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Settlement in LCM-Funded Australian Class Action

Litigation Capital Management Limited (AIM:LIT), a leading international alternative asset manager of disputes financing solutions, announces the outcome of the settlement reached in an Australian class action funded by it.

As previously announced (15 May 2023), the class action was brought in the Federal Court of Australia against the Commonwealth of Australia on behalf of persons who are alleged to have suffered loss and damage as the result of the contamination of their land at seven sites around Australia in proximity to Department of Defence military bases.

The Commonwealth has agreed to pay the sum of AUD$132.7M in order to resolve the class action. A confidential deed of settlement was executed and has now been approved by the court, allowing the disbursement of funds, subject to the unlikely event of appeal.

The claim forms part of LCM’s managed Global Alternative Returns Fund ("Fund I") and was funded directly from LCM's balance sheet (25%) and Fund I Investors (75%). Details of the returns are highlighted below:

*AUD$mInvestment performanceLCM performance metrics
Invested capital13.53.4
Investment return28.67.2
Total revenue42.110.6
ROIC on investment2.122.12
Performance fee*-6.4
Gross profit28.613.6
ROIC after performance fees2.124.03

*The investment returns are subject to change based on the prevailing FX rate and timing of distribution

Patrick Moloney, CEO of LCM, said: "This settlement is a positive start to the fiscal year, demonstrating the momentum LCM’s portfolio has gained over the last six months. We continue to scale our portfolio of investments through increased commitments which are a key indicator of future growth and long term shareholder value.” 

About LCM

 Litigation Capital Management (LCM) is an alternative asset manager specialising in disputes financing solutions internationally, which operates two business models. The first is direct investments made from LCM's permanent balance sheet capital and the second is third party fund management. Under those two business models, LCM currently pursues three investment strategies: Single-case funding, Portfolio funding and Acquisitions of claims. LCM generates its revenue from both its direct investments and also performance fees through asset management.

LCM has an unparalleled track record driven by disciplined project selection and robust risk management. Currently headquartered in Sydney, with offices in London, Singapore, Brisbane and Melbourne, LCM listed on AIM in December 2018, trading under the ticker LIT.

www.lcmfinance.com

Commercial Deals

Indian Litigation Funding Market Primed for Future Growth

When looking at the future of litigation finance, unlocking the potential of the Asian market may be the key to exponential growth for third-party funders. Within this region, India offers one of the most enticing opportunities, with an incredibly high volume of legal claims brought every year and a legal system that could benefit from an influx of outside capital. A feature in Asian Legal Business India uncovers the changing attitudes towards litigation finance in the country, looking at the underlying drivers of adoption, and the challenges that may face the nascent market.  Citing data from the World Bank’s Ease of Doing Business report, the article notes that the average cost of litigation in India accounts for 31 percent of the claim’s value, notably 10 percent higher than the cost of litigation in OECD countries. These high costs combined with the equally disproportionate length of commercial contract disputes, 1,445 days in India versus 590 days for OECD countries, provide fertile ground for the growth of third-party funding.  Kundan Shahi, founder and CEO of LegalPay, notes that the recent judgement in the Delhi High Court and legislative developments in other states “mark a palpable shift in perception and signal a resounding acceptance of this transformative product.” Naresh Thacker, head of disputes at Economic Laws Practice, cautions that whilst the increasing acceptance and adoption of litigation financing is positive, “it may garner attention from legislative bodies to consider introducing a regulatory framework.” Looking towards the future of litigation finance in India, Shahi argues that “growth is inevitable”, but points out whilst the structural deficiencies in the country’s legal system are drivers of demand, they still create issues. To continue this growth, Shahi suggests that if the Indian courts can achieve “a better timeline record for the disposal of commercial litigations/ arbitration, the market will attract more investors.”
Case Developments Commercial

