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Securities Litigation: A Growing Space in Scandinavia

By Mats Geijer |

The following article was contributed by Mats Geijer, Counsel Scandinavia of Deminor.

In the complex world of securities trading, disputes and violations can arise, leading to legal actions that seek to hold wrongdoers accountable and provide recourse for affected parties.

In recent years we have seen an increase in actions from investors towards listed companies, shareholders vs the so-called issuers in the region. Notable cases are OW Bunker, Danske bank in Denmark and more recently Ericsson in Sweden.

Securities litigation serves several important purposes in the financial ecosystem, namely:

  1. Protecting Investors: Securities litigation helps investors in their fiduciary responsibility to seek financial compensation for losses resulting from securities fraud or misconduct. By holding wrongdoers accountable, it deters fraudulent activities and promotes market integrity. 
  2. Enforcing Compliance: Securities litigation enforces compliance with securities laws and regulations, ensuring that companies and individuals adhere to disclosure requirements and ethical standards in their financial dealings.
  3. Promoting Transparency: Securities litigation can uncover hidden risks, misrepresentations, or conflicts of interest that may impact investors’ decisions. This transparency is essential for maintaining trust in the financial markets.
  4. Enhancing Corporate Governance: Securities litigation can target corporate governance failures, such as breaches of fiduciary duty or conflicts of interest among corporate insiders. Holding company officers and directors accountable can lead to improved governance practices.

Securities litigation in Sweden can be done in various ways, through class/group actions, derivative actions, or regulatory enforcement actions (by authorities). Case law in the sphere of private enforcement is historically scarce but will now hopefully start to emerge. A historic reason is probably that Sweden as a civil law country lacks statutory rules regulating civil liability in relation to improper securities activities.

In the Ericsson case, 37 institutions are claiming roughly $200 million from the issuer in the district court of Solna, Sweden. The claimants state they have suffered investment losses since Ericsson withheld information about potential bribes paid to the terrorist organisation ISIS in Iraq, that caused the share price to fall. The claimants are all large (non-Swedish) institutional investors, and the case is funded by a third-party funder (not Deminor). The case will be tried in the first instance court in 2025.

The legal community expects to see an increase in litigation related to securities in the coming years, to paint a picture in 2021 there where was one (1) initial public offering every second day (157 in total). In 2022-23 there were only a handful of initial public offerings each year. Sweden has a disproportionate number of listed companies compared to other EU countries and it is considered a national sport to invest in the stock market. A majority of listed shares are held by local and foreign sovereign wealth funds, they seldom engage in litigation locally but often participate in international cases in the US and elsewhere. The economy is currently in a recession which has historically always led to an increase in the number of disputes.

Deminor is the only international funder with a local presence that focuses on securities litigation. On paper there are plenty of opportunities in Scandinavia, but in practical terms cases are often too “small” meaning the quantum of the potential loss the investor has suffered is not sufficient to initiate the litigation. Or which is more often the situation, the investors that do hold a significant part of the shares (the loss) are not willing to engage in litigation for various reasons. The claimants that are willing to lead the way in terms of creating the much-needed case law is the types we see in the Ericsson case, foreign institutional investors.

We could summarize the situation with a phrase coined by the advertising industry for when there was a minute of silence before the next add was supposed to run – watch this space!

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Mats Geijer

Mats Geijer

Commercial

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Commercial Deals

How to Score a Win-Win Deal in Litigation Funding

By John Freund |

One of the day two panels at the 7th Annual LF Dealmakers event was titled "Structuring Win-Win Deals". Michael Kelley, Partner at Parker Poe moderated a discussion between Joseph Dunn, Managing Director at Fortress Investment Group, Adam Hudes, Partner at Vinson & Elkins, Sarah Johnson, Head of Litigation Investing team at D.E. Shaw & Co., and Ryan Stephen, Co-Founder of Pine Valley Capital Partners.

