Litigation Funding Risk — Firm Avoids Probe on Litigation Funding, Insurers Called “Inconsistent” on Lawsuit Investor Activity, Trends in Patent Litigation Funding

“Insurers Wage ‘Logically Inconsistent’ War on Lawsuit Investors” —

• “Some of the largest US insurance companies are ramping up attacks on litigation funders, even as their peers offer related products.”
• “Insurers blame outside funders behind plaintiffs’ lawyers in mass tort cases—like those alleging harm from talc, opioids, and weedkiller Roundup—for flooding the courts and driving up premiums. They’ve promised to keep up the pressure after legislation to impose a 40% tax on funders stalled in Congress, including by refusing to write policies for litigation finance companies.”
• “But the pushback extends beyond the funders fueling mass tort suits. It also targets those who put money behind a wide range of commercial disputes, including many for which insurers offer their own contingent risk policies.”
• “‘I find it logically inconsistent,’ said Ed Gehres, managing partner at Invenio LLP, a law firm focused on litigation finance transactions. ‘Whether they like it or not, the insurance companies cannot escape the fact that they are participants in the monetization of litigation.’”
• “Major insurance brokerage firms like Marsh McLennan, Lockton, Willis Towers Watson, and Alliant offer litigants and law firms policies covering contingent risk. The policies underwrite case dockets, allowing policyholders to get cheaper capital from funders. Some insurers will also directly underwrite funders’ investments.”
• “Still, insurers have joined the chorus of corporate interests to bring more regulation to the $16.1 billion litigation finance industry. Nationwide, Liberty Mutual, and Sentry were among the massive insurers who lobbied on the litigation finance tax bill, public records show.”
• “The leaders of Chubb and Marsh McLennan pledged to continue fighting the industry after the measure was dropped from the sweeping tax and spending bill signed by President Donald Trump on July 4. They said rising jury awards for car accident cases have spiked the price of auto insurance, and blamed litigation finance for driving advertising in mass tort cases.”
• “Marsh, an insurance broker and subsidiary of Marsh McLennan, places contingent risk policies but does not work with litigation funders, according to Daniela Raz, a senior vice president for the company. Raz worked at litigation funder Omni Bridgeway before joining Marsh in 2023 to work in its contingent liability group.”
• “‘Litigants and law firms on the plaintiff side of ‘the v’ seek out insurance solutions for a number of reasons, including that they can retain more proceeds than they would in an uninsured litigation finance transaction,’ she said. ‘Marsh helps those clients by sticking to our knitting, which is insurance.’”
• “Contingent risk policies put insurers at odds with their messaging. The product is often used in the M&A context, insuring against litigation to help a deal move forward, but there are also a variety of products used by and in tandem with litigation funders.”
• “WIP, or ‘work in progress’ insurance, allows law firms to insure their case dockets. The firms can then take out loans from funders against the policies. Funders will also insure their deals to protect their investment or provide funding to pay premiums to insurance companies.”
• “‘Law firms focused on consumer litigation, including mass tort and personal injury cases, raise more concerns for insurers because the defendants in those cases are typically insured,’ said Raz. ‘Conversely, commercial litigation firms specialize in cases alleging claims like antitrust, contract, and IP, in which there is typically no insurance on the defense side.’”
• “The litigation finance industry is typically broken up into two different categories: those who finance commercial cases like antitrust, breach of contract, and intellectual property, and those who issue loans to mass tort and personal injury law firms against their docket of cases. Some funders participate in both areas.”
• “Consumer legal funding involves loans directly to plaintiffs, rather than their lawyers. The loans, against a potential award in a pending legal claim, are used for claimants’ personal expenses, not litigation.”
• “‘It’s three distinct buckets and three distinct purposes,’ said Eric Schuller, president of the trade group Alliance for Responsible Consumer Legal Funding. ‘So why are you lumping them all together and saying we’re going to do a one-size-fits-all?’”
• “For Stef Zielezienski of insurance industry trade group American Property Casualty Insurance Association, the different types of funding are similar enough. The group, which says its members include 1,200 insurance companies, has lobbied on new regulations.”
• “‘The whole thing is third-party litigation finance,’ said Zielezienski, APCIA’s executive vice president and chief legal officer. ‘I prefer to package it together.’”