Judge in Torres Strait Island Case Highlights Funder’s Motives

Whilst litigation funders and their supporters regularly promote the benefits that the practice can bring to the legal system, it is immediately clear that not all parties within the courts share the same appreciation for third-party funding. An ongoing dispute between a local council in northern Australia and a shipping operator has highlighted this issue once again, with a judge suggesting that the funder’s motives are not necessarily aligned with the local community’s best interests.  Reporting by ABC News covers the latest updates from the dispute between the Torres Strait Island Regional Council (TSIRC) and Sea Swift, one of Australia’s largest shipping companies, over the council’s issuance of $66 million in invoices. The legal case revolves around 253 invoices that TSIRC sent to Sea Swift last December, requesting that the shipping company pay “default maritime fees” for failing to adequately self-report its use of the council-owned boat ramps and jetties.  Justice Peter Applegarth, of the Supreme Court, issued a judgement on Monday that stated TSIRC’s attempt to charge these fees exceeded the council’s authority. Furthermore, Justice Applegarth questioned TSIRC’s methods of calculating the $66 million total for the ‘maritime fees,’ and suggested that the “extraordinarily large demand” may have been an “intended to bring Sea Swift to the settlement table.” As TSIRC is being supported by an unnamed litigation funder, Justice Applegarth’s ruling was of particular interest, since during his call for the dispute to be “promptly mediated”,  he highlighted the role of the funder and argued it was “not supporting TSIRC's litigation as an act of charity or out of love for the people of the Torres Strait.” The judge clarified that he was not seeking to denigrate the work of the funder or its lawyers, and that his “encouragement for the parties to submit to early mediation is not intended to deprive lawyers of work or a litigation funder of its slice of any eventual court award in favour of TSIRC.” Whilst the judge suggested the council’s resources could be better used to support its community, which is home to “the financially poorest people in our state”, TSIRC’s chief executive, James William, defended the council’s use of third-party funding. In a statement to ABC News, William said that “the proceedings have not cost TSIRC anything, as the fees are all being funded on very reasonable terms, which I am not in a position to give any further details on.”
Commercial Regulatory Issues

Judge in 3M Lawsuit Orders Disclosure of Funding Arrangements

As LFJ highlighted in an article yesterday, the issue of disclosure for litigation funding has never been more prominent, and there is no universally agreed upon solution in sight across the US district courts. However, a settlement in one of the largest multi-district lawsuits in the US has provided another fresh example of this divisive issue. Reporting by Bloomberg Law outlines the latest development in the 3M earplug litigation, with District Judge M. Casey Rodgers ordering the claimants’ lawyers to produce information about their funding arrangements. Earlier this week, 3M announced it had agreed to a $6 billion settlement to resolve around 260,000 lawsuits, and it was swiftly followed by Judge Rodgers’ order for the plaintiffs’ attorneys to disclose what proportion of the settlement would be distributed to funders. In her order, Judge Rodgers explained that her intention was to prevent claimants from being “exploited by predatory lending practices, such as interest rates well above market rates, which can interfere with their ability to objectively evaluate the fairness of their settlement options.” Whilst the information will be filed under seal, the order requires the disclosure of any financing arrangements with claimants and includes the requirement for those individual funding agreements to be delivered. Both claimants and lawyers are also prohibited from engaging in new funding agreements without the court’s permission. In a statement to LFJ, Eric Schuller, president of the Alliance for Responsible Consumer Legal Funding (ARC), provided the following comment: “Unfortunately, there is a lot of misinformation when it comes to Consumer Legal Funding. All of ARC members follow a set of Best Practices that include having the consumer's attorney review the contract. This is why ARC is a proponent of proper regulation of the industry so that there is no confusion on the transaction and the consumer is fully informed as to the cost associated with the transaction.”
Case Developments Commercial

