Litigation Funder Certum Launches MSO Aimed at Mass Tort Firms

Another litigation funder is investing in the law firm space, by taking over a managed service organization to provide pre-litigation support for mass tort and personal injury firms.

Texas-based Certum Group, which specializes in litigation finance and related insurance offerings, acquired a managed service organization in October. Rechristened Certum Legal Solutions, the MSO has already partnered with several firms working on a fees for services basis, but will consider acquiring stakes in law firms down the road, said Certum Group’s managing director David Diamond.

Litigation funder Burford Capital in August said it was exploring MSOs and other options for investing in firms, while Big Law’s McDermott Will & Schulte said last month it is considering selling a stake in the firm to outside investors.

“I think it’s an interesting strategy for litigation funders to kind of diversify what has traditionally been their bread and butter approach here involving debt instruments to look at equity opportunities,” said Josh Porte, a partner at Holland & Knight who advises on MSO transactions.

The service organizations, increasingly seen in the healthcare and accounting industries, are getting a closer look in the US legal market as a way for firms to raise capital and steer clear of restrictions on direct investments in most states. Some MSOs are entities spun off from law firms so that outside investors can take direct stakes, while others are created to offer services directly to firms. Certum is part of the latter camp.

Interest in MSO deals was already on the rise, but Burford’s announcement has added a boost, said Trisha Rich, a partner at Holland & Knight that works with Porte.

“This was already happening and we could tell it was going to get busy, but I don’t really think we predicted it would be like this,” she said. “It’s exploded.”

Certum Legal CEO Asim Badaruzzaman built the MSO last year inside New Jersey law firm Sbaiti & Company, where he serves as partner and chair of the mass tort practice group. The firm has handled cases in major mass torts, including litigation over injuries and illnesses allegedly caused by water contamination at Camp Lejeune, PFAS “forever chemicals,” and weedkiller Roundup.

“There is a lot of hunger in the market for operational expertise,” he said. “We can provide them all the infrastructure to be able to manage the complexity that comes with, especially on the mass tort side, managing thousands of cases.”

The MSO will continue to service Sbaiti while also taking on other firms, although Badaruzzaman declined to name them. The company will handle case intake and discovery support tasks done by a mix of attorneys and non-lawyers. Certum Legal has proprietary tools to manage integration with medical records providers, an app that allows the MSO to communicate with clients directly, and uses automation to receive documents, Badaruzzaman said.

“Ultimately this is a much more economical solution for law firms, especially when you don’t have an existing infrastructure,” said Badaruzzaman.

Mass torts and personal injury law are “ground zero” for MSOs, according to Rich. She said her team has about 40 different projects right now, with about half in personal injury or mass torts.

Litigation funders have already been pouring money into these kinds of suits, with many providing loans to mass tort firms against their docket of cases.

Milan Markovic, a law professor at Texas A&M University, has studied deregulation efforts in places like Arizona, which allows non-lawyers to own law firms through entities called alternative business structures.

Private equity firms and litigation funders have flocked to the state.

MSOs are an easier way for outside capital to enter the legal space, according to Markovic.

“It’s definitely a bit of a gray area, particularly as we get down to the brass tacks of individual agreements,” he said. “People are using that as a way to get firms involved without going the full alternative business structure approach.”

Porte at Holland & Knight said they’re currently working with a funder on an MSO transaction. Regarding funders’ longer-term strategies to diversify he said, “I’m excited to see how all that plays out over the next few years. It’s gonna be fun.”