The conversation began around structuring deals for alignment and success. Sarah Johnson noted that it's difficult to achieve perfect alignment, but pricing deals with 'good scenarios' in mind can ensure that all parties are satisfied. Of course, deals are bespoke, so this is very difficult. Which is why D.E. Shaw models out scenarios and walks through them with the client - what is a good settlement, what is a satisfactory damages amount? Ensuring that all parties are all on the same page, which goes into the documentation so all parties can agree to the terms upfront.

Ryan Stephen noted that at Pine Valley they are more law firm focused. They operate like a credit shop, in that they protect downside vs. focus on upside. They look at their capital as a de-risking tool, which means there can be a misalignment if the law firm thinks that value must be proven right away so capital can get out the door. They look to ensure alignment with both the plaintiff and the law firm, such that we're on a similar page in terms of what's a good outcome and what's an outcome that we would not accept. Also understanding of what the law firm needs from an operational perspective. The lender wants to continuously be de-risked, but there is a blind spot there, if the lender de-risks too quickly and the law firm doesn't have the resources need to effectively try their cases. So we need to get on the same page regarding operational budgets.

Michael Kelley then brought up the extrinsic factor of time, to which Ryan Stephen agreed that time is the risk that everyone is dealing with in the space. It is difficult to know what defendants are thinking, how plaintiffs will respond and behave. Getting on the same page regarding a variety of outcomes is key. Lawyers, by necessity, are eternal optimists. Everything is high value and coming very soon. Most capital providers know that is just not how it plays out, because you need to make sure that in those edge scenarios the law firms need to be safe, and the capital providers need to be safe as well.

Adam Hudes then spoke to red flags around non-alignment. He pointed to less-than clear exit terms, referencing the Burford / Sysco dispute as a scenario they want to stay away from. When dealing with a funder that can't clarify exit terms at the outset, that is something that his firm walks away from. From a law firm perspective, cases seem to be never-ending, so law firms are increasingly calculate how can we best manage the duration of these cases, and they want funders to understand that and work with them. If a funder is too pushy, that is another red flag. If they're not willing to truly partner with the law firm, then they should probably part ways early.

Michael Kelley asked about the risk of migration of terms, from the time that the term sheet is proposed. Joseph Dunn answered that it depends on the counter party. In this asset class there isn't a one-size-fits-all process for doing deals. There's less of a market, there's less data, there's fewer intermediaries who have seen that exact deal happen 20 times and here's how it's done. So that lends itself to parties re-cutting terms more frequently than in other asset classes. The likelihood of that happening is driven as much by personalities than it is the economics of a deal.

Dunn added: "I've probably never done a transaction where we agreed with the counter party on the value of the financing. So I think it's more about calling the counter party's BS vs. simply structuring the assets. When we structure deals, we ask the counter party what their view of success is. Usually we disagree with that, and we explain that's more of a homerun, and then propose a more downside scenario. If both sides blindly accept the upside case, then you're not keeping people aligned on the downside."

Commercial People Moves

Moneypenny and VoiceNation Appoint New US Head of Marketing


By Harry Moran |

Moneypenny and VoiceNation, leading virtual receptionist and phone answering providers, have appointed a new US Head of Marketing, Kris Altiere.  Kris joins with over 20 years experience in marketing, growing revenue and improving brand awareness for companies of all sizes from start ups to rebrands and merging companies, which she has done time after time with great success.

Kris has a proven track record in establishing the brands she works with as the trusted leaders in their area, with a well defined identity.  She is an award-winning integrated marketing communications strategist, specializing in connecting vision with innovative digital communication solutions to drive sales, build brand image, and secure customer loyalty. Her role at Moneypenny and VoiceNation will be to drive US awareness and further the growth and recognition of the US brands though strategic marketing strategies, further solidifying the value proposition and expanding into new markets.  

Richard Culberson, CEO at Moneypenny North Amercia comments: “We are delighted to welcome Kris to our award-winning company and are excited about the fantastic experience she will bring to Moneypenny and VoiceNation. She’s an excellent addition to our rapidly growing team and her experience and expertise will be invaluable as we continue to strengthen our brands in the US.” 

