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Key Takeaways from LFJ’s Virtual Town Hall: 2024 Recap & 2025 Outlook

By John Freund |

Last week, LFJ hosted its final virtual town hall of the year which covered an array of key developments and trends in the legal fundng sector. Panelists included Tets Ishikawa (TI), Managing Director of LionFish, Boris Ziser (BZ), Co-Head of the Finance Group at Schulte Roth and Zabel, William Marra (WM), Director at Certum Group, and Sarah Johnson (SJ), Head of the Litigation Investing Team at The D.E. Shaw Group. The panel was moderated by Rebecca Berrebi (RB), Founder and CEO of Avenue 33, LLC.

Below are the key takeaways from the event.

RB: What are the key changes that have effected the regulatory landscape of litigation finance in 2024, and how do you think those changes have affected deals in the industry this year?

TI: There’s been quite a few symbolic moments over the past two years. There was a proposal [The Voss Report] saying that litigation funding should be regulated and there should be a cap on fees. In the UK, there as a Supreme Court decision in the case of PACCAR that considered litigation funding agreements to be damages-based agreements, basically making a lot of litigation funding agreements unenforceable. And that has triggered an industry-wide review of the litigation funding industry in the UK by the Civil Justice Council. And that is ongoing, with a report expected next year, and the government may act on those recommendations and enact legislation.

In addition to all of that, there was a report written by the European Law Institute, which is probably the most interesting thing to focus on. Rather than the usual high level narratives of what’s good and bad about litigation funding, it actually proposed principles on the back of research and feedback that it got on all sides of the argument. And it was written by some really highly regarded judges and academics. And the report was quite balanced. But what was really interesting about the report was that it set a tone for the direction of how the UK should really be thinking about litigation funding. The key themes coming out of it are that 1) there is no one size fits all solution-litigation funding has many different parts to it, and 2) that regulation is not just something one does, but there needs to be a real identifiable problem that regulation resolves, otherwise there could be a lot of adverse consequences, and that recognition is key. There is also the recognition that funders do run commercial businesses, so there has to be an economically viable solution.

RB: Deal structures evolve as time goes on, and certainly have evolved in our industry. Boris, can you speak to any particular deal structures that have become less popular this year than they were before, or have started to fall by the wayside?

BZ: I wouldn’t say any have fallen by the wayside, I think that there has been a little bit of a shift – if you go back a number of years, you would see there were more debt deals than equity deals, and that was for various reasons, some of it was preference, some was tax-driven, some was based on an analysis of whether you would be splitting legal fees and things like that – and I think over the last couple of years, you have seen more of a shift where more parties are comfortable with equity deals, particularly with the introduction of alternative business structures in Arizona and Utah. So I don’t think that anything has gone by the wayside, but there has been more comfort and more development on the equity side of the business.

RB: Will, do you see that too? What do you think about that?

WM: Yeah I think that’s right. What’s interesting is, there hasn’t been that much development on the question of which provisions in litigation funding contracts may or may not be enforceable, or the big question of tax clarity. I think Boris makes a very good point about Rule 5.4, the debate around that has largely settled. So you do see an increase around law firm deals. I think this question is also tied up with the increasing diversification of products available, and if you start too think about insurance, and insurance-backed debt, and debt plus equity in these deals, we’re seeing a lot of that. We’re also seeing an increase in acquisitions to the extent that claims are alienable and can be acquired. I think that a lot of claim holders are seeing a lot of benefits entering into those sorts of arrangements.

RB: Sarah, what deal structures do you think are growing in popularity, and why do you think that is happening?

SJ: We’ve seen something similar in the shift from debt to equity. I might characterize it though as a move away from debt to law firms, where your collateral is a lot of cases. I think we’ve seen those deals – especially the ones that happened before Covid – there were a lot of different risks that were introduced rather than just the underlying litigation. The amount of OpEx that the law firm needed to survive, and when you’re debt financing for the whole firm, it gets very complicated. So we’ve seen a shift away more to – I won’t say single cases – but perhaps smaller portfolios with a law firm, so you can target your exposure and share more of the risk and OpEx with the law firms themselves.

We’ve also seen a bifurcation in terms of the size of deals. We’re seeing some more very large deals, like $100MM+ deals, and also small single cases, than perhaps we saw in previous years. We’re just seeing a lot of one-off single case deals where funders can share the risk, vs. entire portfolio monetizations.

To view the entire discussion, join the event page on LinkedIn (you must register for the event to view).

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John Freund

John Freund

Commercial

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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.