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LF Dealmakers Panel: The Great Debate: Trust and Transparency in Litigation Finance

LF Dealmakers Panel: The Great Debate: Trust and Transparency in Litigation Finance

The day’s featured panel included a discussion around ethical challenges and conflicts of interest, impacts on attorney-client relationships, developing a regulatory framework, and balancing the benefits vs. the risks of litigation funding. The panel consisted of Nathan Morris, SVP of Legal Reform Advocacy at the U.S. Chamber of Legal Reform, Charles Schmerler, Head of Litigation Finance at Pretium Partners, Lucian Pera, Partner at Adams and Reese, and Maya Steinitz, Professor of Law at Boston University. The panel was moderated by Michael Kelley, Partner at Parker,Poe, Adams and Bernstein, LLP. This unique panel was structured as a pair of debates (back-to-back), followed by an open forum involving panelists and audience questions. The first debate was centered around the question of ‘what is litigation finance?’ Essentially, what constitutes third-party financing, what are the key components that make up a litigation funder, and how should we define the practice? Some key takeaways from this part of the discussion:
  • Insurance carriers haven’t been classified as third-party funders, but essentially that is what they are doing
  • A secured bank loan to a law firm is not what we talk about when we talk about litigation funding. So, financing a litigator is not necessarily litigation finance. Litigation funders offer financing related to the litigation, making them an interested party in the litigation., in contrast to a disinterested bank
  • Law firms acting on the contingency model can indeed be classified as litigation funders
  • Litigation funding doesn’t even have to be for profit. Famously, Peter Thiel funded Hulk Hogan’s litigation against Gawker, and it is unclear if there was any profit participation on Thiel’s part, though his likely motivation was revenge (or perhaps justice) after Gawker previously outed him as gay
  • Context matters, especially when we consider how we define litigation finance for the purpose of regulation
The question then came: Is a legal defense fund a litigation funder? It files briefs, and somebody must pay to have those briefs filed. So should their donors be identified? This question led to a robust debate between moderator Michael Kelley and Charles Schmerler over whether the Chamber of Commerce should be classified as a litigation funder. After all, the Chamber accepts donations and then uses its capital to file claims—so would donors to the Chamber be considered litigation funders? Schmerler noted that causal litigation is different from commercial litigation—especially from a public policy perspective. So conflating them under the semantic of ‘litigation funding’ isn’t as useful, even if they can each be technically classified as litigation funding. That robust discussion gave way to the second debate, which focused on disclosure, and control and conflicts in litigation finance transactions. Kelley asked Nathan Morris why he supports disclosure in litigation funding matters. Morris feels that the purpose of disclosure is to understand the nature of the involvement of the funder, and such disclosures should be made, just as they are made in the case of insurance. It’s important to gauge a funder’s measure of influence, the structures and contours of their arrangement with the plaintiff, and how that might impact case decision. Maya Steinitz added that disclosure requires a nuanced analysis, in that impact litigation is different from commercial litigation, which is different from class actions. So identifying a clear line for disclosure leads to conflicting views, because people are responding to the idea of disclosure in different scenarios. Steinitz believes in a balancing test—what is in the best interests of the public, considering variables such as the type of litigation and motive of litigation? We shouldn’t draw a general rule on disclosure, but rather have a bespoke response based on several factors. Other panelists disagreed, believing that ‘disclosure is a solution in search of a problem,’ and that ultimately it will serve no benefit, as it is essentially impossible to determine how much control a litigation funder has over a claim, or whether the law firm in question is in dire need of capital and must therefore cede control to the funder. Morris’ position remains that disclosure is necessary, and insists his views are not predicated on the desire to see the industry regulated out of existence, but rather to protect the public interest. The open forum portion led to some interesting discussion points, including:
  • Whether law firms in a funded claim have abdicated their independence to litigation funders
  • How ethics rules regulate litigation funders and funding agreements
  • Whether disclosure of the existence of funding can even identify any control issues in the case
  • The prospect of litigation being funded for purely financial (as opposed to meritorious) reasons
In the end, this was a very unique structure for a panel discussion, which led to a passionate and spirited debate by the panelists, as well as a thorough degree of engagement from the audience.
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Cartiga’s $540M SPAC with Alchemy

By John Freund |

Cartiga, a long-standing player in consumer and attorney funding, is heading to the public markets. The company agreed to combine with Alchemy Investments Acquisition Corp. 1 in a transaction pegged at $540 million in equity consideration, positioning the platform to scale its data-driven approach to underwriting and portfolio management. Management frames the move as about reach and efficiency: tapping a listed currency, broadening investor access to the asset class, and accelerating inorganic growth.

