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Litigation poses a unique challenge for insolvent, distressed or cash-poor claimants—but high-value claims can be among their most valuable assets. Legal finance allows stakeholders to pursue valuable claims that otherwise may have to be abandoned or settled—thus maximizing recoveries for debtors and for creditors. A legal finance provider can monetize claims for companies in reorganization, fund liquidations or litigation trusts, provide capital to law firms or insolvency practitioners to pursue matters taken on risk and finance inter-creditor disputes.

Litigation finance has become a common and integral aspect of discussions surrounding corporate restructuring. It enables the financing and monetization of litigation rights, treating them as valuable assets that can unlock the value of estate assets for creditors and shareholders. As a result, litigation finance deals are now recognized as a significant alternative investment asset class, offering relatively high and uncorrelated rates of returns. However, it is important to note that investing in legal finance carries its own set of risks.

In 2024, as corporate bankruptcies surge in the US, an increasing number of companies are entering bankruptcy with existing litigation assets in addition to avoidance and other claims that arise post-filing. Debtors and creditors should not overlook a tool to generate incremental value for bankruptcy estates: Selling or substantially monetizing large litigations—valuable collateral that has historically been overlooked as a source of incremental value for a debtor.
In this session we will outline some real-life case studies which illustrate the value of legal finance for recovering value for bankruptcy estates.
MagCorp: A mining firm had been involved in a long-standing lawsuit against its former holding company, accusing them of driving them into bankruptcy. After winning a $213 million judgment, MagCorp's bankruptcy trustee faced a shortage of funds to continue pursuing the case. To address this cash flow issue, the trustee and their attorney organized a groundbreaking public auction to sell an interest in the right to receive litigation recoveries from the $213 million judgment on appeal. The sale, which amounted to $26.2 million, allowed the estate to liquidate a portion of its contingent asset, mitigate the risk of the appeal, and ensure a minimum recovery for MagCorp's creditors.
Maines: A large food service distributor filed for voluntary bankruptcy following increased business pressures due to Covid-19 restaurant closures and was acquired by another company. The main assets in the estate were a portfolio of various food antitrust claims that would be hard for the company to pursue due to a lack of personnel and time constraints. The appointed trustees were able to distribute the cash proceeds from the sale of the litigation assets directly to creditors—generating liquidity that they would otherwise not have been able to access and delivering an accelerated and guaranteed financial result ahead of case resolution.
Cox Operating LLC: The recent 363 auction process run by the debtor and its advisor Moelis & Company in the In re: MLCJR LLC Chapter 11 bankruptcy for MLCJR’s subsidiary Cox Operating LLC’s pre-filing litigation claim generated substantial incremental liquidity for the debtor from a litigation claim that in the past may have been overlooked as an independent source of value.

The ethical issues involving Judge David Jones in Texas are in the news all over the world. What lessons to we learn? What obligations do professionals -- both practitioners and judges have to question "connections"? How do we protect our industry which is built on transparency, notice and fairness? What happens when we fail to protect it? Does the public shrug their shoulders and figure that none of it is fair and only the powerful benefit? The mistrust hurts us all and especially in a court system that sees more businesses and individuals than any other. Are we destroying ourselves by regarding this as more of a game and forgetting that this is a profession that is built on trust?

Lenders face a fundamental problem in life: the math, from the onset, favors the borrower. This is nowhere better displayed than in real estate transactions, where most debt is non-recourse and secured at the property level. Much legal work in a real estate transaction can be viewed as an effort to make up for and possibly invert the inherent disadvantages of the lender. This session aims to provide an intuitive, practical understanding of the role of option theory in structuring and valuing the positions of borrowers and lenders.

For many practitioners, courtroom matters often become more routine recitations of settlements or agreed isolated issues to be argued. Likely all practitioners would appreciate a "tune up" on getting through a hotly contested case. Topics might include: pretrial motions (when and how to make); discovery right/procedures/objections; review of burden of proof and burden shifting rules; advice on presenting evidence by witness & common objections; how to get "in the record" the evidence you need - appraisals, valuation, lien position, payments, etc; Expert witness rules.

Debtor estates and other distressed stakeholders can monetize formerly contaminated parcels which have no higher or better use than solar by leasing or selling those assets to specialized brownfields-to-solar developers. These niche developers can buy suitable parcels outright or offer twenty-year leases which can be transferred with the property. The Inflation Reduction Act and renewable energy-friendly states provide significant financial incentives which allow for generous lease rates. Bankruptcy trustees, debtor estates, creditors and other stakeholders have begun exploring this monetization strategy, which can be accomplished out of court, as long as the assets are at least partially remediated.

creation of special “Chapter 11 districts” and the Texas Two-Step

(regardless of what the Supreme Court concludes)

Legislative updates

9th and 10th Circuits have one view, the is another view developing the 2nd Circuit, and the 6th Circuit have some cases being worked through the system.