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Recent Developments in Litigation Finance (Part 2 of 2)

Recent Developments in Litigation Finance (Part 2 of 2)

By Mauritius Nagelmueller This article aims to provide an overview of the most significant recent developments in the litigation finance industry. Part 2 of this 2-part series discusses the rapid growth of litigation finance across the globe, as well as its multi-dimensional expansion into diverse markets. If you’d like to reference Part 1 of this series, you can find it here. Growth The most significant overall trend in litigation finance is simply put: growth – a vibrant and ongoing increase in the use and acceptance of the industry. Litigation finance has emerged from a promising niche into a mainstream alternative asset class. The use has multiplied in the recent years, and among many other characteristic features, investors are attracted by the chance to diversify their portfolios with uncorrelated assets. The demand in the legal world is still much higher than the supply of litigation finance – an indicator that normally only the best cases are receiving financing. By now, the business spans the financing of both plaintiffs and defendants, single cases and portfolios, at practically every stage of the dispute, for example also at the enforcement phase. As litigation finance has become a multi-billion-dollar business, surveys and reports by universities and journals, as well as financing providers point to its continued growth, with no signs of stopping any time soon. While detailed data grows increasingly available, it is hard for reporters or councils to keep pace with the industry, which continues to evolve before initial research can proffer valid conclusions. While this powerful forward movement promotes access to justice in the eyes of many, the impact on the civil justice system concerns others. Calls for more rules and regulation regarding inter alia, disclosure and conflicts of interest remain loud. Whichever side one chooses, the market for this service is growing, the demand enormous, and high-quality cases tend to find high-quality finance providers. Expansion For all the reasons stated above, as well as in the Part 1 of this series, 2017 has been the year of expansion for litigation finance firms. New offices in multiple jurisdictions, new funds that are larger or have innovative structures, and broader services providing the full spectrum of finance and risk management related to legal disputes. A wave of new office launches took place in multiple directions internationally. Litigation finance firms from the U.K. entered the U.S. market, and are eager to establish their business in New York City, Washington D.C., Philadelphia, California, and a number of other locales across the U.S. Strategic recruiting, e.g. of former U.S. judges and biglaw partners, builds strong teams in a constantly growing environment, and makes a career in litigation finance a more and more attractive option. Following the developments in Asia described previously, litigation finance firms have opened their first offices in Singapore. The market is also growing in Canada, where local courts have increasingly embraced litigation finance for the past 15 years. International litigation finance and insurance firms seem attracted, and have ventured into Canada this year. And funds are growing bigger accordingly. The largest players have billions of dollars committed to the legal market, able to invest hundreds of millions in a short period of time. The biggest single litigation investment fund in North America has been raised this year, at $500 million. An increase in size is not the only development, however, since crowdfunding and innovative online platforms play a progressively important role, opening the market to an even broader range of participants. Litigation finance has never been one-dimensional, but has included tailored financing concepts and related services like asset tracing for some time. The progress of portfolio financing shapes the market thoroughly. More recently, the range of available insurance options has developed in the U.S., bringing a new variety of sophisticated services, such as contingency fee insurance and attorney fee insurance solutions which can offer a cheaper hedge compared to financing. All in all, it will be fascinating to watch how things play out in the years ahead. Whatever the outcome, 2017 will certainly be remembered as a transformative year for the nascent industry of litigation finance.   Mauritius Nagelmueller has been involved in the litigation finance industry for more than 10 years. This 2-part article is for general information purposes only and does not purport to represent legal advice. The views and opinions expressed are those of the author and do not necessarily reflect the position of his employer. No reader should act or refrain from acting on the basis of any information related to this 2-part article without seeking the appropriate advice from a lawyer licensed in the recipient’s jurisdiction.
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Kerberos Named Finalist for 2025 CIO Industry Innovation Awards in Private Credit

By John Freund |

Kerberos Capital Management has been named one of only four finalists nationwide for Chief Investment Officer (CIO) magazine’s 2025 Industry Innovation Awards in the Private Credit category.

Each year, CIO magazine honors organizations that demonstrate “truly exceptional approaches to the challenges of institutional asset ownership and asset management.” This recognition highlights Kerberos’ leadership in private credit and its innovative strategies that continue to set new standards in the institutional investing market.

