Happy Friday! When is a litigation funding agreement “an abuse of discretion”?
Chief Judge Stacey G. Jernigan ordered that GLS Capital’s $2.3 million funding agreement for a trustee in bankruptcy proceedings be voided and the trustee replaced. In her colorful opinion — which included lines like, “The court is having trouble seeing how ‘the juice will ever be worth the squeeze’ here” and “This is not good” — the judge ruled the agreement was harmful to creditors of a company that oversees 14 restaurant-related entities.
Funders like bankruptcy cases and can get involved in a variety of ways — funding the trustee is common, but they can also fund creditors or the debtor.
Experts like Ken Epstein, who previously worked at Omni Bridgeway and recently opened a litigation finance advisor and broker shop, said the judge’s ruling shows “there’s still very little true understanding of how funding works.” He thinks this instance was an anomaly and is unlikely to result in changes in bankruptcy funding.
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What I’m Reading
My colleague Holly Barker wrote about how Maryland federal prosecutors added allegations against SCOTUSblog co-founder Tom Goldstein, saying he misused his client trust account to conceal income from the IRS in 2021. The revisions also included more details about representations he allegedly made to an unnamed litigation funder when seeking help with tax liabilities and a mortgage loan.
On Thursday, we wrote about a letter Democratic Senators Elizabeth Warren and Ron Wyden sent asking Cantor Fitzgerald Chairman Brandon Lutnick about the firm’s reported interest in a litigation finance product regarding tariffs. Lutnick is the son of US Commerce Secretary Howard Lutnick. Todd Gillespieand Jamie Tarabay reported that the company had internal discussions about facilitating trades around the legal challenges to tariffs, but the idea was rejected.
William Weisman, director of commercial litigation and corporate capital at funder Parabellum Capital, wrote a piece in the National Review about the true size of the litigation finance industry. He argues that the oft-cited $16 billion AUM figure from litigation finance broker Westfleet Advisors is cherry-picked to prop up a false narrative that funders exert outsized influence over the US legal system.
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