Four Questions to Keep Litigation Funders Up at Night in 2025

The litigation finance industry enters the new year with growing calls for regulation and complicated questions for funders about where to invest their money.

Litigation finance has grown into a $15.2 billion business as third-party investors pay the cost of lawsuits in return for a piece of court awards or settlements. It continues to face opposition from the US Chamber of Commerce, which is pushing states to take a closer look at outside financers, and facing scrutiny in at least some courts.

Here are a few pivotal questions for litigation funders in 2025.

Will Regulation Ramp Up?

Florida is a possible battleground for 2025 in the fight over mandatory disclosures for parties using outside funding to back lawsuits.

Louisiana, Indiana, and West Virginia were among a handful of states in 2024 that passed legislation requiring some form of disclosure. A similar bill that failed in the Sunshine State is likely to get another push from the US Chamber of Commerce.

Congress could also see another federal bill designed to regulate the industry. Rep. Darrell Issa (R-Ca.) in October introduced legislation that would have required the disclosure of outside funding in civil cases. The bill, which came months after a House Judiciary subcommittee hearing, failed to move.

Issa isn’t the only federal lawmaker targeting funding disclosures who may turn up the heat next year. Rep. James Comer (R-Ky.), Chair of the Committee on Oversight and Accountability, in July asked the Judicial Conference to enact disclosure rules for federal courts.

The US Judicial Conference’s Advisory Committee on Civil Rules agreed to study whether it is necessary to have a nationwide rule requiring disclosure of litigation funding and will create a subcommittee to look at the issue.

Will Burford’s Argentina Investment Pay Off?

Litigation funding giant Burford Capital in 2023 scored a major victory in a case it funded against Argentina, positioning itself for a 37,000% return on an investment in its claims.

Burford is backing a suit seeking to force Argentina to repay shareholders of oil company YPF SA who alleged they were burned by its 2012 nationalization. The funder in 2015 acquired the right to pursue the claims for $16.6 million. Eight years later, a New York federal judge ruled against Argentina and ordered it to pay $16 billion.

It remains to be seen whether Burford will ever get that money. The ruling is currently on appeal and the Justice Department has urged the judge not to force the country to give up its stake in YPF to partially satisfy the court judgment. Burford remains publicly optimistic, even as its investment nears the decade mark. The funder says the DOJ is simply taking a position on a narrow question of law.

Will the Johnson & Johnson Talcum Powder Cases Settle?

Many of the attorneys leading the massive litigation against J&J over its talcum powder products are backed by ligation funders.

The cases, alleging the products cause cancer, have been ongoing for nearly 10 years. An $8 billion settlement has been delayed by the company’s multiple attempts filing for bankruptcy. Infighting among plaintiffs’ attorneys over the influence of litigation finance on the proposed settlement is also slowing the process.

Attorneys from Beasley Allen sued Smith Law Firm and Porter Malouf alleging that the two firms owe it more than $1 million in litigation expenses related to the J&J case. Beasley Allen also says Smith Law and its founder Robert Allen Smith pushed clients to vote in favor of a controversial settlement deal in the case because of pressure to pay off a large debt—"perhaps as high as $240 million"—to its outside litigation funder.

The delay in mass tort settlements has triggered a “refinancing wave” among plaintiffs’ attorneys seeking more money to pay off loans coming due. The longer the wait, the higher the interest rates on those and the smaller the cut that ultimately goes to the lawyers.

What About Judgment Insurance?

In 2023, many litigation funders moved over to insurance brokerage firms with the hopes of getting a head start in a growing sector. Some cases insured with judgment preservation policies have notched big losses since that time, prompting insurers to pull out and rethink pricing.

Insurance brokers have spotted multiple ways to become a part of the legal finance ecosystem by offering products that work in tandem with litigation funding and, at times, in lieu of it. Liberty Mutual, one of the more active insurers in the space, backed out of at least two potential litigation insurance deals after a $1.6 billion judgment it underwrote was reversed. The judgment was insured for between $500 million and $750 million in total.

In October, a judge slashed Quinn Emanuel’s fee for the law firm’s work on a case to $92.4 million from $185 million. Quinn had an insurance policy guaranteeing about 90% of the original fee, leaving underwriters potentially on the hook for about $75 million.

Many in the industry predict price adjustments, with insurance becoming more expensive. Insurers may focus on underwriting portfolios rather than individual cases to hedge risk.