Fund Litigation & Distressed Private Debt

Distressed Investment Litigation

Lathrop GPM represents clients in insolvency proceedings, related litigation and out-of-court workouts. The firm’s distressed investment litigation practice covers virtually every aspect of disputes that arise in financially troubled situations, including:

• Breach of fiduciary duty claims against directors, officers and controlling stakeholders of distressed entities
• Preference and fraudulent transfer litigation under federal bankruptcy law and state uniform transfer statutes
• Subordination disputes between competing classes of creditors
• Intercreditor fights arising from complex capital structures and multi-tranche financing arrangements
• Litigation over substantive consolidation of affiliated entities
• Enterprise and asset valuation disputes that determine recoveries across the capital structure

Lathrop GPM’s restructuring attorneys draw on the firm’s capabilities across multiple practice groups — including fund formation and private equity, intellectual property, securities, and corporate governance — to advance client interests as the industry and company profile dictates. This cross-practice integration enables the team to litigate competition issues, intellectual property disputes, fraud claims, structured financial product disputes and corporate governance matters within the restructuring context.

Private Equity Fund Litigation

Lathrop GPM represents funds, fund advisors and their portfolio companies in disputes that draw upon the firm’s litigation strengths and its deep understanding of the private equity fund industry. This includes disputes arising from the fund-formation process, advisory relationships, investment strategies and the regulatory schemes affecting fund sponsors.

Representative dispute types include:

• Capital-structure disputes between holders at different levels of an issuer’s debt and equity
• Lender group versus borrower claims arising from syndicated and bilateral credit facilities
• Internal partner disputes at both the fund level and the investment manager level
• Advisory relationship disputes between fund sponsors and their investors
• Regulatory enforcement matters implicating fund operations and compliance

The team’s knowledge of how funds operate — from formation and capital raising through investment deployment and exit — enables Lathrop GPM to provide clients with a practical edge, whether the matter requires hard-fought litigation or a negotiated workout.

Insurance Recovery & Risk Transfer for Fund and Distressed Debt Matters

Distressed debt and fund disputes frequently involve valuable insurance assets that can significantly affect recovery strategies and outcomes. Lathrop GPM’s team works with clients to identify, preserve and pursue complex insurance claims arising from:

• Insolvencies and distressed investments
• Lender liability disputes
• Professional liability matters
• Other high-stakes financial controversies

In addition to litigation recovery, Lathrop GPM advises fund clients on risk transfer strategies designed to mitigate future exposures, including insurance program structuring, policy audits and reviews, contractual risk transfer provisions, and coverage analysis. By combining restructuring, litigation, and insurance recovery capabilities, the firm helps clients maximize available coverage, unlock additional sources of recovery, and protect their interests throughout the life cycle of a distressed investment.

Frequently Asked Questions

What types of disputes arise in distressed debt investing?

Distressed debt disputes typically involve litigation over competing claims to a financially troubled company’s assets and cash flows. Common disputes include preference and fraudulent transfer actions under federal bankruptcy law, breach of fiduciary duty claims against company insiders, subordination disputes between competing creditor classes, intercreditor fights among lender groups, and valuation disputes that determine how recoveries are allocated across the capital structure. These cases often proceed in U.S. Bankruptcy Court but may also involve state court litigation, arbitration or regulatory proceedings.

What is the difference between fund litigation and general business litigation?

Fund litigation involves disputes arising from the formation, operation, and investment activities of private investment funds — including private equity funds, hedge funds, credit funds and family offices. These disputes require attorneys who understand fund economics, LP/GP relationships, advisory fee structures, carried interest, regulatory compliance under the Investment Advisers Act and the multi-layered capital structures that characterize institutional investing. General business litigation typically does not require this specialized fund-industry knowledge.

Can Lathrop GPM handle both the litigation and the underlying fund transaction?

Yes. Lathrop GPM’s Fund Litigation & Distressed Private Debt practice is part of a full-service platform that includes dedicated fund formation and private equity transactional teams. This means the firm can represent fund clients from initial fund structuring through investment deployment, workout negotiations and — when necessary — litigation. This integrated approach is particularly valuable in distressed situations where transactional and litigation issues arise simultaneously.

How does insurance recovery relate to distressed investment disputes?

Distressed investments and fund disputes frequently involve insurance assets that can significantly affect the total recovery available to clients. Directors and officers (D&O) policies, professional liability coverage, representations and warranties insurance, and other policy types may provide additional sources of recovery beyond the distressed entity’s own assets. Lathrop GPM’s team identifies, preserves and pursues these insurance claims as part of the overall litigation and recovery strategy.

What kinds of clients typically need fund litigation counsel?

Fund litigation counsel is typically engaged by private equity sponsors, hedge fund managers, mezzanine and second lien lenders, institutional bondholders, family offices, unsecured creditor and equity committees, litigation trusts, claim and asset acquirers, and major commercial banks. These clients face disputes ranging from internal partner disagreements to large-scale restructuring litigation involving billions of dollars in claims.