“We are proud to be recognized among the top firms in the country for our work in private credit,” said Joe Siprut, CEO & CIO of Kerberos Capital Management. “This acknowledgment underscores our team’s commitment to innovation, disciplined risk management, and delivering differentiated value to our investors.”

Kerberos’ inclusion as a finalist reinforces its growing national reputation as a forward-thinking investment manager that thrives on tackling complex challenges, seeking to generate alpha from complexity but not from increased risk.

About Kerberos Capital Management

Kerberos Capital Management is an SEC-registered investment adviser and alternative investment manager, providing creative solutions for those seeking capital in special situations. Kerberos’ flagship private credit strategy emphasizes legal assets and other complex collateral. Kerberos manages both a pooled vehicle and separate accounts for institutional and high net worth investors worldwide.

Litigation Funding Voided: Bankruptcy Court Underscores Need for Court Approval

By John Freund |

Litigation finance has become an increasingly utilized tool to support valuable claims in financially distressed bankruptcies. However, a recent decision from the Northern District of Texas—voiding a $2.3 million litigation funding agreement between a liquidating trustee and a funder—has reignited scrutiny over how these arrangements are structured and approved.

An article on McDonald Hopkins's website emphasizes best practices in the wake of that ruling, urging parties to proactively ensure enforceability of funding agreements. Even when plan documents appear to authorize litigation funding, it’s strongly recommended that parties secure explicit approval from the bankruptcy court. Such approval enhances certainty, mitigates future challenges, and solidifies the funder's standing against all estate stakeholders.

Key recommendations from the advisory include:

  • Prepare for judicial and stakeholder scrutiny. Courts are likely to closely examine the economics and procedural fairness of funding agreements. Demonstrating that terms are fair, reasonable, and beneficial to the estate and creditors is essential.
  • Review existing agreements carefully. Funders and trustees should verify that their authority is clearly established in underlying plan or trust documents and confirm whether the arrangement has been properly disclosed and court‑approved. If not, consider options like negotiating revised terms or seeking court ratification.
  • Maintain transparency and documentation. Keep detailed records of communications, payments, and disclosures. Monitor developments in the case for challenges to funding arrangements.
  • Engage experienced bankruptcy counsel. Legal guidance is critical to respond to objections and navigate the nuanced landscape of litigation finance in reorganization contexts.

This ruling serves as a clear reminder: litigation funding in bankruptcy requires far more than a signed agreement—it demands judicial scrutiny and explicit approval. Stakeholders must prioritize transparency, heavy documentation, and procedural integrity to ensure arrangements are respected.

LCJ Calls Out Burford, Fortress for Control Provisions in TPLF Contracts

By John Freund |

A new salvo has been fired in the debate over transparency in litigation finance. Lawyers for Civil Justice (LCJ) has submitted a comment letter to the Advisory Committee on Civil Rules exposing what it says are extensive control provisions in third-party litigation funding (TPLF) contracts—contradicting funders’ public assertions of passivity.

A press release from Lawyers for Civil Justice highlights excerpts from nearly a dozen funding agreements, including contracts involving Burford Capital and a Fortress Legal Assets affiliate, that purportedly grant funders authority to select counsel, approve or reject settlements, and even continue litigation after the plaintiff exits the case. These “zombie litigation” provisions, LCJ argues, represent de facto control by financiers—despite repeated funder claims that they do not direct litigation strategy.

At stake is a proposed federal rule requiring disclosure of litigation funding agreements in civil cases. LCJ’s letter offers ammunition to supporters of mandatory disclosure, citing examples such as a Burford-Sysco agreement that bars settlement without funder consent, and an International Litigation Partners contract that allows the funder to issue binding instructions to attorneys. In one instance, a funder retained the right to continue litigation in its own name even after the plaintiff had withdrawn—raising red flags over who actually drives case outcomes.

Funders like Burford, Parabellum, and Statera have long argued they are “passive investors” and do not “control legal assets.” But the LCJ analysis directly challenges these claims, suggesting a significant gap between public narrative and contractual reality.

If adopted, a federal disclosure rule would mark a seismic shift in how courts assess conflicts of interest and strategic control in funded litigation. For the legal funding industry, the debate underscores a pivotal question: can funders claim passivity while retaining the contractual tools of influence?