Trending Now

Highlights from LFJ’s Virtual Town Hall: Investor Perspectives

By John Freund |

Highlights from LFJ’s Virtual Town Hall: Investor Perspectives

On March 27th, LFJ hosted a virtual town hall featuring key industry stakeholders giving their perspectives on investment within the legal funding sector. Our esteemed panelists included Chris Capitanelli (CC), Partner at Winston and Strawn, LLP, Joel Magerman (JM), CEO of Bryant Park Capital, Joe Siprut (JSi), Founder and CEO of Kerberos Capital, and Jaime Sneider (JSn), Managing Director at Fortress Investment Group. The panel was moderated by Ed Truant (ET), Founder of Slingshot Capital.

Below are highlights from the discussion:

One thing that piqued my interest recently was the recent Georgia jury that awareded a single plaintiff $2.1 billion in one of 177 lawsuits against Monsanto. What is your perspective on the health of the mass tort litigation market in general?

JSn: Well, I think nuclear verdicts get way more attention than they probably deserve. That verdict is going to end up getting reduced significantly because the punitive damages that were awarded were unconstitutionally excessive. I think it was a 30 to 1 ratio. I suspect that will just easily be reduced, and there will probably be very little attention associated with that reduction, even though that’s a check that’s already in place to try to prevent outsized judgments that aren’t tied as much to compensatory damages. I expect Monsanto will also likely challenge the verdict on other grounds as well, which is its right to do.

The fact is, there are a whole number of checks that are in place to ensure the integrity of our verdicts in the US legal system, and it’s already extraordinarily costly and difficult for a person that files a case who has to subject himself to discovery, prevail on motions to dismiss, prevail on motions for summary judgment, win various expert rulings related to the expert evidence. And even if a plaintiff does prevail like this one has before a jury, they face all sorts of post-trial briefing remedies that could result in a reduction or setting aside the verdict, and then they face appeals. The fact is, I think corporate defendants have a lot of ways of protecting themselves if they choose to go to trial or if they choose to litigate the case.

And I think, oftentimes when people talk about the mass tort space, their disagreement really isn’t with a specific case, but with the US Constitution itself, which protects the right to juries, even in civil litigation in this country. The fact is that there is a rich tradition in the United States that recognizes tort is essential to deterring wrongdoing. And ensuring people are fairly compensated for the injuries that they sustained due to unsafe products or other situations. So, broadly speaking, we don’t think in any systematic a way that reform is required, although I suspect around the margins there could be modest changes that might make sense.

Omni has made a number of recent moves involving secondary sales and private credit to improve their earnings and cash flow. What is your sense of how much pressure the industry is under to produce cash flow for its investors?

JSi: I think there is some pressure for sure, but more than pressure, I think it’s a natural thing for self-interested managers to want to give their investors realizations so that they can raise more capital, right?

So, even if no one had ever told me, boy, it would be nice to get money back at some point in the future, that would obviously still be what I’m incentivized to do because the sooner I can get realizations and get cash back, the sooner people can have confidence that, wow, this actually really works, and then they give you 2x the investment for the next vehicle.

So the pressure is, I think, part of it. But for a relatively new asset class like litigation finance, which is still in middle innings, I think, at most, you want realizations. You want to turn things over as quickly as you can, and you want to get capital back.

In terms of what ILFA is doing, do you feel like they’re doing enough for the industry to counter some of the attacks that are coming from the US Chamber of Commerce and others?

CC: I think there has been a focus from ILFA on trying to prevent some of the state court legislation from kind of acting as a test case, so to speak, for additional litigation. So there’s been, you know, they’ve been involved in the big stuff, but also the little stuff, so it’s not used against us, so to speak.

So I think in that regard, it’s good. I wonder at what point is there some sort of proposal, as to if there’s something that’s amenable, is there something that we can all get behind, if that’s what’s needed in order to kind of stop these broad bills coming into both state legislatures and Congress. But I think overall, the messaging has been clear that this is not acceptable and is not addressing the issue.

Pretium, a relative newcomer to the market, just announced a $500 million raise. At the same time, it’s been rumored that Harvard Endowment, which has traditionally been a significant investor in the commercial litigation finance market, is no longer allocating capital to the Litfin space. What is your sense of where this industry continues to be in favor with investors, and what are some of the challenges?

JSi: On the whole, I think the answer is yes, it continues to be in favor with investors, probably increasing favor with investors. From our own experience, we talk to LPs or new LPs quite frequently where we are told that just recently that institution has internally decided that they are now green lighting initiatives in litigation finance or doing a manager search. Whereas for the past three or four years, they’ve held off and it’s just kind of been in the queue. So the fact that that is happening seems to me that investors are increasingly interested.

Probably part of the reason for that is that as the asset class on the whole matures, individual managers have longer track records. Maybe certain managers are on their third or fourth vintage. And there are realized results that can be put up and analyzed that give investors comfort. It’s very hard to do that on day one. But when you’re several years into it, or at this point longer for many people, it becomes a lot easier. And so I think we are seeing some of that.

