Trending Now
Commercial Special Features

Highlights from IMN’s 2nd Annual International Litigation Finance Forum

On October 19th, IMN hosted its second Annual International Litigation Finance Forum in London, bringing together thought leaders from across the litigation finance industry and showcasing perspectives from funders, lawyers, insurers and more across a packed day of content.

Following on from the successful inaugural edition in 2022, this year’s event once again demonstrated the growing strength of the litigation funding market, both in the UK and across the globe. The agenda also managed to capture the broad diversity of perspectives within the industry, with lively discussion and debate across the panels and breakout sessions.

The day began with a panel focused on the current state of litigation funding in Europe, which immediately demonstrated the changes in the regional market over the last 12 months. Whereas last year’s panel on this topic was dominated by discussion around the Voss Report and the looming prospect of further regulation, yesterday’s conversation was firmly focused on the increasing innovation in the market and an evolving landscape that has seen competing models of third-party financing develop.

Litica’s Ed Yell emphatically stated that “the growth in Europe over the last year has been spectacular”, and Iain McKenny from Profile Investment described the current state of play as a “hot bed for evolution.” A core element of the panel’s conversation revolved around the growing formation of a secondary market for litigation finance transactions, with JBSL’s co-founder Sarah Lieber summarising it aptly: “Secondary trading is the hallmark of a maturing asset class, it’s necessary to think about from the beginning of every funding deal.”

The second panel of the morning ventured into the economics of the market, looking at the different types of funder capitalization and the challenges faced by funders looking to raise capital in the turbulent market. The panellists explored the differences between the UK and US market, with Ted Farrell from Litigation Funding Advisers, highlighting the lack of portfolio funding deals in the UK and pointing out that “single case is always going to be super expensive.” Neil Purslow explained that from Therium’s perspective, portfolio deals in the UK “usually don’t work well and fail”, resulting in a pivot back towards single case funding.

The first of two panels focusing on the role of litigation insurance saw a wide-ranging discussion that covered everything from the type of cover available, to the increasingly varied ways that funders, law firms and insurers are collaborating on deals. On this topic, Robin Ganguly from Aon, stressed the need for funders and insurers “to work together to make the industry sustainable,” emphasising that “deals have to be attractive to everyone or deals won’t get done.” All the panelists agreed that those seeking insurers needed to be more proactive and prepared, with Tom Davey of Factor Risk Management putting it in clear terms: “Get insurance when it’s available, not three weeks before trial.”

Unsurprisingly, the following panel discussion on class actions and group litigation immediately turned to the subject of the Supreme Court’s PACCAR ruling. Echoing similar sentiments from speakers earlier in the day, most of the panelists agreed that funders and law firms were taking a pragmatic approach and exploring a variety of alternative structures for funding agreements and working closely with clients to find an optimal solution. Brown Rudnick’s Elena Ray provided the clearest overview of the situation, saying that firms “are not seeing a negative impact on the litigation funding space, so the parties have adjusted well to the PACCAR judgement.”

Lara Melrose from Orchard Global described the UK’s group action market as “a very buoyant one” and noted that funders are benefitting from the courts’ flexible approach as demonstrated in recent decisions including the first amalgamation of claims in the CAT and the first application for a collective settlement. Alex Garnier of NorthWall Capital also pointed out that part of funders’ interest in class actions stems from the fact that “they’re not just fought in the courtroom they’re also fought in the court of public opinion”, thereby creating added pressure on large corporates to settle rather than “having their dirty laundry aired in court for months.”

After a break for lunch and networking, the agenda once again returned to the topic of insurance, but with this panel putting an added emphasis on the lawyers’ perspective. Prompted by the panel’s moderator, Rocco Pirozzolo, the lawyers on the panel discussed some of the difficulties and frustrations they’ve faced when looking to secure insurance for a case. HFW’s Nicola Gare turned the question on its head, instead pointing out some best practices, with a particular emphasis on those funders who are able to give a prompt decision and explain their reasoning. 

Meanwhile, Jamie Molloy from Ignite Insurance, and James Gowen-Smith from Miller, both said that it was important for all parties to remember it was a collaborative relationship and that it always worked best where there was adequate transparency, and where insurers were involved in the strategy discussions as early as possible.

