The law firm, the hedge fund and the fights behind a £36bn lawsuit
Litigation over the Mariana disaster in Brazil was overshadowed by tension between Pogust Goodhead and its backer
At around 3.45pm on November 5 2015, a radio message crackled in the pick-up truck of a tree-planting team contracted by Brazilian iron ore producer Samarco.
The Fundão tailings dam, which stored the waste from Samarco’s Germano mine near Mariana, had burst. One of the workers, Paula Geralda Alves, immediately realised that her home village of Bento Rodrigues was in peril. “We heard a noise,” she recalls. “It sounded like ocean waves, a plane and helicopter all together.”
The mother of one jumped on her motorcycle and raced to warn fellow villagers. Alarmed residents clambered up a hill and watched as Bento Rodrigues was engulfed.
“It came destroying everything, like a monster,” recounts Alves, now 46. “Cars, animals, dogs, chickens, a school bus turning over and sinking. All covered in mud.”
The Mariana tragedy, which killed 19 people and sent a tsunami of sludge down the Rio Doce as far as the Atlantic Ocean, polluting waterways and wrecking livelihoods, is now the subject of a £36bn lawsuit being brought in London. A ruling on liability is imminent.
On one side stand mining companies BHP of Australia and Brazil’s Vale, which jointly own Samarco. On the other are over 620,000 alleged victims of what became Brazil’s worst environmental disaster. They say they have been denied justice in the South American country.
Their case, the largest mass lawsuit in British legal history, has been brought not by an established “magic circle” law firm but by a relatively young one, Pogust Goodhead.
But as the judgment nears, the law firm is in turmoil following a power struggle with Gramercy, the US hedge fund whose $750mn plus of financing for the firm as a whole has turned the legal outfit into a major player in class-action litigation.
In August, Gramercy appointed a receiver to Pogust Goodhead, following alleged breaches of some terms of its loan. This set off a chain of events that led to the departure of its founder, Tom Goodhead, sparking a wave of resignations and casting doubt on the future of the Mariana case.
The affair has also put a spotlight on the role of litigation funders, who finance class-action lawsuits, or the law firms that bring them, in return for a share of any payout or settlement. The practice began gathering pace in the UK in the 1990s, but took off the following decade as more funders entered the market.
Advocates argue that litigation finance is widening access to justice that might otherwise be too expensive or risky, especially in cases that pit ordinary people against global corporations.
But the size of some paybacks has been criticised. When a lawsuit against the UK’s Post Office over a faulty IT system was settled for nearly £58mn in 2019, the litigation funder took about £24mn, leaving roughly 550 sub-postmasters who brought the case with an average of £22,000 each.
Some also describe the Pogust Goodhead case as a cautionary tale of what can go wrong when the institutions that provide the funding have concerns about, or disagreements with, the management of the firms they are financing.
Funders say lawyers need to show greater business acumen and financial discipline. “I want lawyers to get . . . better at budgeting, better at not overstating claim values,” said Susan Dunn, co-founder of Harbour Litigation Funding, at an October gathering of litigation funders in London, where the Pogust Goodhead situation was the hot topic. “[Lawyers must] not just see us as a walking wallet, who is endlessly there for all the budget increases.”
In a statement, Pogust Goodhead said: “While some former employees appear intent on rewriting history, Pogust Goodhead is firmly focused on the future. Under renewed leadership and strengthened governance, the firm has moved beyond personality-driven narratives and is dedicated to rebuilding trust, attracting top talent, and, most importantly, delivering justice for our clients.”
Goodhead said in a separate statement that “tensions inevitably emerge in businesses of the scale of Pogust Goodhead, given the high stakes involved for all” and that his focus remained on “supporting the clients and the Mariana case in whatever way I can”.
Gramercy categorically denied that it had ever interfered in the management of the company or its cases, adding that it had “great confidence in the firm’s ability to litigate the Mariana Dam case and hopes the firm will be able to obtain fair compensation for the victims that have been waiting over 10 years for justice”.
After years of taking unglamorous and barely profitable cases as a barrister on car crashes and slip-and-trip claims, Goodhead believed he had alighted on something promising.
It was 2017 when the tall, slightly dishevelled Welshman began wondering whether the UK could better deploy class action lawsuits like the Americans. As he investigated the market, he met a Brazilian lawyer looking for help representing 6,000 fishermen affected by the Mariana disaster.
