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Highlights from LFJ’s Virtual Town Hall: Investor Perspectives

By John Freund |

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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Sony and Apple Challenge Enforceability of Litigation Funding Models

By John Freund |

A pivotal UK court case could reshape the future of litigation finance agreements, as Sony and Apple reignite legal challenges to widely used third-party funding models in large-scale commercial disputes.

An article in Law360 reports that the two tech giants are questioning the validity of litigation funding arrangements tied to multibillion-pound cartel claims brought against them. Their core argument: that certain litigation funding agreements may run afoul of UK laws governing damages-based agreements (DBAs), which restrict the share of damages a representative may take as remuneration. A previous Court of Appeal decision in PACCAR Inc. v. Competition Appeal Tribunal held that some funding models might qualify as DBAs, rendering them unenforceable if they fail to comply with statutory rules.

This resurrected dispute centers on claims brought by class representatives against Apple and Sony over alleged anti-competitive behavior. The companies argue that if the funding arrangements breach DBA regulations, the entire claims may be invalidated. For the litigation funding industry, the outcome could severely curtail access to justice mechanisms in the UK—especially for collective actions in competition law, where third-party financing is often essential.

The UK’s Competition Appeal Tribunal previously stayed the proceedings pending clarity on the legal standing of such funding arrangements. With the dispute now heading back to court, all eyes will be on whether the judiciary draws a clear line around the enforceability of funder agreements under current law.

The decision could force funders to rework deal structures or risk losing enforceability altogether. As UK courts revisit the DBA implications for litigation finance, the sector faces heightened uncertainty over regulatory compliance, enforceability, and long-term viability in complex group litigation. Will this lead to a redefinition of permissible funding models—or to a call for legislative reform to protect access to collective redress?

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Funder’s Interference in Texas Fee Dispute Rejected by Appeals Court

By Harry Moran |

A Texas appeals court has ruled that a litigation funder cannot block attorneys from pursuing a fee dispute following a remand order, reinforcing the limited standing of funders in fee-shifting battles. In a 2-1 decision, the First Court of Appeals found that the funder’s interest in the outcome, while financial, did not confer the legal authority necessary to participate in the dispute or enforce a side agreement aimed at halting the proceedings.

An article in Law360 details the underlying case, which stems from a contentious attorney fee battle following a remand to state court. The litigation funder, asserting contractual rights tied to a funding agreement, attempted to intervene and stop the fee litigation between plaintiffs' and defense counsel. But the appellate court sided with the trial court’s decision to proceed, emphasizing that only parties directly involved in the underlying legal work—and not third-party financiers—are entitled to challenge or control post-remand fee determinations. The majority opinion concluded that the funder’s contract could not supersede procedural law governing who may participate in such disputes.

In dissent, one justice argued that the funder’s financial interest merited consideration, suggesting that a more expansive view of standing could be warranted. But the majority held firm, stating that expanding standing would invite unwanted complexity and undermine judicial efficiency.

This decision sends a strong signal to funders operating in Texas: fee rights must be contractually precise and procedurally valid. As more funders build fee recovery provisions into their agreements, questions linger about how far those rights can extend—especially in jurisdictions hesitant to allow funders a seat at the litigation table.

Commercial Regulatory Issues

Oklahoma Moves to Restrict Foreign Litigation Funding, Cap Damages

By John Freund |

In a significant policy shift, Oklahoma has enacted legislation targeting foreign influence in its judicial system through third-party litigation funding. Signed into law by Governor Kevin Stitt, the two-pronged legislation not only prohibits foreign entities from funding lawsuits in the state but also imposes a $500,000 cap on non-economic damages in civil cases—excluding exceptions such as wrongful death. The new laws take effect November 1, 2025.

An article in The Journal Record notes that proponents of the legislation, including the Oklahoma Civil Justice Council and key Republican lawmakers, argue these measures are necessary to preserve the integrity of the state's courts and protect domestic businesses from what they view as undue interference. The foreign funding restriction applies to entities from countries identified as foreign adversaries by federal standards, including China and Russia.

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