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.