Goodhead knew that BHP had a parent company in London at the time of the incident, which occurred in Brazil’s mining heartland state of Minas Gerais, and that there was an opportunity to sue multinationals with such links in the British capital.
After securing initial funds from wealthy US plaintiff lawyers and shoring up his personal finances, Goodhead established SPG Law, a predecessor firm of Pogust Goodhead, in Liverpool. His partner was Harris Pogust, a jet-setting American lawyer who served as chair until stepping down in December 2024.
The firm’s first major successes included a data breach case against British Airways and another relating to the Volkswagen diesel emissions scandal. But the Mariana case, both morally worthy and potentially lucrative, became Goodhead’s white whale.
Such large and complex cases require significant upfront funding. The firm secured initial loans from a number of backers before being introduced to Gramercy, a hedge fund prepared to fund the firm and its cases on a much larger scale.
In 2023, the US outfit unveiled a $552.5mn loan for Pogust Goodhead — the largest of its kind to a UK-based law firm. “We now have the financial firepower to hold any company anywhere in the world accountable for corporate wrongdoing,” Goodhead said at the time.
He aspired to be in the same league as the big US law firms. Junior lawyers were promised big rewards. They worked hard — some staff privately complained about a toxic workplace culture and gruelling hours — and played hard. Stories of boat parties and private jet usage became well known in London and Brazil, where Goodhead travelled more than 70 times in recent years.
An independent investigation commissioned by the firm after Goodhead’s exit found he had spent £82,000 on private jets and was a frequent guest at the £500-a-night Emiliano Hotel overlooking Rio de Janeiro’s Copacabana Beach.
Pogust Goodhead declined to comment. Goodhead said the expenditure was all “disclosed, budgeted and accounted for” and “entirely ordinary in the context of a multibillion-dollar, founder-led business”. He added that he had not been shown a copy of the investigation report.
Tension between the law firm and its US backer was apparent early on, according to people who worked there at the time, and even Goodhead’s allies acknowledge that he was not the most prudent businessman.
Still, lawyers at Pogust Goodhead say they felt under intense scrutiny from Gramercy, according to several people with knowledge of the situation, and that dealing with the funder’s many queries set employees on edge.
If it wins the Mariana case, Pogust Goodhead is expected to take 20 per cent or 30 per cent from the awards of most claimants, though it is working pro bono for indigenous communities. In the meantime, the costs of the case appear to have strained its finances. The 2022 accounts of its parent company were filed more than a year late and included a warning from its auditors over whether it could continue as a going concern. Its 2023 accounts are overdue.
“I don’t believe I always got the messaging right [at the law firm],” said Goodhead in his statement. “In retrospect, I should have sought to share the ownership of the business with my partners, prevented being reliant upon one lender and diversified from group litigation into other practice areas.”
The Mariana case went to trial in October 2024. Shortly after, BHP and Vale unveiled an updated $23bn settlement with Brazilian authorities, on top of the $7bn already paid out in reparations.
Although many victims of the disaster, including municipalities, objected to the lack of consultation and the amounts on offer, the scheme was endorsed by powerful politicians, including President Luiz Inácio Lula da Silva.
The companies argued that it rendered the UK court action unnecessary, while the mining industry’s lobby group petitioned Brazil’s supreme court, which banned municipalities from paying legal fees in overseas cases without its approval.
Still, the trial went ahead and concluded in March. It was around this time that Goodhead and Gramercy entered talks over a third credit facility.
Publicly, Goodhead said his firm had the “unequivocal backing” of its lenders but according to people with knowledge of the situation, he was privately hoping Gramercy would hurry up and write the next cheque.
Instead, he was summoned to a meeting in June with the hedge fund in New York. BHP and Vale had indicated a willingness to offer about $1.4bn to settle the case — $800mn in compensation for the victims and $600mn in legal costs. Gramercy appeared open to the idea, says a person with knowledge of the talks. “They really wanted to settle.”
But the mooted number was far short of the roughly $3bn Pogust Goodhead thought would be a more adequate figure in a case where they had originally sought £36bn.
Relations between Goodhead and Gramercy started to chill further.
On a Monday evening in early August, Goodhead arrived at the Rotunda Bar in London’s Four Seasons Hotel for what he thought was a meeting with Gramercy to discuss the next round of financing.
