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Trends and Key Developments Impacting the Litigation Finance Market

June 7, 2023

Trends and Key Developments Impacting the Litigation Finance Market

How are inflation and rising rates impacting the litigation funding market? How can funders attract more institutional capital in today’s economic environment? What new products are emerging to disrupt the market? IMN’s 5th Annual Financing, Structuring, and Investing in Litigation Finance event kicked off with an opening panel on “The State of the Market: Where is the Litigation Finance Market Headed?” The panel consisted of Douglas Gruener, Partner at Levenfeld Pearlstein, Reid Zeising, CEO and Founder of Gain (formerly Cherokee Funding & Gain Servicing), William Weisman, Director of Commercial Litigation at Parabellum Capital, Charles Schmerler, Senior Managing Director and Head of Litigation Finance at Pretium Partners, and David Gallagher, Co-Head of Litigation Investing at the D.E. Shaw Group. The panel was moderated by Andrew Langhoff, Founder and Principal of Red Bridges Advisors. There is a lot of experimentation happening in the Litigation Finance market, whether that be single-case financing, portfolio financing, secondaries investment, defense-side funding and other strategies. Regardless of one’s position in the market, it is evident that the Litigation Finance sector continues to grow, both in terms of demand for the industry’s products and in terms of adoption within the broader Legal industry. Interestingly, David Gallagher of D.E. Shaw noted that while both funder AUM and new commitments by funders continue to rise, the rate at which AUM is rising is slowing down while the rate at which new commitments are rising is speeding up. So, there are no longer ‘too many dollars chasing too few deals,’ as was the case for the past several years. William Weisman of Parabellum corroborated that narrative by noting that his phone and the phones of many other funders continue to ring with new deals. And while the majority of cases Parabellum sees are single case funding, there is increasingly demand for portfolio funding. Weisman also noted that there is opportunity in the smaller end of the market, which larger funders can’t focus on due to opportunity cost or LTV reasons. Doug Gruener added that average deal size has indeed trended upwards over the past few years, primarily due to a recent influx in mass tort investments. Nine-figure deals are not uncommon in today’s funding environment. Also, the cost of legal services goes up every year, especially in an inflationary environment, which of course necessitates larger and larger case investments. Charles Schmerler of Pretium noted that pricing is up, but that is relative to the previously muted pricing.  Funders are now able to underwrite in ways that are more sensible, in terms of what investors are looking for. Moderator Andrew Langhoff then asked if demand is up, AUM is up, pricing is up, why are funders having issues raising capital? David Gallagher responded that just because a handful of market participants are having trouble, that doesn’t imply systemic risk. In fact, it underlines the sustainability of the industry, given that specific operators can have problems and the rest of the industry still grows. Charles Schmerler added that in any economy, there will be idiosyncratic distress. This will impact the market. Things shake out, and for funders to succeed, they need to understand what sophisticated investors in the market are looking for. There can be a disconnect there—funders need to understand investors’ needs and exit strategies. The question then turned to duration risk—is this what is causing hesitation amongst LPs? Doug Gruener stated firmly that he’s found that duration risk is not the issue, rather it’s the broader state of the market that is causing some investors to sit on the sidelines, perhaps due to a ‘risk-off’ approach. Another factor that doesn’t help is the age of the industry—this is the 5th annual IMN event, after all—so that FOMO that existed in year one simply doesn’t exist anymore. Reid Zeising of Gain did stress duration risk as an issue, however. “Lesson 101 in Finance,” he reminded, is that “asset and liability should match duration. If you extend your liability beyond your asset, that is the number one way to get in trouble.” Other parts of the discussion centered around regulation (“The Chamber of Commerce is the shill of the Insurance Industry,” according to Reid Zeising), secondaries (“There were a large number of investments made five to seven years ago, so the opportunity is ripe both on the demand side and supply side,” says Doug Gruener), and disclosure (“In the space of disclosure, if both sides could have a reasonable discussion, it might work. But we’re not in a space where both sides can have that discussion,” claims Charles Schmerler). Overall, the first panel at IMN covered a broad range of topics impacting the Litigation Finance sector in 2023. It was a robust and well-rounded discussion, and set the table for subsequent panels which dove deeper into the topics touched upon here.   *Editor’s Note: An earlier version of this article incorrectly stated that David Gallagher noted that new commitments by funders are now falling. Mr. Gallagher in fact stated they are rising. We regret the error. 

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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.