is now
is now
is now
Litigation finance agreements depend entirely on lien priority. Ferrum argued that the defendant had taken out a secondary, undisclosed loan from another funder on the same settled case. When the settlement funds were distributed, the secondary lender was paid first, effectively subordinating Ferrum’s lien without their consent. This, Ferrum claimed, constituted tortious interference with their contractual rights.
The 2021 Ferrum Capital lawsuit stemmed from a funding agreement entered into sometime in late 2019 or early 2020. While the full details of the non-disclosure agreement (NDA) involved restrict public access to some specifics, court records (primarily filed in New York State Supreme Court and the U.S. District Court for the Southern District of New York) reveal the following:
The agreement allegedly contained standard provisions for litigation funding: a non-recourse loan against future settlements, coupled with a priority lien on any proceeds. ferrum capital lawsuit 2021
New York usury laws cap interest rates on loans at 16% for corporations (and 25% for non-bank lenders). The defendant argued Ferrum’s 2.5x multiplier effectively represented an annual interest rate exceeding 150%—making the agreement criminally usurious and thus unenforceable. Ferrum countered that litigation funding is not a "loan" but an "investment" in a legal asset, exempt from usury laws. This became the central legal battleground.
By late spring 2021, the merger was on life support. The SPAC market was cooling off from its Q1 frenzy, and regulatory scrutiny was rising. The drop-dead date passed. The deal died. so you don't get the fee."
Ferrum then came calling for its $5.25 million breakup fee.
Hightower refused to pay. And here is where the lawsuit gets spicy. the secondary lender was paid first
Ferrum alleged that Hightower deliberately torpedoed the merger to avoid closing the transaction. In legal terms, Ferrum invoked the doctrine of “anti-sandbagging” and implied covenants of good faith. The complaint claimed that Hightower executives engaged in “intentional, bad-faith conduct” designed to let the deadline lapse, thereby triggering the breakup fee structure—but from the other side.
Hightower’s counter-argument? The merger failed due to market conditions, not their actions. They claimed the breakup fee was unenforceable because Ferrum had failed to actually secure the $35 million in committed capital. In other words: "You didn't have the money ready, so you don't get the fee."