“J&J Loses Bid To Probe Beasley Allen Talc Litigation Funding” —

• “A special master found Monday there is no reason to believe third-party funders are influencing Beasley Allen Law Firm’s decisions in a massive talc litigation in New Jersey, defeating a subpoena from Johnson & Johnson digging into alleged third-party litigation funding.”
• “Special master Joel Schneider said in an order that the mere fact that Beasley Allen has opposed various settlement offers from the pharmaceutical giant in the multidistrict litigation over J&J’s talcum powder products is not evidence the firm is being controlled by litigation funders; the parties simply disagree about the value of the claims, he said.”
• “‘This is not the first nor will it be the last MDL where counsel for plaintiffs and defendants differ about the settlement value of plaintiffs’ claims,’ Schneider said. ‘Defendants’ effort to portray [Beasley Allen] as a lone wolf with regard to settlement is unavailing.’”
• “Schneider rejected J&J’s argument that it has a ‘right to get to the bottom’ of any possible third-party litigation funding at Beasley Allen. Beasley Allen represents thousands of clients in the multidistrict litigation in the District Court of New Jersey.”
• “Schneider denied a similar discovery request from J&J in July 2024 and said Monday that no new information had come to light to persuade him to decide differently.”
• “‘The [special master] finds that no new relevant developments have been revealed to alter the [special master’s] previous order and, accordingly, defendants’ motion will be denied,’ Schneider said.”
• “In the time since the last ruling on J&J’s third-party litigation funding subpoena on Beasley Allen in July 2024, J&J has pursued a $9 billion settlement via bankruptcy in Texas which was ultimately dismissed in March.”
• “In the New Jersey case, the company claimed that alleged voting irregularities on Beasley Allen’s part during the Texas bankruptcy, as well as the firm’s general opposition to approving that plan, warranted a closer look at any possible third-party litigation funding.”
• “Schneider turned down that argument on Monday, saying ‘voting issues and disputes that arose in the Texas bankruptcy are far removed from the present litigation financing discovery dispute.’”
• “He added that, regarding Beasley Allen’s decision to oppose the Texas bankruptcy settlement, that ‘now is not the time or context to address tangential fact disputes not related to the merits of this action.’”
• “According to Schneider, J&J mounted a new argument at oral argument that Beasley Allen is using its clients’ claims as collateral for different loans, but he said there is also no evidence to support that argument.”

“Trends in Transparency in Patent Litigation Funding” —

• “Over the past decade, third-party litigation funding (TPLF) has risen to prominence in U.S. patent litigation. The high cost of patent litigation can create an obstacle for cash-strapped inventors and non-practicing entities, who increasingly seek out third party funders to fund their patent monetization or enforcement strategies.”
• “At the same time, funders have discovered that the high stakes—and high returns—of patent litigation can create an attractive investment vehicle. Given that alignment of interests, it is no surprise that TPLF in patent cases has surged over the past decade, with some estimates indicating that as of 2021, nearly a third of all patent litigation is now funded.”
• “One key issue that has arisen in funded patent litigation is transparency—in other words, to what extent must funder involvement in a patent infringement action be revealed? This article tackles this issue of transparency in litigation funding of patent cases, and discusses practical impacts for companies involved in patent litigation that may be funded.”
• “The surge in litigation funding has been met with a cry for transparency, not only by companies sued in patent cases, but also by lawmakers.”
• “Three main concerns that have been driving these demands for transparency in TPLF. The first stems from the traditional concepts of procedural jurisprudence and how those issues may be impacted by funder involvement.”
• “Funders may often retain settlement vetoes, select counsel, or drive appeals in ways that some may argue serve investment return profiles more than commercial reality. These issues, if not properly addressed, can be at odds with settled legal and judicial principles, such as conflicts of interest and standing.”
• “These concerns militate against secrecy in funding, and favor transparency, so that conflicts of interest can be fully vetted, the various rules of ethics properly adhered to (e.g., who are the decisionmakers in any given case—the client, or an outside investor), and questions of standing can be properly tested.”
• “Secondly, businesses that are more often on the defense side, and which do not typically rely on litigation funding, will rightly tend to view a lack of transparency on TPLF as unfair, and contrary to their interests.”
• “As a recent example, on Oct. 2, 2024, a group of the largest U.S. corporations signed a letter to the Judicial Conference, urging the Advisory Committee on Civil Rules (Committee) to amend the Federal Rules of Civil Procedure to adopt a uniform rule regarding TPLF disclosure.”
• “The letter cites Federal Rule of Civil Procedure 26(a)(1)(A)(iv) requiring defendants to disclose insurance agreements, to argue that this should apply to plaintiffs for TPLF, under the same rationale that transparency ‘will enable counsel for both sides to make the same realistic appraisal of the case, so that settlement and litigation strategy are based on knowledge and not speculation.’”
• “Other district courts have employed similar local rules requiring disclosure of parties with financial interests, such as Northern District of California’s Local Rule 3-15 and District of New Jersey’s Local Civil Rule 7.1.1.”
• “However, even in districts that allow for discovery into TPLF, courts often require a showing of relevance or good cause, e.g., where the funder has authority to make material litigation or settlement decisions, where there are inadequate protections for interests of the parties, or where there may be conflicts of interest.”
• “The most recent cases have largely continued this trend, with courts evaluating TPLF-related discovery requests on a case-by-case basis, generally granting discovery into the identities of funders, but denying further discovery absent a specific showing of relevance. Samesurf, Inc. v. Intuit, Inc., No. 22-CV-412, 2024 WL 4994338, at *1 (S.D. Cal. Dec. 4, 2024); see also Haptic, Inc. v. Apple, Inc., No. 24-CV-02296, 2025 WL 1569306, at *3 (N.D. Cal. June 3, 2025) (holding valuation-related documents to be relevant but protected by work-product privilege); Entangled Media, LLC v. Dropbox Inc., No. 23-CV-03264-PCP (VKD), 2025 WL 1069896, at *4 (N.D. Cal. Apr. 8, 2025) (allowing partial discovery into a security agreement showing funder’s security interest in the asserted patents).”