In a bold move that blurs the lines between legal practice and financial innovation, a New York-based law firm is transforming its future legal fees from opioid litigation into securities for investment. Napoli Shkolnik PLLC, a prominent player in mass tort litigation, has packaged its anticipated earnings from approximately $1.3 billion in settlements with opioid manufacturers and pharmacies—including giants like McKesson, Janssen, CVS, and Walgreens—into a new financial product. These settlements, detailed in a Securities and Exchange Commission filing, mark the company’s strategy to monetize anticipated profits upfront.
This approach reflects a growing trend where law firms and investors intersect, particularly through securitization—a financing tool traditionally reserved for assets like auto loans or credit card debt. By securitizing the payouts from legal settlements, firms such as Napoli Shkolnik can access immediate funds, thereby spreading financial risks and bolstering cash flow while awaiting the staggered settlement payments.
Observers like Samir Parikh, a law professor at Wake Forest University who specializes in mass torts financing, note the increasing sophistication and systematization within the sector. “This trend is a double-edged sword,” Parikh remarks. “While it provides law firms the capital needed to take on big defendants, it also escalates the stakes of mass tort litigation, possibly intensifying legal battles.”
Historically, the concept isn’t new. Various states and counties leveraged similar financial mechanisms in the late 1990s, securitizing parts of their massive tobacco lawsuit settlements. Those cases provided precedents but remained shrouded in privacy, unlike the transparency seen in Napoli Shkolnik’s recent SEC filings.
In detailing the financial underpinnings of such deals, the law firm revealed its plan to capitalize on its role in negotiating hefty settlements linked to the opioid crisis. These include a combined $6 billion settlement with pharmaceutical companies such as TEVA and AbbVie, aimed at compensating state and local governments for the widespread public health fallout.
Despite the firm’s reticence to publicly discuss its financial strategies, the SEC document sheds light on the substantial payouts expected. Over several years, Napoli Shkolnik could amass over $126 million in legal fees alone, based on receiving a 15% cut of the annual payments from just one of these agreements.
Backing such ventures, entities like Fortress Investment Group and C Cubed Capital Partners play crucial roles. Fortress has supported Napoli Shkolnik since 2018, funding a range of cases pertaining to medical-related injuries or deaths, while C Cubed is actively managing the securitization process.
Critics and proponents of litigation financing continue to debate its impacts. Detractors condemn the practice as fueling frivolous lawsuits, whereas advocates argue it levels the playing field against financially robust corporations, particularly in litigation as consequential as opioid accountability.
Ted Farrell, founder of Litigation Funding Advisers, defends this approach as essential for justice. “The devastation wrought by opioid manufacturers is undeniable,” he states. “Financing like this empowers plaintiff firms to hold large corporations accountable.”
This financing model, both remarkable in its scope and typical of corporate finance strategies, represents a novel pathway for law firms navigating the costly landscapes of high-stakes litigation. As legal practices evolve, the intersection of law and finance grows ever more complex, reshaping how justice is pursued and how legal battles are funded.