that the ethical concerns most have about the industry do not pose any serious threat to its future growth potential. In terms of fee sharing, Scheindlin pointed out how bar associations play a critical role in drafting and interpreting codes of conduct, which are then adopted by the states. She noted the New York bar’s opinion on Rule 5.4, which found that litigation funding violates the fee sharing restriction. This was a controversial opinion, for obvious reasons. In fact, there was such an outcry, that the city bar created a working group around litigation funding, to make recommendations around ethics and principles. The working group addressed the realities of litigation funding, and whether disclosure of funding should be required in litigation and arbitration. In the end, the working group offered two proposals. The first being that the funder can share fees with the client, provided that the funder remains independent and does not influence case decisions by participating in the claim. The second being that the funder can participate in the claim, if it benefits the client. And the client can provide informed consent to disclose confidential information to the funder (Scheindlin noted that she favors the second proposal). Neither proposal has yet been adopted, though Judge Scheindlin believes Rule 5.4 regarding fee sharing will be modified in NY, based on these recommendations. It remains to be seen which proposal will win out. On the issue of control, which is related to fee sharing, Scheindlin explained that many funding agreements give the funder the right to approve the selection of counsel. Some may view this as control, but really the funders just want to ensure the counsel is adequate to handle the claim. In terms of disclosure, Scheindlin pointed out how 12 states have passed legislation on litigation funding, with another 11 proposing legislation. Most involve consumer funding. Only Wisconsin specifically includes financing of commercial claims. So it’s clear the focus is on consumer cases, but no one knows where this will go. There is a robust debate on the subject of disclosure, with many industry opponents pushing to reveal the identity of the funder, as well as the terms of the funding agreement. There is a lot of disagreement on the various avenues that can be taken regarding the issue of disclosure, so it will be interesting to see how this issue will develop. On privilege, Scheindlin noted the common interest exception in regard to sharing privileged information, and how courts are split as to whether this applies to litigation funders. Is a shared commercial interest the same as a common legal interest? This is the question at hand. However, most courts have found that privileged documents are protected by work product, where a funder is concerned. Ultimately, though, an NDA or confidentiality agreement is likely needed here to ensure that work product applies. So while there are plenty of minefields, in terms of issues that could upend TPLF, Judge Scheindlin feels confident that funding will prevail in the end. To quote Judge Scheindlin: “There are always those who will oppose new ways of doing things. Those who seek to restrict TPLF… are in my opinion, merely afraid of the level playing field that such funding creates. I don’t think they will succeed. TPLF is now an accepted part of the legal landscape, and is here to stay.”
The High Court has rejected mining giant BHP’s application for an anti-suit injunction (ASI) that sought to prevent Pogust Goodhead from pursuing lawful evidence-gathering measures in the United States against the former president of the Brazilian redress scheme foundation set up after the Mariana dam collapse.
The Court found no basis to characterise Pogust Goodhead’s use of Section 1782 to seek a deposition of Mr André de Freitas, former CEO of the Renova Foundation[i] as vexatious, oppressive, or unconscionable, as argued by BHP.
In November 2024, Pogust Goodhead filed the §1782 application in the District Court of Arkansas seeking limited testimony from Mr de Freitas in relation to Pogust Goodhead’s claim arguing that BHP unlawfully interfered with Pogust Goodhead’s retainer rights and the compensation due to its Brazilian clients. The U.S. court granted the subpoenas in January 2025.
Since then, BHP has sought to block the deposition by filing motions to quash the subpoenas in April 2025 and seeking an ASI in the High Court. A ruling from the Arkansas court is pending.
In Wednesday’s judgment, Mr Justice Waksman rejected BHP’s request for an injunction that would have halted the U.S. evidence-gathering process, finding no basis to prevent Pogust Goodhead from continuing with its §1782 discovery efforts.
Justice Waksman wrote in his decision: “I agree with PG that the depositions serve a distinct and legitimate purpose, being to better understand Renova’s role in relation to the various settlements and their form.”
Alicia Alinia, CEO at Pogust Goodhead commented: “We welcome the Court’s clear judgment. BHP has repeatedly attempted to obstruct legitimate investigations into its conduct. Mr de Freitas’s testimony is central to understanding how our clients’ rights may have been undermined. It is essential that he gives evidence. Only by hearing directly from those involved can our clients’ rights be properly safeguarded and the full truth established.”
Key Findings
The court held that English courts do not control how parties lawfully obtain evidence abroad, and that the U.S. court is the appropriate authority to decide the scope and propriety of discovery sought under Section 1782.
The Court also highlighted BHP’s significant delay in bringing the ASI application — nearly four months after learning of the U.S. subpoenas — which weighed against granting any injunctive relief.
Any concerns about the scope of the subpoenas, alleged misstatements, or burden on the witness are squarely matters for the U.S. District Court, which has already engaged with the issues in detailed hearings.
As a result, BHP cannot use the English courts to derail the ongoing U.S. process. The parties now await the District Court of Arkansas’s decision on whether BHP’s motions to quash the subpoenas will succeed.
The following article was contributed by Dr. Avv. Gian Marco Solas[1], founder of Sustainab-Law and author of Third Party Funding, New Technologies and the Interdisciplinary Methodology as Global Competition Litigation Driving Forces (Global Competition Litigation Review, 1/25). Dr. Solas is also the author of Third Party Funding, Law Economics an Policy (Cambridge Press).
