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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.

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John Freund

John Freund

Commercial

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King & Spalding Sued Over Litigation Funding Ties and Overbilling Claims

By John Freund |

King and Spalding is facing a malpractice and breach of fiduciary duty lawsuit from former client David Pisor, a Chicago-based entrepreneur, who claims the law firm pushed him into a predatory litigation funding deal and massively overbilled him for legal services. The complaint, filed in Illinois state court, accuses the firm of inflating its rates midstream and steering Pisor toward a funding agreement that primarily served the firm's financial interests.

An article in Law.com reports that the litigation stems from King and Spalding's representation of Pisor and his company, PSIX LLC, in a 2021 dispute. According to the complaint, the firm directed him to enter a funding arrangement with an entity referred to in court as “Defendant SC220163,” which is affiliated with litigation funder Statera Capital Funding. Pisor alleges that after securing the funding, King and Spalding tied its fee structure to it, raised hourly rates, and billed over 3,000 hours across 30 staff and attorneys within 11 months, resulting in more than $3.5 million in fees.

The suit further alleges that many of these hours were duplicative, non-substantive, or billed at inflated rates, with non-lawyer work charged at partner-level fees. Pisor claims he was left with minimal control over his case and business due to the debt incurred through the funding arrangement, despite having a company valued at over $130 million at the time.

King and Spalding, along with the associated litigation funder, declined to comment. The lawsuit brings multiple claims including legal malpractice, breach of fiduciary duty, and violations of Illinois’ Consumer Legal Funding Act.

Legal Finance and Insurance: Burford, Parabellum Push Clarity Over Confrontation

By John Freund |

An article in Carrier Management highlights a rare direct dialogue between litigation finance leaders and insurance executives aimed at clearing up persistent misconceptions about the role of legal finance in claims costs and social inflation.

Burford Capital’s David Perla and Parabellum Capital’s Dai Wai Chin Feman underscore that much of the current debate stems from confusion over what legal finance actually is and what it is not. The pair participated in an Insurance Insider Executive Business Club roundtable with property and casualty carriers and stakeholders, arguing that the litigation finance industry’s core activities are misunderstood and mischaracterized. They contend that legal finance should not be viewed as monolithic and that policy debates often conflate fundamentally different segments of the market, leading to misdirected criticism and calls for boycotts.

Perla and Feman break legal finance into three distinct categories: commercial funding (non-recourse capital for complex business-to-business disputes), consumer funding (non-recourse advances in personal injury contexts), and law firm lending (recourse working capital loans).

Notably, commercial litigation finance often intersects with contingent risk products like judgment preservation and collateral protection insurance, demonstrating symbiosis rather than antagonism with insurers. They emphasize that commercial funders focus on meritorious, high-value cases and that these activities bear little resemblance to the injury litigation insurers typically cite when claiming legal finance drives inflation.

The authors also tackle common industry narratives head-on, challenging assumptions about funder influence on verdicts, market scale, and settlement incentives. They suggest that insurers’ concerns are driven less by legal finance itself and more by issues like mass tort exposure, opacity of investment vehicles, and alignment with defense-oriented lobbying groups.

Courmacs Legal Leverages £200M in Legal Funding to Fuel Claims Expansion

By John Freund |

A prominent North West-based claimant law firm is setting aside more than £200 million to fund a major expansion in personal injury and assault claims. The substantial reserve is intended to support the firm’s continued growth in high-volume litigation, as it seeks to scale its operations and increase its market share in an increasingly competitive sector.

As reported in The Law Gazette, the move comes amid rising volumes of claims, driven by shifts in legislation, heightened public awareness, and a more assertive approach to legal redress. With this capital reserve, the firm aims to bolster its ability to process a significantly larger caseload while managing rising operational costs and legal pressures.

Market watchers suggest the firm is positioning itself not only to withstand fluctuations in claim volumes but also to potentially emerge as a consolidator in the space, absorbing smaller firms or caseloads as part of a broader growth strategy.

From a legal funding standpoint, this development signals a noteworthy trend. When law firms build sizable internal war chests, they reduce their reliance on third-party litigation finance. This may impact demand for external funders, particularly in sectors where high-volume claimant firms dominate. It also brings to the forefront important questions about capital risk, sustainability, and the evolving economics of volume litigation. Should the number of claims outpace expectations, even a £200 million reserve could be put under pressure.