Napoli Shkolnik PLLC, a prominent law firm poised to earn over $100 million for its involvement in opioid litigation, is taking an innovative approach by packaging its fees and selling them to investors as securities, according to a Securities and Exchange Commission (SEC) filing. The firm’s earnings are part of approximately $1.3 billion in settlements with major opioid manufacturers and pharmacies, including McKesson, Janssen, CVS, and Walgreens.
This maneuver highlights the growing intersection between law firms and investors, with securitization emerging as a common tool within the $15.2 billion litigation finance industry. This industry sees outside funders backing lawsuits or investing in yet-to-be-paid settlements, particularly in mass tort cases. Law professor Samir Parikh of Wake Forest University suggests this trend is increasing in sophistication and introducing new players into the litigation landscape, although its implications remain a subject of debate.
Securities have traditionally been used to package auto loans, credit, and other types of loans for investors. For law firms awaiting large settlement shares, securitization provides immediate access to cash while mitigating risk. This financial strategy is not unprecedented; in the late ’90s, some states and counties securitized parts of settlement awards from tobacco company lawsuits. However, details of similar financial moves by law firms are typically not disclosed.
Napoli Shkolnik’s SEC filing offers a rare look into how a leading mass tort law firm plans to monetize its current and future earnings. The document outlines at least one settlement, its payout timeline, and the firm’s share. Noteworthy is the involvement of Fortress Investment Group, which has supported Napoli Shkolnik in various cases, while litigation funder C Cubed Capital Partners is managing the securitization process.
Representing plaintiffs in opioid-related cases, Napoli Shkolnik played a key role in negotiating a $6 billion settlement with TEVA and AbbVie, scheduled to be paid to state and local governments. The firm also helped Ohio’s Cuyahoga County secure a $260 million settlement in litigation against multiple pharmaceutical companies, including McKesson and Teva.
Overall, companies implicated in opioid litigation are expected to pay approximately $21 billion to resolve the suits. While the SEC document does not disclose the total earnings Napoli Shkolnik expects from these settlements, it does reveal that the firm will receive 15% of annual payments from Janssen, amounting to over $27 million over seven years. This rate applied to other settlements could yield the firm as much as $126 million over several years.
Mass tort litigation funding is a controversial yet pivotal mechanism. Lenders often provide loans with interest rates exceeding 20% to plaintiffs’ firms, which advocates argue levels the playing field against financially robust corporations. Such funding mechanisms have allowed law firms like Napoli Shkolnik to sustain prolonged legal battles and secure substantial settlements on behalf of their clients.