An article in MarketWatch reports that the proposed business combination would take Cartiga public via Alchemy’s SPAC, with the parties emphasizing how a listing could support growth initiatives and acquisitions. The piece notes the strategic rationale—public-market transparency and capital flexibility—as the platform seeks to deepen its footprint in funding for legal claims and law firms.

While final timing remains subject to customary steps (including the shareholder vote and regulatory filings), the announcement marks one of the most significant U.S. litigation-finance capital-markets events of the year.

Cartiga’s trajectory reflects a broader institutionalization of legal finance: more data, more discipline, and more diversified funding channels. The company’s model—providing non-recourse advances to plaintiffs and working capital to law firms—relies on proprietary analytics and scale to manage risk and returns across cycles. A public listing, if completed, would put Cartiga alongside other listed peers globally and provide investors with another pure-play exposure to the asset class’s uncorrelated return profile.

Omni Bridgeway Highlights Dispute Finance as Strategic PE Value Driver

By John Freund |

Private equity (PE) firms often view legal disputes involving portfolio companies as liabilities—not opportunities for value creation. However, in a recent blog post, Omni Bridgeway argues that when properly modeled and leveraged, dispute finance can unlock hidden value throughout a PE investment lifecycle.

An article on Omni Bridgeway’s website explains that dispute finance enables PE firms to convert uncertain legal claims into a probability‑weighted, risk‑adjusted net present value (NPV), which can be used as a powerful negotiating lever in acquisitions. The firm illustrates this with an example: a $10 million litigation claim, after probabilistic weighting, legal cost deductions, and discounting, yields a risk‑adjusted NPV of roughly $3.5 million—highlighting how firms can avoid overpaying for speculative legal value

Once the investment is underway, dispute finance can preserve EBITDA by funding legal costs outside the P&L, since such non‑recourse financing isn’t treated as an SG&A expense or recorded as debt. Omni Bridgeway demonstrates that a $2 million litigation expense can be eliminated from SG&A, boosting EBITDA from, say, $11 million to $13 million.

As dispute finance becomes more accepted in M&A workflows, funders that offer robust valuation frameworks and flexible, non‑recourse instruments may gain a competitive edge. Overall, Omni Bridgeway’s post highlights that monetising legal claims—through non‑recourse capital advances or outright sale to a funder—can free up liquidity for operational initiatives without increasing downside risk.

New North Litigation Capital Launches, Backed by £50 Million in Senior Secured Financing from Pollen Street Capital

By John Freund |

Pollen Street Capital ("Pollen Street") today announces a new senior secured credit facility of up to £50 million to New North Litigation Capital (“New North”). New North is a commercial litigation finance company and a direct subsidiary of Capital Law, a Cardiff based law firm founded in 2006.

Capital Law has a strong track record in commercial litigation, having closed over 400 claimant cases since 2001 with a 95% win rate. Drawing on its senior leadership and experienced disputes team, Capital Law launched New North to address the underserved small to mid-market segment of commercial litigation market. 

New North will be the only litigation financier in the UK owned and operated by practicing lawyers, bringing their day to day lived experience of handling mid-market litigation into pricing the risk and the funding investment decisions.

Christopher Nott, Founder and CEO of New North commented: “We are pleased to work with Pollen Street on this financing to launch New North Litigation Capital. The funding supports us to bridge a critical gap by funding claims that are often deemed too small by other players in the market. We are excited to work with the Pollen Street team as we create this new kind of litigation funding.”

Connor Marshall-Mckie, Investment Director at Pollen Street, commented:New North addresses an important gap in the litigation funding space, focusing on smaller mid-market commercial litigation. With the significant opportunity available and the deep experience of the leadership team from Capital Law we are excited to partner with the team to support their growth.”

About Pollen Street

Pollen Street is a fast-growing and high-performing private capital asset manager. Established in 2013, the firm has built deep capability across the real estate, financial and business services sectors aligned with mega-trends shaping the future of the industry. Pollen Street manages over €7bn AUM across private equity and credit strategies on behalf of investors including leading public and corporate pension funds, insurance companies, sovereign wealth funds, endowments and foundations, asset managers, banks, and family offices from around the world. Pollen Street has a team of over 95 professionals.