The agenda turned from the present to the future in the next panel, with an insightful discussion around new models of delivering legal finance and how new technology, such as emerging AI tools, can be incorporated to fuel future growth. Nick Rolwes-Davis from Lexolent led the calls for more innovation and change in the funding process, arguing that the industry was “probably overdue a change” and that increased efficiency could be achieved by “using technology as a triage tool.” Ben Knowles of Clyde & Co. offered similar support for evolution within litigation funding, pointing out that from a law firm’s perspective, “if technology could improve that due diligence process, then hopefully more cases could be funded.”

In the penultimate session of the day, Louise Trayhurn from Legis Finance, and Carlos Ara Triadu from Cuatrecasas, led the room in an engaging and entertaining interactive session. Trayhurn turned the tables on the audience, seeking out the varying perspectives of lawyers and funders on the evolving relationship between funders and law firms. Whilst some attendees were more hesitant than others, the live Q&A format provided an excellent change of pace and allowed for a free-flowing discussion about the unique challenges and opportunities around the lawyer-funder dynamic.

For the final panel of the event, the focus shifted to developments in continental Europe and the ongoing implementation of the EU’s Directive on Representative Actions. The discussion, moderated by Joanna Curtis from Brown Rudnick, looked at the differing approaches to implementation across Europe, focusing on the panelist’s local jurisdictions of Germany, Ireland, and Spain. Whilst all the speakers agreed that the directive was a positive development overall, they also pointed out that in terms of enhancing access to litigation funding in Europe, it may not produce significant changes. Elaine Whiteford from Wilkie Farr & Gallagher highlighted that there are still “a number of critical issues that the initiative doesn’t address for funders” in Europe, with the use of funding still primarily limited by each country’s national laws on its permissibility.

Overall, IMN’s second UK event managed to provide an insightful exploration of the litigation funding industry and provided attendees with a comprehensive view of the market, bolstered by insights from stellar thought leaders. Across a busy day of content, the forum offered a platform for a variety of perspectives, generating debates and discussions that will no doubt continue long after the event.

LFJ looks forward to seeing how IMN continues to build on the success of the 2023 forum in the future.

Commercial

View All
Announcements Commercial Regulatory Issues

More Than 100 Companies Sign Letter Urging Third-Party Litigation Funding Disclosure Rule for Federal Courts Ahead of October Judicial Rules Meeting

By Harry Moran |

In the most significant demonstration of concern for secretive third-party litigation funding (TPLF) to date, 124 companies, including industry leaders in healthcare, technology, financial services, insurance, energy, transportation, automotive and other sectors today sent a letter to the Advisory Committee on Civil Rules urging creation of a new rule that would require a uniform process for the disclosure of TPLF in federal cases nationwide. The Advisory Committee on Civil Rules will meet on October 10 and plans to discuss whether to move ahead with the development of a new rule addressing TPLF.

The letter, organized by Lawyers for Civil Justice (LCJ), comes at a time when TPLF has grown into a 15 billion dollar industry and invests funding in an increasing number of cases which, in turn, has triggered a growing number of requests from litigants asking courts to order the disclosure of funding agreements in their cases. The letter contends that courts are responding to these requests with a “variety of approaches and inconsistent practices [that] is creating a fragmented and incoherent procedural landscape in the federal courts.” It states that a rule is “particularly needed to supersede the misplaced reliance on ex parte conversations; ex parte communications are strongly disfavored by the Code of Conduct for U.S. Judges because they are both ineffective in educating courts and highly unfair to the parties who are excluded.”

Reflecting the growing concern with undisclosed TPLF and its impact on the justice system, LCJ and the Institute for Legal Reform (ILR) submitted a separate detailed comment letter to the Advisory Committee that also advocates for a “simple and predictable rule for TPLF disclosure.”

Alex Dahl, LCJ’s General Counsel said: “The Advisory Committee should propose a straightforward, uniform rule for TPLF disclosure. Absent such a rule, the continued uncertainty and court-endorsed secrecy of non-party funding will further unfairly skew federal civil litigation. The support from 124 companies reflects both the importance of a uniform disclosure rule and the urgent need for action.”