One of the inherent challenge to raising capital in the litigation finance asset class is that even just the term litigation finance itself is sort of shrouded in mystery. I mean, it’s very unclear what that even means and it turns out that it means many different things. The media on the whole, not including LFJ obviously, but the media on the whole has not done us many favors in that regard because they often use the term litigation finance to mean one specific thing, oftentimes case finance, specific equity type risk on a single case, when in fact, there are many of us who do all kinds of different things: law firm lending, the credit stuff, the portfolio finance stuff. There’s all kinds of different slivers. And so the effect of that is that an LP or factions within an LP may have a preconceived notion about what litigation finance is, which is completely wrong. And they may have a preconceived notion of what a particular manager’s strategy is. That’s completely wrong.

I also think that litigation finance provokes an almost emotional reaction sometimes. It’s often the case that investments get shot down because someone on the IC says that they hate lawyers, or they got sued once, and so they hate lawyers. And so they want nothing to do with litigation finance. And so whether that’s fair or unfair is irrelevant. I think it is something that is a factor and that doesn’t help. But I’d like to think that on the whole, the good strategies and the good track records will win the day in the end.

The discussion can be viewed in its entirety here.

Secure Your Funding Sidebar

About the author

John Freund

John Freund

Commercial

View All

Legalist Expands into Government Contractor Lending

By John Freund |

Litigation funder Legalist is moving beyond its core offering of case-based finance and launching a new product aimed at helping government contractors manage cash flow. The San Francisco-based firm, which made its name advancing capital to plaintiffs and law firms in exchange for a share of litigation proceeds, is now offering loans backed by government receivables.

An article in Considerable outlines how Legalist’s latest product is designed to serve small and midsize contractors facing long payment delays—often 30 to 120 days—from federal agencies. These businesses frequently struggle to cover payroll, purchase materials, or bid on new work while waiting for disbursements, and traditional lenders are often unwilling to bridge the gap due to regulatory complexities and slow timelines.

Unlike litigation finance, where returns are tied to legal outcomes, these loans are secured by awarded contracts or accounts receivable from government entities. Legalist sees overlap in risk profiling, having already built underwriting systems around uncertain and delayed payouts in the legal space.

For Legalist, the move marks a significant expansion of its alternative credit offerings, applying its expertise in delayed-cashflow environments to a broader market segment. And for the legal funding industry, it signals the potential for funders to diversify their revenue models by repurposing their infrastructure for adjacent verticals. As more players explore government receivables or non-litigation-based financing, the definition of “litigation finance” may continue to evolve.

Funders’ Hidden Control Spurs Calls for Litigation‑Funding Transparency

By John Freund |

Litigation funding contracts are usually sealed from public view—but recently disclosed agreements suggest they often grant funders much more power than commonly acknowledged. A batch of nine contracts submitted by Lawyers for Civil Justice, a corporate and defense‑oriented group, to a judicial panel considering a proposed federal rule to mandate disclosure reveals funders in some instances reserve the right to reject settlement offers, choose or even replace counsel, and take over lawsuits entirely.

An article in Reuters explains that one example involves a 2022 contract between Burford Capital and Sysco Corp, in which Sysco is forbidden to accept a settlement without the funder’s written approval. Another case shows a contract with Longford Capital treating a change of counsel as a “Material Adverse Event,” again requiring funder consent. These terms reveal control far beyond the “passive investor” role many funders claim.

Currently, many funders argue that because their agreements do not always alter case control in practice, full disclosure of the contracts is unnecessary. But defenders of transparency say even the potential for control—whether or not exercised—can materially affect litigation outcomes, especially in settlement negotiations.

There is increasing momentum toward mandatory disclosure. Over 100 corporations, including those in tech, pharma, and automotive sectors, have urged the U.S. Advisory Committee on Civil Rules to adopt a rule requiring disclosure of funder identities and control rights. Several states (like Kansas, Louisiana, Indiana, West Virginia) have also put disclosure requirements into law. In Kansas, for instance, courts may review full funding agreements in private, while opposing parties receive more limited disclosures.

LCM Exits Gladstone Class Action; Writes Off A$30.8M

By John Freund |

Litigation Capital Management has pulled funding from a long-running Australian class action brought by commercial fishers against the state-owned Gladstone Ports Corporation, opting to cut its losses and reset capital allocation. The funder said the case has now settled on terms that provide a full release between the parties and a payment to the defendant toward costs—covered in full by after-the-event insurance—pending court approval in late October.

An announcement on Investegate details that LCM will write off A$30.8 million, equal to its cash invested, and has launched a formal strategic review with Luminis Partners. Management attributed the exit to portfolio discipline following adverse outcomes and noted preparation issues and aspects of expert evidence that, in the company’s view, no longer supported the case theory.

LCM is pursuing two potential recovery avenues: a costs assessment it says could recoup a portion of legal fees paid, and a prospective claim against the original solicitors for alleged breach of contract and negligence. Beyond this case, LCM flagged near-term milestones: an expected judgment within roughly three weeks in a separate UK commercial litigation co-funded alongside Fund I (A$20.6 million LCM capital at stake), and a decision soon on permission to appeal an April 1 arbitration loss.

Full-year FY25 results will be presented on October 1, when management plans to update investors on strategy and portfolio priorities.