Talcum Law Firm Accuses Litigation Funders of ‘Pirating’ Cases

A Mississippi-based plaintiffs’ firm accused three large investment firms of fraudulently inducing it to enter into two loan agreements on false grounds for talcum powder litigation.

The Smith Law Firm filed suit Wednesday against Ellington Financial, ICG Investments, and Stifel Financial alleging that funders misrepresented the availability of funds for a second tranche of a multi-million-dollar loan and conspired to gain control of the firm and its talcum powder litigation.

“The Defendants have executed what is commonly referred to as a ‘loan to own’ scheme,” counsel for Smith Law firm at Carner & Rosemon wrote in the amended complaint filed in US District Court for the Southern District of Mississippi. “From the outset the Defendants conspired to defraud SLF knowing that this fraud would most likely result in SLF defaulting on its SLF1 loan interest payments and quarterly talc expenses which would allow the Defendants to pirate the SLF case fees.”

Ellington and Stifel did not respond to a request for comment. Robert Allen Smith, the founder of Smith Law Firm, and his attorney at Carner & Rosemon, PLLC, did not respond to a request for comment.

A spokesperson for ICG said “We are in an ongoing legal process and therefore unable to comment further.”

According to the complaint, the three institutions provided loans to the firm for “tens of millions of dollars.” The loans funded the law firm’s operations and supported the firm’s involvement in long-running litigation against Johnson & Johnson alleging its baby powder was tainted with cancer-causing asbestos. Smith Law says it brought the first case that went to trial in South Dakota in 2009. J&J denies allegations that its talc products caused cancer.

It is now a multi-district litigation and faces more than 73,000 suits from consumers who blame baby powder for their cancers.

After the talcum powder litigation was delayed by multiple bankruptcies filed by Johnson & Johnson, Smith Law says it submitted a request to draw on the second portion of the loan, around $30 million, but was denied. The firm could not meet its required cash interest payments due on the first loan and was put in default, they wrote in the complaint.

Smith Law further alleged that the funders only included the $30 million tranche to artificially increase the overall size of the loan so it could be placed in a Collateralized Loan Obligation, which is a structured security that bundles lower-rated corporate loans and sells them to investors.

The three investment firms manage billions of dollars and litigation finance is only a portion of their portfolio. Stifel is a global wealth management and investment banking company that manages over $550 billion in client assets. ICG is an alternative asset manager with $127 billion in assets under management. Ellington acquires and manages mortgage-related, consumer-related and corporate -related financial assets and has $18.2 billion in assets under management.

Smith Law has been involved in the talcum powder litigation for nearly 17 years, filing its first case in 2009. In that time, Johnson & Johnson has filed three separate bankruptcy proceedings, all of which were dismissed.

In 2013, Smith Law pursued a joint venture regarding the talcum powder litigation with law firms Beasley Allen and Porter Malouf. Smith Law eventually bought out Porter Malouf’s interest with a loan from ICG, according to the complaint. The joint venture consists of 11,500 talcum powder cases. Smith Law claims that the reason it felt comfortable buying out Porter Malouf was because it believed it had access to the $30 million in funds.

In 2024, Beasley Allen sued Smith Law and Porter Malouf alleging the two firms owe it more than $1 million in litigation expenses. The suit also claimed Smith Law’s 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 case is still ongoing and in February the judge enforced the indemnification provision of the purchase agreement for the talcum powder litigation and ordered Smith Law to defend Porter Malouf in the suit and pay for all of its fees and expenses.

The case is: The Smith Law Firm, PLLC v. Ellington Financial Inc. et al, S.D. Miss., 3:26-cv-00101, 2/11/26