Kris comments: “I am really looking forward to joining the diverse and global team and utilizing my extensive background and expertise in Healthcare and Legal to further expand those areas within the US, while growing the existing client sectors.  I am excited be part of the Moneypenny and VoiceNation award winning culture and to help lead and grow our marketing team, as well as work with the amazing UK marketing teams, to help the business with our ambitious growth plans.”

About our market-leading brands

Moneypenny and VoiceNation are America’s leading virtual receptionist & phone answering providers offering 24/7 communication solutions. 

Collectively, Moneypenny and VoiceNation employ over 1,000 people handling millions of calls, chats and bespoke tech solutions for thousands of businesses of all shapes and sizes from sole traders right up to multinational corporations.

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Commercial Legal Innovation

Rebecca Berrebi Interviews Steven Molo at LF Dealmakers

By John Freund |

Day two of the 7th Annual LF Dealmakers event featured a 30-min 1:1 interview session between Rebecca Berrebi, Founder and CEO of Avenue 33, and Steven Molo, Founding Partner of MoloLamken. The discussion was titled "Deep Dive: The Ultimate Decision Point - Taking a Case to Trial."

Below are some key highlights from the Q&A:

RB: Various sources report that fewer than 1% of civil cases filed in court actually go to trial. So why should funders care about trial?

SM: It's the ultimate risk. You've funded the case and you're betting on the fact that it doesn't go to trial. If it does, your investment is at risk. If you pay attention to the case the entire time and treat it as though it may go to trial, you're more likely to get a settlement that is beneficial.

RB: How do you choose jury consultants, and what does that process look like?

SM: Some people think that the venue is the most important thing, and some are particularly skilled or experienced in certain types of cases and they've developed a lot of data over time. Each of those things come into play. People do different types of research - phone surveys (I'm not sure how valuable they really are), focus groups, min-trials or mock trials (I think the concept of this is overblown). It's really about coming up with a plan for the case, understanding the venue, and if it's a big enough case hiring multiple consultants. You should be informed by-but not imprisoned by-the research.

RB: How important is it to have a lead trial lawyer with subject matter expertise?

SM: What's important is trial advocacy. Who can go before a judge and jury and lead trial information forward, rather than just pounding them over the head with information. Having expertise is important, but you don't need to be the world's foremost expert to lead a trial.

RB: How important is the selection of local counsel when your primary trial team is in one location and the trial is out of town?

SM: A lot depends on the venue. Those who have funded patent cases in Texas, you know there are the usual players that line up on either side of the case, and that's how the process works. I think you can overweight that - this fear of 'getting homered' where the local judge is in the pocket of the local lawyer. It can work the other way too - that judge might not like that lawyer! The general rule we try to follow is 'get good local counsel.' Don't worry about being overshadowed by local counsel.

I've found that most judges around the country get a kick from having a lawyer from out of town come into their courtroom. It's something interesting and it's a break from their day to day. As long as that lawyer behaves themselves, it can become a positive situation.

RB: Trials obviously include witness, and often the outcome of a case can depend on the witness' performance. What can the funder do to ensure the witness' ability to perform?

SM: Obviously with privilege issues, you don't want to be in there preparing the witness. But you can assess somebody as a communicator, and there's no reason why you can't have a conversation with the plaintiff in the case to let them know what you think about this person.

Beyond that, you can impose a structure on witness preparations with counsel. Will it be a written Q&A, if so, that Q&A might have to be produced at trial. Also where will you do the preparation? We have some courtroom-like settings, and having someone sit in a conference room is not the same thing as having them sit in the witness box. Best to bring the witness into the courtroom so they can experience it before going into trial for the first time, which is a very stressful situation. Also structuring the timeline of the preparation, so it's not done the night before. Also getting an experienced lawyer in your firm to do the mock cross examination, so there is a tension there that wouldn't otherwise be there if they're being mock-crossed by someone they know and are familiar.

Setting up the structure beforehand is something funders can address without running into privilege concerns.