HB Litigation News

Tag: Bankruptcy & Creditors Rights

  • When Litigation Financing Goes Wrong, Who Pays?

    When Litigation Financing Goes Wrong, Who Pays?

    Emerging Litigation Podcast

    Emerging Litigation PodcastProduced by HB Litigation

    Interviews with leading attorneys and other subject matter experts on new twists in the law and how the law is responding to new twists in the world.

    Interested in contributing an article? Email us at Editor@LitigationConferences.com.

    When Litigation Financing Goes Wrong, Who Pays?

    With Crushing Debt Owed to Financiers, Mass Tort Firm Files Bankruptcy 

    By Jennifer Holmes

    The AkinMears LLP bankruptcy serves as a cautionary tale for law firms navigating the high-stakes world of litigation financing—where access to capital can be a lifeline, but financial overreach can lead to collapse.

    In January 2025, Houston-based mass tort law firm AkinMears LLP filed for Chapter 7 bankruptcy, citing over $200 million in debt owed to litigation funding companies Virage SPV 1 ($116.4M) and Rocade Capital ($86M). This filing marks a significant moment in the legal industry, highlighting the financial risks law firms face when heavily relying on third-party litigation financing.

    According to Bloomberg Law’s U.S. Bankruptcy Tracker, AkinMears LLP was the only U.S. law firm filing for bankruptcy in January 2025 with $50 million or more in liabilities. In total, 12 large law firms declared bankruptcy in January 2025, up from seven in January 2024 but slightly below the 17 cases recorded in January 2023.

    The Role of Litigation Funders

    Litigation financing has become a crucial resource for law firms pursuing large-scale mass tort cases. Virage SPV 1 and Rocade Capital are two key players in this space, specializing in providing capital to firms operating on a contingency fee basis.

    • Virage SPV 1: Founded in 2013 and based in Houston, Virage Capital Management LP provides financial solutions to attorneys and law firms, deploying over $1.1 billion across various portfolios. Their funding model allows firms to cover litigation costs, operational expenses, and case acquisitions without an immediate financial burden.

    • Rocade Capital: A private credit firm, Rocade Capital provides flexible growth capital to plaintiff law firms. It emerged as a major litigation finance player after partnering with Barings LLC and EJF Capital, raising approximately $470 million in 2023 to support legal funding initiatives.

    These third-party litigation funding (TPLF) companies evaluate cases based on their likelihood of success. If a firm wins, the funder receives a share of the proceeds, often as a first-priority creditor. If the firm loses, the funder bears the financial loss. However, as the AkinMears case demonstrates, the system carries significant risks for all involved.

    AkinMears’ Previous Financial Struggles

    AkinMears LLP has faced finance-related legal disputes before. In 2015, the firm was embroiled in litigation with financier Amir Shenaq, who was hired to secure funding for mass tort cases.

    According to Shenaq, he helped arrange approximately $90 million in loans for the firm, which was used to finance the acquisition of 14,000 lawsuits from other firms. However, a dispute over unpaid commissions led Shenaq to file a lawsuit, alleging that AkinMears owed him $4.2 million.

    This case underscored the volatility of litigation finance arrangements and the financial strain that firms face when relying heavily on external funding.

    The Risks of Litigation Financing

    One of the biggest challenges in litigation finance is the unpredictable nature of mass tort cases. AkinMears’ bankruptcy suggests that a backlog of unresolved cases, missed payments to funders, and investor pressure created an unsustainable financial situation. The firm’s collapse raises broader questions about the long-term viability of litigation financing as a business model.

    Key Questions Remain

    Should there be greater transparency and regulatory oversight to prevent potential undue influence from litigation funders?

    Should judges be informed when a mass tort case is being financed by a third party?

    Are some cases being extended unnecessarily to maximize payouts for funders and attorneys?

    How can law firms balance the financial advantages of litigation funding with the risks of over-leveraging?

    While litigation financing provides critical resources for plaintiffs and law firms, the AkinMears LLP case illustrates the dangers of misalignment between financial strategies and legal practice. As the legal industry grapples with these challenges, law firms must carefully weigh the benefits and risks of third-party financing.

    Jennifer Holmes is a former journalist turned business writer and analyst. She can be reached at Editor@LitigationConferences.com.