After small talk over drinks with Nick Paolazzi, one of the hedge fund’s managing directors, another person suddenly approached. Goodhead was served with papers detailing 15 allegations against the firm for failing to comply with its loan obligations. Later that night, he was told he had been suspended. He ceased to be a director of the firm in September.
At a stroke, Pogust Goodhead went from being a plucky litigation boutique taking on some of the world’s biggest companies to a firm in crisis. Several employees say it appeared to them that Gramercy had orchestrated the removal of Goodhead in an attempt to exercise greater influence on the firm and its cases — particularly Mariana.
In England and Wales, lawyers rather than financiers must have independent control of cases, as part of rules intended to ensure decisions are made in the best interest of litigants.
The Gramercy-appointed receiver held Goodhead’s shares and overhauled the board of directors. Staff were told that Goodhead was “on leave”, but he and chief legal officer Chris Neill had been locked out of their email accounts and offices. The law firm’s chief operating officer, Alicia Alinia, whom colleagues say was close to Gramercy, was made interim CEO.
Neill is now taking Pogust Goodhead to an employment tribunal over his dismissal, which he believes was because he blew the whistle “about serious regulatory and ethical failings” at the firm. Pogust Goodhead said Neill’s dismissal was “unrelated to any alleged protected disclosure” and it intended to “robustly defend its position”.
But loyalty to Goodhead in some quarters remains strong. “Many people are in the lawsuit because of their trust in Tom,” says Mariana’s mayor, Juliano Duarte, whose municipality is a lead claimant. “He led them to believe in English justice.”
A group of about 30 lawyers at the firm wrote to the new board to air their concerns about Gramercy’s actions, stating that there had been a “lack of communication and transparency regarding the reasons for the upheaval”.
More than 15 lawyers resigned from the firm or went on leave, including key leads on the Mariana case and the NOx diesel emissions case, which went to trial in October — though not before Pogust Goodhead had offered to step down as lead solicitor because of the turmoil.
Some senior lawyers said they were worried Gramercy was exercising influence over the firm and its cases, concerns that were reinforced by the terms of a new $65mn credit facility agreed in August. People with knowledge of this loan say the terms included provisions for Gramercy to request access to sensitive litigation information. Some terms in the agreement have since been changed in response to those concerns, two people say.
Gramercy said in a statement: “It is categorically untrue that Gramercy now, or has ever, owned, controlled or managed Pogust Goodhead, or has had any control whatsoever in respect of its client matters, including settlement or litigation of any case.”
Asked about the recent turbulence at the firm, the Solicitors Regulation Authority said in a statement: “We are monitoring this situation closely. We are engaging extensively with the firm, including on-site visits, and seeking assurances from its management, so we can make sure the interests of clients are being protected. We will take action where necessary.”
Pogust Goodhead said that the firm welcomed the SRA’s “continued guidance and oversight”.
The turbulence at Pogust Goodhead has not gone unnoticed in Brazil. Thousands of claimants, including several municipalities, have left the action in order to join the miners’ indemnity scheme.
More recently, a committee representing all of the Mariana claimant groups tried to fire Pogust Goodhead and instruct another firm. It later backtracked.
But many claimants still crave the validation that a judgment would confer, even though it could take as long as two years to decide the level of damages. In what is left of Bento Rodrigues, a ghost town where crumbling buildings are still partly buried in mud, graffiti and signs denounce what happened.
“It’s not about the money,” says Gelvana Rodrigues, her eyes filling with tears. Three days after the village was inundated, the body of her seven-year-old son Thiago was found 100km downstream. “The last thing he said to me was, ‘You’re the best mum in the world,’” she recalls. “They never said, ‘Sorry for killing your son.’ I want justice for him . . . The only hope we have is in England.”
Thatiele Monic Estevão says her quilombo, a community descended from runaway slaves, has lost income and sacred sites were damaged. “We need to make these mining companies understand they can’t just come into our territories, take everything and leave destruction behind.”
BHP said $13.1bn had already been paid out to people and public authorities, with 575,000 individuals receiving $6bn in compensation and financial aid, and that “the measures taken in Brazil are the most efficient and effective way” to make reparations. Vale declined to comment.
Alves, whose actions in 2015 were credited with saving hundreds of lives, also wants closure.
“There’s a great expectation”, she says, “that we will be recognised, receive a fair amount [and] be able to lead a dignified life.”