Mass tort attorneys and the financial backers who support them find themselves in a precarious situation as drawn-out legal cases delay significant payouts. Two of the most prominent multidistrict litigation (MDL) cases—those against Johnson & Johnson over its talc products and Bayer concerning its pesticide Roundup—remain unresolved even after years of proceedings. With no clear end in sight, the lawyers and their funders are grappling with high-interest loans reaching maturity, forcing refinancing and raising concerns about the sector’s sustainability.
Johnson & Johnson’s talc litigation, which involves allegations that its products cause cancer, has been hampered by the company’s repeated attempts to seek bankruptcy protection. These efforts have postponed an 8 billion dollar settlement, leaving claimants and their attorneys waiting indefinitely. Similarly, legal actions against Bayer over Roundup have reached an impasse. Conflicting rulings in lower courts have increased the likelihood of the U.S. Supreme Court stepping in to resolve the matter, further prolonging the resolution.
These delays are creating ripple effects throughout the mass tort sector. Law firms heavily reliant on contingency fees are now facing mounting pressure. Their operating model, which depends on receiving a percentage of settlements as payment, often requires significant upfront costs to manage cases. Firms typically take out high-interest loans to fund these expenses, using their case portfolios as collateral.
However, as the talc and Roundup cases stretch into their second decade, these loans are coming due, forcing firms to either restructure or refinance. The refinancing process often involves steep costs, such as higher interest rates, increased guarantees, and even operational cuts, leaving firms struggling to stay afloat.
The influx of new lawyers into the mass tort space, combined with a dearth of high-profile cases on the horizon, has exacerbated the financial strain. The litigation finance industry, valued at 15.2 billion U.S. dollars, initially focused on commercial disputes before shifting its attention to mass torts. These cases offer opportunities for funders to deploy large sums of capital across diversified portfolios of cases. However, many anticipated payouts have not materialized, leaving funders and law firms in a difficult position.
Michael Kelley, a partner at Parker Poe who specializes in funding deals, highlighted the issue, stating, “All these loans have maturity dates in them. Those are coming and going, and the question always becomes, what happens?”
Brandon Baer, founder of Contingency Capital, echoed these concerns, describing the situation as a period of “stress and distress.” At a litigation finance conference in September, Baer noted that limited partners pressure funders to deliver returns while borrowers grapple with liquidity shortages.
The industry is also facing what Baer termed a “fallow period,” with fewer major mass tort cases on the horizon. While there are currently about seven prominent mass torts in progress, Baer predicts a lull of three to five years once these cases are resolved. Many law firms will face financial uncertainty during this time as they wait for the next wave of high-value cases.
The reliance on loans with double-digit interest rates, often exceeding 20%, adds another layer of complexity. These loans typically mature within three to four years, and when cases remain unresolved, firms are forced to renegotiate. Refinancing often comes with stringent terms, such as increased collateral requirements or reduced salaries for firm owners, which can strain operations further.
“Nobody makes a bad loan. Bad loans happen over time,” said Andrew Sagliocca, CEO of Esquire Bank, which lends to plaintiffs’ firms. The bank, which often provides loans of up to 30 million dollars, has shifted its focus away from mass torts due to the prolonged timelines. Instead, it now prioritizes single-event cases, such as automobile accidents, which offer quicker resolutions and lower risks.
Lawyers are also finding themselves in increasingly precarious positions. According to Kelley, around 85% of his practice now involves funding arrangements, with a growing portion dedicated to refinancing deals. These arrangements often require firms to make difficult choices, including cutting costs or putting more of their assets on the line. “That’s pretty scary for a lot of the attorneys,” Kelley explained. “Lenders want to see the principals putting more skin in the game.”
As mass tort attorneys navigate this challenging landscape, the sector’s future remains uncertain. The combination of prolonged cases, high-interest loans, and a saturated market has created a precarious environment. For many firms, the ability to weather this period will depend on their capacity to adapt, manage risks, and identify sustainable opportunities.
While the next wave of mass torts may eventually bring renewed activity, the industry’s current state serves as a cautionary tale about the dangers of overleveraging and the importance of strategic planning. Until then, many law firms and their investors will remain trapped in a cycle of debt and uncertainty, waiting for the resolution of ongoing cases and the emergence of new opportunities.