  • Greatly Exaggerated: The Impact of Bankruptcy on Mass Torts with Jennifer Hoekstra

    Greatly Exaggerated: The Impact of Bankruptcy on Mass Torts with Jennifer Hoekstra

    ear plugs on red background

    When large companies face massive mass tort litigation, one way they can survive is to file for bankruptcy protection and reorganize. 

    3M recently put its Aearo Technologies subsidiary into bankruptcy in the face of more than 230,000 claims that’s its defective earplugs caused hearing loss.  When it came to filing bankruptcy 3M said Aearo was solely responsible for the product. But for several years of litigation 3M argued that it, as the parent, was solely responsible, not its various subsidiaries. That was a strategy that was beneficial to the company in multidistrict litigation.

    Why did 3M suddenly change course? What impact does bankruptcy have on claimants? Could corporations use bankruptcy law to neuter mass tort litigation for all eternity?  And how did the strategy sit with the federal magistrate judge overseeing the multidistrict litigation?

    Joining me to discuss this incredibly complex litigation is Jennifer M. Hoekstra, a partner with Aylstock Witkin Kreis & Overholtz. Jennifer has been involved in all varieties of complex litigation since 2007, focusing on mass torts, drug and device litigation, and others.  She has a J.D. from Tulane, which she earned while also completing a certificate in Environmental Law. She has actively served as trial counsel or an integral member of the trial team in several of the 3M Earplug trials securing nearly $300 million in compensatory damages for military veterans. Jennifer shared her insights on the intersection of complex mass torts and bankruptcy, an intersection that wasn’t originally on her roadmap.

    This podcast is the audio companion to the Journal on Emerging Issues in Litigation. The Journal is a collaborative project between HB Litigation Conferences and the Fastcase legal research family, which includes Full Court Press, Law Street Media, and Docket Alarm. The podcast itself is a joint effort between HB and our friends at Law Street Media. If you have comments or wish to participate in one our projects please drop me a note at Editor@LitigationConferences.com.

    Tom Hagy

    (actual size)

    Tom Hagy
    Litigation Enthusiast and
    Host of the Emerging Litigation Podcast
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    P.S. During the podcast I mentioned an article and wanted to share the link. It’s called “Bankruptcy Grifters” by Lindsey D. Simon. It was published in the Yale Law Journal.

    Jennifer Hoekstra

    Jennifer Hoekstra

    Jennifer M. Hoekstra is a partner with Aylstock, Witkin, Kreis & Overholtz, PLLC. A native of Saint Paul, Minnesota, Ms. Hoekstra boasts an impressive academic and professional record, including graduation from two of the nation’s top schools. She earned her Bachelor of Arts in Environmental Science from Columbia College, Columbia University in the City of New York. She relocated to Louisiana to attend Tulane Law School, where she earned her J.D. while also completing a certificate in Environmental Law. During her law school career, she spent a semester studying at the University of Wisconsin School of Law and visited on their International Law Journal as a Junior Member during her Hurricane Katrina evacuation semester.

    Ms. Hoekstra has been involved in complex litigation cases of all forms since 2007. Ms. Hoekstra has earned a solid reputation as a skilled writer and researcher, and plays an integral role in several complex litigation cases, practicing in the areas of Pharmaceutical Mass Torts, Defective Device Mass Torts, and other complex litigation. She is currently a member of the Proton-Pump Inhibitors Plaintiff Executive Committee and the 3M Earplugs MDL Discovery and ESI Committee.

    Jennifer was central to the successful outcome in bellwether trials in the Genetically Modified Rice, Actos and DePuy Pinnacle Hip MDLs with more than $11 Billion in trial verdicts resulting from those cases. She has actively served as trial counsel or an integral member of the trial team in several of the 3M Earplug trials securing nearly $300 Million in compensatory damages for military veterans.

    She is licensed to practice before all Louisiana state and federal courts and the U.S. District Courts for the Northern District of Texas and Eastern District of Missouri as well as the 5th and 8th Circuit Courts. She is a member of the American Bar Association, the Louisiana Bar Association, the Acadiana Federal Bar Association, the Alexandria Louisiana Bar Association and the American Association for Justice. She is a member of Women En Mass, founding member of the board for the Society Women Trial Lawyers and was also a member of the inaugural 2018 Board of Directors for Emerge Louisiana.