There is an inaccurate and counterproductive belief in the litigation funding market, that the asset class would be uncorrelated from the global economy. That was in fact due to a much bigger scientific legal problem, that the law itself was not considered as physical factor of correlation, as instrument to measure and determine cause and effects of economic events in legal systems.
This problem has been solved, in both theoretical and mathematical terms, and in fact – thanks to technology available to date such as AI and blockchain – it looks much better for litig … ehm … legal third-party funders.
AI allows to detect and file claims that would otherwise not have been viable / brought forward, such as unlocked competition law claims[2], which represent the largest chunk of the market for competition claims. See funding proposal.
Human law as factor of correlation allows to calculate the unexpressed value of the global economy. Everything that, in fact, can be unlocked with litigation, allowing then a public-private IPO type of process to optimize legal systems[3].
Physical modeling of the law also allows to transform debt / liabilities into new investments, thus allowing to settle litigation earlier and with less legal costs, leaving more room to creativity to optimize the investments[4].
While it may be true that the outcome of one single judgement does not depend on the fluctuations of the financial economy, legal reality certainly determines the ups and downs of the litigation funding (and any other) market. Otherwise, we could not explain the rise of litigation funding in the post-financial crisis for instance, or the shockwaves propagated by judgements like PACCAR.
The flip side is that understanding and measuring legal reality, as well as leveraging on modern technologies and innovative legal instruments, the market for legal claims and legal assets is much bigger and sizeable than with the standard litigation financial model.
In order to test Litigation Funding 3.0, I am presenting the following proposal:
10 MILLION EUR in the form of a series A venture capital type of investment to cover one test case's litigation costs, tech, book-building and expert costs aimed at targeting three already identified global or multi-jurisdictional mass anticompetitive claims in the scale of multi-billion dollars, whose details will be provided upon request.
Funder(s) get:
Percentage of claims' return as per agreement with parties involved;
Property of the AI / blockchain algorithm;
License of TPF 3.0.
The funding does not cover: additional legal / litigation / expert / etc. costs.
AI: Artificial Intelligence ML: Machine Learning TPF: Third Party Funding
GENERAL SCENARIO FOR COMPETITION LAW DAMAGE CLAIMS – IN SHORT
Competition authorities around the globe are rapidly developing AI / ML tools to scan markets / economy and prosecute anti-competitive practices. This suggests a steep increase in competition claims in the coming years, in both volume and scope. AI also reduces the costs and time of litigation and ML allows to better assess its risks and merit, prompting for a re-modelling of the TPF economic model in competition claims considering empirical evidence of the first wave(s) of funded litigation.
Below is the abstract and table of contents from my research:
Abstract
This article aims at fostering competition litigation and market analysis by integrating concepts borrowed from physics science from an historical legal and evolutionary perspective, taking the third party funding (TPF) market as benchmark. To do so, it first combines historical legal data and trends related to the legal and litigation markets, discussing three macro historical trends or “states”: Industrial revolution(s) and globalisation; enlargement of the legal world; digital revolution and liberalisation of the legal profession. It then proposes the multidisciplinary methodology to assess the market for TPF: mainstream economic models, historical “cyclical” data and concepts borrowed from physics, particularly from mechanics of fluids and thermodynamics. On this basis, it discusses the potential implication of such methodology on the global competition litigation practice, for instance in market analysis and damage theory, also by considering the impact of modern technologies. The article concludes that physics models and the interdisciplinary methodology seem to add value to market assessment and considers whether there should be a case for a wider adoption in (competition) litigation and asset management practices.
-- 1. Italian / EU qualified lawyer and legal scientist. Leading Expert at BRICS Competition Law & Policy Centre (Higher School of Economics, Moscow). Ph.D.2 (Maastricht Law School, Economic Analysis of Law; University of Cagliari, Comparative Law) – LL.M. (College of Europe, EU competition Law). Visiting Fellow at Fordham Law School (US Antitrust), NYU (US Legal finance and civil procedure).
2. G. M. Solas, ‘Third Party Funding, new technologies and the interdisciplinary methodology as global competition litigation driving forces’ (2025) Global Competition Litigation Review, 1.
3. G. M. Solas, ‘Interrelation of Human Laws and Laws of Nature? Codification of Sustainable Legal Systems’ (2025) Journal of Law, Market & Innovation, 2.
US personal injury law firms are leading a push to open the doors to private equity investment in the legal sector, even in the face of long-standing regulatory opposition to outside ownership of law practices.
According to the Financial Times, a growing number of US firms that built their practices around high-volume, billboard-driven mass tort and injury representation are quietly exploring capital injections from private equity firms. The motivation is fast growth, increased leverage, and the ability to scale operations rapidly, something traditional partner-owned firms have found difficult in a consolidating market.
The move represents a departure from the conventional owner-operator model historically favored by the legal profession, where practicing attorneys hold equity in their firms. Private capital could provide aggressive funding for marketing, case acquisition, litigation infrastructure, and operational expansion, enabling firms to ramp up nationwide acquisition of cases. Critics, however, warn that outside investors prioritizing returns could create pressure to maximize volume over client outcomes.
Private equity’s entrance into legal services is not entirely new, but the aggressive push by personal injury firms may mark a tipping point. If regulators and bar associations ease restrictions on non-lawyer ownership or passive investment, this could fundamentally reshape how US law firms are structured and financed.
For the legal funding industry, this trend signals a potential increase in demand for third-party litigation financing and capital partners. As firms leverage outside investments for growth and case volume, funding providers may find new opportunities or face increased competition.
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