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A major legal dispute playing out in London's High Court is drawing fresh attention to the structural tensions that can arise when hedge funds finance large-scale litigation — and what happens when the financial interests of a funder and the legal interests of claimants begin to pull in different directions.
The dispute involves a £36 billion lawsuit, brought by more than 420,000 individuals in Brazil and around the world, following the collapse of the Fundão tailings dam in Mariana, Brazil on November 5, 2015. The dam collapse, one of the worst environmental disasters in Brazilian history, resulted in the deaths of 19 people and caused large quantities of iron ore tailings to flow down hundreds of kilometers of rivers. English court proceedings have already found BHP and Vale, the two companies which owned and operated the Fundão tailings dam through their joint venture Samarco, jointly liable for the disaster. The subsequent trial of the matter is to be a trial on quantum (the amount of compensation to be awarded) which is due to start in April 2027.
Litigation in this case has been financed by Gramercy Funds Management, a $9 billion+ hedge fund based in the US. Gramercy has committed more than $700m to Pogust Goodhead in the Fundão case.
Gramercy Funds Management’s Robert Koenigsberger and Pogust Goodhead chief executive Tom Goodhead had a phone call in June 2025, during which they discussed BHP and Vale’s settlement offer of around $1.4 billion (about £1.15 billion). Goodhead was scathing of the offer which he believed was far too low for a claim of this size, but Koenigsberger, as a fiduciary for his fund and its investors, was very concerned about the risks of proceeding to trial. In the end Goodhead’s views were not those which prevailed, and within 8 weeks the Chief Executive had been removed from his position at the law firm, a move supported by Gramercy.
After eight weeks Goodhead was removed as Chief Executive of his law firm by Gramercy who were acting as a fiduciary to the fund’s investors. Goodhead’s removal was for cause – due to his Financial Conduct allegations that he had secretly incurred large sums of expenditure at the firm that would be justified for a large law firm but not for Pogust Goodhead. Goodhead had disclosed all of his expenditure at the firm which he believed to be proper for a firm of its size.
Goodhead told the FT that he believed the reason for his removal from the law firm he set up was connected to Gramercy pressurizing him to settle BHP and Vale’s liability for less than the £36bn claim. However, Gramercy denied the two events were linked.
In a surprising twist to this case a client committee consisting of claimants has appointed Bailey Glasser International, a new UK arm of a leading US class action law firm to take over the case. Tom Goodhead, the man at the center of the funding dispute has joined Bailey Glasser. The new team of lawyers will be financed by NorthWall Capital, another third party litigation funder.
Pogust Goodhead is disputing the claimants’ client committee’s decision to change their legal representation in the High Court. The claimants’ client committee has been instructed by the new class action lawyers, Bailey Glasser International, a UK arm of a US class action firm, and Pogust Goodhead says that the client committee does not have the power to remove them from the case and that such a change could have ‘dire consequences’ for the litigation, including disrupting ‘significant contracts, funding structures and insurance arrangements’ which have been put in place over the last few years. The Solicitors Regulation Authority is monitoring the situation.
As the third-party litigation funding industry continues to grow, interest in this case is being drawn from across the globe as the issues surrounding the case expose fundamental conflicts that affect the successful delivery of justice through litigation. The nature of a funders legitimate interests in relation to risk management versus their inappropriate influence over the legal strategy of a case are issues that are currently gaining increased attention from the courts and from the regulators in both the US and in the UK.
We looked at the growing industry of litigation finance in Miami two weeks ago, including the issue of opaque offshore structures and the call for greater disclosure. None of the specific parties involved in the BHP case have been opaque in this regard, however, making it the most high-profile example of these issues right now.
The outcome of the case will be watched not only by those directly involved but also by others who work in the area of third party funding, lawyers, funders and regulators across the world.
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