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

September 27, 2023

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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Third-Party Funding Reshapes Post-M&A Arbitration in Spain

By John Freund |

Third-party funding is increasingly shaping the strategic landscape of post-M&A arbitration, according to discussions at the OPEN de Arbitraje 2026 conference held in Madrid. Practitioners and arbitrators examined how external capital is altering the calculus for claimants pursuing disputes that arise from share purchase agreements, earn-out clauses, and post-closing indemnity claims.

As reported by Iberian Lawyer, panelists framed third-party funding as a viable alternative for parties navigating the often-protracted and capital-intensive nature of M&A arbitrations. The discussion emphasized that funding agreements are no longer reserved for distressed claimants but are increasingly deployed by well-capitalized parties seeking to manage risk, free up balance sheet capacity, or align outside investors with the success of a claim.

Spain has emerged as one of Europe's more receptive jurisdictions for funded arbitration, with both the Spanish Court of Arbitration and the Madrid International Arbitration Center requiring disclosure of third-party funding arrangements. That regulatory clarity has helped institutional funders deepen their involvement in the Iberian market while giving counterparties greater visibility into the financing of claims.

The panel highlighted that post-M&A arbitration presents particular structural features that make funding attractive: claims tend to be discrete, liability-driven, and supported by extensive transactional documentation, all of which improve underwriting predictability. As funders refine their models for valuing M&A disputes, the conference signaled that capital is poised to play a more visible role in shaping which claims are pursued and how they are resolved.

Commercial

Funded Class Action Delivers NZ$125 Million Win Against ANZ in New Zealand High Court

By John Freund |

Litigation funding played a decisive role in a landmark New Zealand High Court ruling that has left ANZ Bank New Zealand facing potential liability of up to NZ$125 million. The class action, brought on behalf of approximately 17,000 borrowers, would not have been viable without backing from funders LPF Group and CASL, which financed the proceedings against the country's largest bank.

As reported by LawFuel, Justice Geoffrey Venning delivered summary judgment against ANZ on May 4, 2026, finding the bank in breach of disclosure obligations under the Credit Contracts and Consumer Finance Act 2003 (CCCFA). The case turned on a coding error in ANZ's loan systems that affected variation letters issued between June 2015 and May 2016. Although the bank argued the underpayments averaged just NZ$2 per customer per month, the court held that "technical errors in disclosure, no matter how small the financial impact, trigger automatic statutory penalties."

ANZ was ordered to refund the lead plaintiffs NZ$32,728.42, establishing a benchmark that, when extrapolated across the class, produces the NZ$125 million exposure figure. The judgment rejected ANZ's "no harm" defense, confirming that Section 22 of the CCCFA imposes strict liability regardless of actual financial harm.

ANZ chief executive Antonia Watson described the consequences as "disproportionate." The bank reported after-tax New Zealand profit of roughly NZ$1.4 billion last year. The decision underscores how funded class actions are reshaping consumer redress in jurisdictions where individual claims would be uneconomic to pursue.

Commercial

EU Court of Justice to Weigh Litigation Funding’s Impact on Antitrust Enforcement

By John Freund |

The Court of Justice of the European Union is set to examine whether certain forms of litigation financing risk undermining the effectiveness of the bloc's antitrust laws, in a referral that could reshape the funding landscape for cross-border consumer class actions. The case originates from Portugal and centers on the funding arrangements supporting Ius Omnibus, a non-profit consumer protection association that has emerged as a prominent claimant in European competition litigation.

As reported by MLex, the CJEU will determine whether class actions backed by particular funding structures pose a risk to the public-interest objectives of EU antitrust enforcement. The referral asks the court to assess whether economic incentives embedded in third-party funding can coexist with the bloc's competition rules or whether they create conflicts that compromise enforcement quality.

The decision is expected to carry significant implications for consumer associations and class representatives across Europe, many of which rely on outside capital to pursue mass claims against companies accused of anticompetitive conduct. A ruling that restricts certain funding models could narrow the financial pathways available to non-profit claimants, while a ruling that affirms flexible structures would reinforce that alternative finance is compatible with robust enforcement.

The case arrives as European policymakers continue to debate the boundaries of permissible litigation funding under the Representative Actions Directive and as national courts in Germany, the Netherlands, and Portugal develop divergent approaches to funder disclosure and control. The CJEU's eventual judgment is poised to set a binding precedent across all 27 member states.