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Key Takeaways from LFJ’s Special Digital Event: Insights from New Entrants into Litigation Funding

On Wednesday, December 15th, Litigation Finance Journal hosted a special digital event featuring insights from new entrants into litigation funding. A panel featuring Charles Schmerler (CS), Senior Managing Director of Pretium Partners, Zachary Krug (ZK), Director of Signal Capital Partners, and Mark Wells (MW), Co-Founder of Almatura, discussed deal sourcing fundraising and hiring from a new entrant’s perspective. 

Below are some key takeaways from the panel discussion, which was moderated by Ed Truant, founder of Slingshot Capital:

Broadly speaking, how do you view the current investor landscape for fundraising in the jurisdiction in which you’re involved? Also, what sort of goals do LPs have when approaching the litigation finance space, and how should new entrants into the space prepare when speaking to prospective investors?

MW: Our first fundraise really was a slow burn between 2008 – 2010 when we closed the first fund. You’ll remember when we arrived in the market then, pretty much everyone was a first time manager. There was very little in the way of seasoned product, or to say nothing of the type fund 2 fund 3 type of opportunities. So the investors who were attracted in those days were the pioneering investors and they really had no choice but to commit themselves to first time managers.

I think if we fast forward to 2021, it’s a much more mixed environment. There’s a lot more players. My experience is mainly on the European side, but I understand this is also true on the west side. And a number of the players have now matured and are on fund 3, fund 4, fund 5, so investors are presented with a more complete offering ranging from first time managers all the way through to repeat managers.

ZK: In some respects, I think the high returns that are uncorrelated to the market remains, and is even a stronger factor in terms of investor appetite, particularly when you look at a landscape where many asset classes are at historically high valuations and it’s difficult to achieve the kind of multiple style returns that you can potentially achieve in litigation funding. So I think that attraction remains there and is quite strong. I think the difficulty for anyone who’s trying to raise money, there’s certainly a lot of money out there, and interest—but the difficulty is, if you’re a new entrant without a track record, you may be an excellent litigator with a long track record of trial victories, but I think without a track record of successful realizations, it can be difficult. Given the asset class and how it performs, it takes a while to develop a track record that’s worth anything because of the long tail risk in these assets.

CS: My advice at first was ‘don’t try to raise a lot of money at the beginning of a global pandemic.’ But once you get past that, I think these are key points. Mark touched on something important in that there’s been a significant change in the way investors are able to approach the asset class from the way it was ten years ago. There’s much more data available right now. It’s not a mature industry yet, but there is empirical data out there. So investors are able to diligence this very carefully and they have a number of choices, there are a lot of players as Mark and Zach said. So I think anyone who is looking to raise capital has to be extremely well prepared.

Let’s turn our attention toward deal sourcing. Where are you currently originating deals from, and to the extent that you’re willing and able to respond—what methods have you tried and what have yielded the best and worst results?

MW: I think we’d say probably four channels of deal flow, the most important deals are from lawyers, and then the other sources would be claimants coming to us direct typically via advertising, LinkedIn, Google, media mentions, stuff like that. And then brokers and intermediaries; both specialist brokers and some of the ad hoc intermediaries.

ZK: Mark hit on the key channels from my perspective. I do think it remains very much a relationship driven business, and in terms of what works and what doesn’t work. There is, I think in terms of the lawyers and even the brokers and intermediaries, and I suppose with the funders as well, an aspect where there’s a fair amount of relationship building, business development, what have you, that’s important to maintain those relationships.

Let’s shift into a different topic: Hiring. How do you think about organizational design for your firms in terms of a combination of finance, legal, quants type of expertise. Mark, how do you tackle that, historically?

MW: Yeah, that’s interesting how you list the financing and the legal and quantitative skills. I think I’d add one more characteristic which can really cut across all those disciplines—and that’s factual curiosity and factual inspection. In our experience over the years, when we look back and look very long and hard about why we lose cases., often it’s singular one-off factors. Something that we get a few times is that we lost the case because the facts that were eventually found deviated from what we’d assume when we were underwriting the case. I think really probing the facts and thinking about what can fill in any blanks in the claimant’s narrative is a really important part of the picture that needs to apply to everyone involved in underwriting the cases.

ZK: It’s an interesting question, one that I’m grappling with as we speak, as a relatively new strategy within what is otherwise a very quantitative and numbers-driven organization. My experience is that most litigation funders are staffed by ex-litigators or have many lawyers on staff. They tend to bring that litigation mindset with them, which obviously is important from an underwriting and diligence perspective. But often when you put a bunch of litigators into a room to discuss a case, we can be very good at identifying the risks of what could go wrong, but less good at being creative about how to structure for those risks or to price for those risks, or be willing to take those risks. So my sense in terms of organization and hiring is—it’ll be more important to find folks who are creative about deal structuring and pricing more than simply smart lawyers. It’s more important to have that commercial acumen.

Charles, can you comment about what the market for talent is like at the moment and what’s the general professional background that you’re seeing from some of your hires?

CS: This feeds off the discussion you were just having with Mark and Zach. The market is good, there is always opportunity to find smart capable lawyers. We have a lot of analysts and quantitative people at the firm already. So we are less in need of hiring those. But I think you already touched on what is the ongoing debate—which is, where should you focus your energies? Should it be on the analytical side, the financial analytical side, or the legal side? We find that you can hire—but the question is: What’s the best way to go about hiring?

So for us, we are looking more for people who are not just creative in structuring, but who understand how to recognize value. And that can mean different things in different contexts. For example, we have a particularly strong patent team. Between our two senior-most people, only one is a lawyer. Both have extensive experience monetizing patents over decades, and they understand how to assess the value of a portfolio in ways that most other people cannot.

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Case Developments Commercial

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?

Case Developments Commercial

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.

Critics, however, contend that the laws may undermine access to justice, especially in complex or high-cost litigation where third-party funding can serve as a vital resource. The cap on non-economic damages, in particular, has drawn concern from trial lawyers who argue it may disproportionately impact vulnerable plaintiffs without sufficient financial means.

Oklahoma’s move aligns with a broader national trend of state-level scrutiny over third-party litigation funding. Lawmakers in several states have introduced or passed legislation to increase transparency, impose registration requirements, or limit funding sources.

For the legal funding industry, the Oklahoma law raises pressing questions about how funders will adapt to an increasingly fragmented regulatory landscape. It also underscores the growing political sensitivity around foreign capital in civil litigation—a trend that could prompt further regulatory action across other jurisdictions.