The corporate letter advances a number of additional reasons why TPLF disclosure is needed in federal courts:

Control: The letter argues that parties “cannot make informed decisions without knowing the stakeholders who control the litigation… and cannot understand the control features of a TPLF agreement without reading the agreement.” While many funding agreements state that the funder does not control the litigation strategy, companies are increasingly concerned that they use their growing financial leverage to exercise improper influence.

Procedural safeguards: The companies maintain that the safeguards embodied in the Federal Rules of Civil Procedure (FRCP) cannot work without disclosure of TPLF.  One example is that courts and parties today are largely unaware of and unable to address conflicts between witnesses, the court, and parties on the one hand, and non-parties on the other, when these funding agreements and the financial interests behind them remain largely secret.

Appraisal of the case: Finally, the letter reasons that the FRCP already require the disclosure of corporate insurance policies which the Advisory Committee explained in 1970 “will enable counsel for both sides to make the same realistic appraisal of the case, so that settlement and litigation strategy are based on knowledge and not speculation.” The companies maintain that this very same logic should also require the disclosure of TPLF given its growing role and impact on federal civil litigation.

Besides the corporate letter and joint comment, LCJ is intensifying its efforts to rally companies and practitioners to Ask About TPLF in their cases, and to press for a uniform federal rule to require disclosure. LCJ will be launching a new Ask About TPLF website that will serve as a hub for its new campaign later this month.

Read More
Commercial People Moves

Mesh Capital Hires Augusto Delarco to Bolster Litigation Finance Practice

By Harry Moran |

In a post on LinkedIn, Mesh Capital announced the hiring of Augusto Delarco who has joined the Brazilian firm as a Senior Associate, bringing a “solid and distinguished track record in complex litigation and innovative financial solutions” to help develop Mesh Capital’s Litigation Finance and Special Situations practices. 

The announcement highlighted the experience Delarco would bring to the team, noting that throughout his career “he has advised clients, investors, and asset managers on strategic cases and the structuring of investments involving judicial assets.”

Delarco joins Mesh Capital from Padis Mattars Lawyers where he served as an associate lawyer, having previously spent six years at Tepedino, Migliore, Berezowski and Poppa Laywers.

Mesh Capital is based out of São Paulo and specialises in special situations, legal claims and distressed assets. Within litigation finance, Mesh Capital focuses on “the acquisition, sale and structuring of legal claims, covering private, public and court-ordered credit rights.”

Case Developments Commercial

Delaware Court Denies Target’s Discovery Request for Funding Documents in Copyright Infringement Case

By Harry Moran |

A recent court opinion in a copyright infringement cases has once again demonstrated that judges are hesitant to force plaintiffs and their funders to hand over information that is not relevant to the claim at hand, as the judge denied the defendant’s discovery request for documents sent by the plaintiff to its litigation funder.

In an article on E-Discovery LLC, Michael Berman analyses a ruling handed down by Judge Stephanos Bibas in the United States District Court for the District of Delaware, in the case of Design With Friends, Inc. v. Target Corporation. Design has brought a claim of copyright infringement and breach of contract, and received funding to pursue the case from Validity Finance. As part of its defense, Target had sought documents from the funder relating to its involvement in the case, but Judge Bibas ruled that Target’s request was both “too burdensome to disclose” and was seeking “information that is attorney work product”.

Target’s broad subpoena contained five requests for information including Validity’s valuations of the lawsuit, communications between the funder and plaintiff prior to the funding agreement being signed, and information about the relationship between the two parties.

With regards to the valuations, Judge Bibas wrote that “while those documents informed an investment decision, they did so by evaluating whether a lawsuit had merit and what damages it might recover,” which in the court’s opinion constitutes “legal analysis done for a legal purpose”. He went on to say that “if the work-product doctrine did not protect these records,” then the forced disclosure of these documents “would chill lawyers from discussing a pending case frankly.”

Regarding the requests for information about the relationship between Design and Validity, Judge Bibas was clear in his opinion that these requests were disproportionately burdensome. The opinion lays out clear the clear reasoning that “Target already knows that Validity is funding the suit and that it does not need to approve a settlement”, and with this information already available “Further minutiae about Validity are hardly relevant to whether Target infringed a copyright or breached a contract years before Validity entered the picture.”The full opinion from Judge Bibas can be read here.