Trending Now
  • Pravati Capital Establishes Coalition to Advance Responsible Litigation Funding Regulation Across U.S. Following Arizona Law’s Passage
Commercial Regulatory Issues

Best Practices and Lessons Learned in Firm-Funder Partnerships

September 29, 2022

Best Practices and Lessons Learned in Firm-Funder Partnerships

This Day 2 panel featured Alex Chucri, CEO and Founder of Pravati Capital, Vincent Montalto, Partner at DLA Piper, and Ronald Schutz, Partner at Robins Kaplan. The panel was moderated by Kathryn Boyd, Partner at Hecht Partners. Discussion topics ranged from operationalizing firm decisions involving funding, to the best ways to structure a funding partnership or alliance. Not everyone knows about the various structures of relationships between law firms and funders, so the panel addressed the various models in play, including those that involve some form of recourse funding. Pravati has a debt structure in play, which founder Alex Chucri thinks makes the most sense for his firm’s structure. He believes in recourse to the firm, to the management team, and personal guarantees. This makes investors more comfortable, knowing that Pravati has skin in the game. Panelists also discussed having to monitor the capital structures, and being cautious about capital allocation. A lot of funders raise $100MM and need to put that capital to work, and so they finance claims the wouldn’t otherwise take on. This is concerning. “When you put capital into a deal, it changes the whole landscape of a deal,” according to Vincent Montalto. His firm has implemented internal structures to monitor capital expenditure and management. The panel also delved into some of the risks of partnering with funders, including whether funders will withdraw their funding – how and why would they do this? Where is funder money coming from – there are all types of investment structures out there, law firms have to be aware of those, so they can better understand the risk to the funder, which presents a downstream risk to them. These are things that the average lawyer in a law firm doesn’t appreciate, but it’s very important to know if the funder  has the capital on hand, is it subject to capital calls, etc. One final point on the tax implications of recourse funding: recourse funding can be clawed back, and so its treated as a loan and so it’s not taxed. Recently there was a legal standing that if the funding structure is non-recourse, that is treated as income, which means it is taxes. Often, there are a lot of emotions about getting a deal done, so they overlook the tax implications, and there is a real danger there.
Secure Your Funding Below
Secure Your Funding Sidebar

Commercial

View All
Commercial Fundraising

IVO Capital Partners Launches Fund IV for Litigation Finance

By John Freund |

Paris‑based litigation funder IVO Capital Partners has launched its fourth vehicle, named IVO Legal Strategies Fund IV, targeting €150 million (approx. US$173 million) to back contested commercial disputes and arbitration claims across continental Europe and beyond.

According to an article in WealthBriefing, the fund will deploy capital primarily within France, the Netherlands, Germany, Spain and Portugal, and is focused on claim types such as competition law, data protection infringements and collective redress mechanisms. With over 11 years’ experience investing in cases across Europe, the UK and the U.S., IVO says its team is “uniquely positioned to capitalise on the growing need for capital to fund meritorious cases.”

The vehicle is structured as a closed‑ended fund with an 8‑year life, a 3‑year investment period and a target internal rate of return of 14 percent. Typical individual lawsuits range between €500k and €5m; IVO expects to invest in 50‑60 diversified matters for Fund IV, thereby reinforcing the argument that legal finance can serve as an uncorrelated asset class — largely decoupled from macroeconomic trends. The firm emphasises that the European litigation‑funding market remains nascent compared with the U.S., but regulatory changes such as the EU Damages Directive and the Representative Actions Directive are enhancing access to collective actions and follow‑on claims.

Investors in the preceding fund mix included family offices and wealth managers (wealth advisors now form over a third of the investor base), and the minimum entry into Fund IV is €100k for professional and qualified investors. Key risks remain case‑selection, outcome uncertainty and length of duration; IVO says capital‑protection insurance helps mitigate downside.

Commercial

Third‑Party Litigation Funding Gains Ground in Environmental Cases

By John Freund |

Environmental suits, increasingly seen as tools to hold governments and corporations accountable for ecosystem destruction and climate risk, often stall or never get filed because of steep costs and limited budgets.

An article in Nature highlights the U.S. commercial TPLF market as managing over US $12.4 billion in assets, showcasing the potential scale of the model for environmental justice. The core argument is that by providing funding to plaintiffs who otherwise could not afford the fight, TPLF can enable lawsuits that address pollution, habitat loss and climate change liability — aligning with broader calls to broaden access to justice in sustainability law. At the same time, the author cautions that TPLF carries risks: it may bring conflicts of interest, shift control of litigation away from claimants, or impose commercial pressures that are misaligned with public-interest goals.

For the legal funding industry this correspondence underscores important dimensions. It signals an expanding frontier: environmental litigation is becoming a viable sector for funders, not just mass-torts or commercial disputes. But it also raises governance questions: funders will need to establish best practices to ensure alignment with public interest, preserve claimant autonomy and guard against criticisms of “outsourcing” justice to commercial actors.

The article suggests that regulators, funders and civil-society actors should collaborate to craft transparent frameworks and guardrails if TPLF is to fulfill its promise in environmental realms.

Commercial

How Litigation Funding Evens the IP Playing Field

By John Freund |

Third-party litigation funding (TPLF) is becoming increasingly important for small firms, inventors and universities seeking to enforce intellectual-property rights against major corporations.

According to an article in Bloomberg, funding arrangements enable plaintiffs with viable claims—but limited resources—to access litigation and expert fees that would otherwise be prohibitive. In the complex IP space, cost and risk often preclude smaller rights holders from doing anything meaningful when a financially strong infringer acts. In effect, the commentary argues, litigation finance helps tilt the playing field back toward fairness and innovation rather than letting size alone determine outcomes.

The piece also observes that public debate has at times mis-characterised litigation funding—especially after efforts to tax funder returns—which it says “shined a spotlight on the solution” rather than creating the problem. The authors stress that the proper policy response is not punitive taxation or sweeping disclosure mandates that risk chilling investment. Instead, they advocate for targeted transparency under court supervision, combined with a recognition that accessible funding is a core part of ensuring just enforcement of IP rights.

For the legal-funding industry, the commentary underlines several take-aways: funders who back IP-rights holders serve a social as well as economic role, helping inventors and smaller entities access justice they could not otherwise afford. The industry should engage proactively in outreach: educating IP counsel and claim-holders about funding, telling success stories of smaller plaintiffs, and working with policymakers and legislators to shape rational regulation. The challenge remains to balance the benefits of funding with ethical, transparency and conflict-of-interest safeguards—as discussion in the broader TPLF context shows.