$137.2 Million Settlement in PFAS Class Action Funded by LCM

One of the most prominent examples of environmental pollution affecting individuals and communities in recent years has been the spread of Per- and polyfluoroalkyl substances (PFAS), otherwise known as ‘forever chemicals’. However, litigation funders are proving to be a powerful ally for those communities who have suffered harm from government or corporate malpractice, as a recent settlement in an Australian class action has demonstrated. An article by The Daily Advertiser provides an overview of the latest development in the class action brought against the Australian government, which represented landowners who were affected by toxic PFAS chemicals in firefighting foam. The parties in the class action had reached an in-principle agreement for a $137.2 million settlement in May and on August 25, the settlement was approved by the Federal Court’s Justice Michael Lee. Contamination from these forever chemicals had reportedly affected around 30,000 landowners in Australia, with the class action alleging that the government had not taken adequate measures to prevent these chemicals from spreading into the soil and groundwater. Shine Lawyers represented the claimants, and the firm’s joint head of class actions, Craig Allsop, emphasised that “this does not have to be the end of the battle for compensation and acknowledgement", as individuals who suffered personal injury from these toxic chemicals can still bring claims. In a post on LinkedIn, Litigation Capital Management (LCM) stated that it was “very pleased to have funded the class action brought on behalf of group members against the Commonwealth of Australia in relation to the alleged contamination of their land by PFAS.” Lina Kolomoitseva, senior investment manager at LCM, managed the funder’s involvement in the class action.
Commercial

LexCapital Provides Update on Strategic Initiatives and Partnerships

Despite the looming possibility of increased regulation for litigation finance in the European Union, in the last year we have seen a surge in litigation funding activity within individual European jurisdictions. Among these countries, Italy has been one of the most notable for its increase in activity, and has seen new domestic funders launch operations, with LexCapital entering the market in July 2022. In a post on LinkedIn, Giuseppe Farchione, COO of LexCapital, provides an update on the funder’s recent activities and its plans for the remainder of 2023. Farchione stated that the LexCapital team are “enthusiastic about the project, about the partners who have placed their trust in the management team that has formed and is getting stronger.” Farchione also provided a list of LexCapital’s current and planned initiatives:
  • The launch of the Rottamazione dei derivati (Scrapping of derivatives) campaign, to “collect the interest and acquire the disputed rights of/from all subjects” who have suffered harm from illegitimate financial derivative contracts.
  • The planned launch of the ‘LexInsurance’ initiative, which will see LexCapital partner with leading Italian insurers to offer ATE insurance coverage to litigants.
  • A proprietary business intelligence system: LexCapital Litigation Assessment (LLA), which has now entered into its testing phase and includes a database of 1.2 million judgements.
  • A strategic partnership with German and French partners focused on antitrust litigation, which will be announced when the contracts are finalised.
  • A separate partnership with a Spanish partner also focused on antitrust litigation, also to be announced in future.
  • A strategic agreement with an Italian consumer association to support their members’ collective actions or individual claims.
Studying and planning to launch a social impact and not for profit initiative, including speaking at the “Sustaining Access to Justice in Europe: New Avenues for Costs and Funding” conference in Rotterdam.
Commercial Regulatory Issues

Analysing the Varying Funding Disclosure Requirements in District Courts

Whilst much has been made of ongoing efforts to increase disclosure requirements for third-party litigation funding in patent lawsuits, it is important to remember that there is little uniformity in these requirements across the US. A new piece of analysis examines some of the most notable jurisdictions across America, providing insight into recent rulings to see where plaintiffs should be most aware of disclosure rules.  A new article by Zacharias Shepard, associate at Baker Botts, provides an overview of recent court decisions that have impacted disclosure requirements for third-party funding of patent disputes. He first considers the ongoing saga in the District of Delaware, where Chief Judge Colm Connolly’s standing order has imposed stringent disclosure measures that require parties to not only disclose the identity of any third-party funders, but also details around the funders’ level of control and financial interest. As Shepard notes, this standing order has already faced challenges, most notably from Nimitz Technologies, whose petition to reverse one of Judge Connolly’s orders was denied by the Federal Circuit. He suggests that whilst there are likely to be further challenges to Judge Connolly’s standing order, plaintiffs involved in cases in the District of Delaware should initially be prepared to disclose details around their funding arrangements. In contrast, Shepard highlights recent rulings from the Eastern District of Texas that have favoured plaintiffs by allowing funding arrangements to remain confidential. Of particular note among these rulings was Hardin v. Samsung Electronics Co. Ltd., where the Court held that “[l]itigation funders have an inherent interest in maintaining the confidentiality of potential clients’ information and, therefore, [Plaintiffs] had an expectation that the information disclosed to the litigation funders would be treated as confidential.” Nearby, in the Western District of Texas, there are no mandatory disclosure requirements for third-party funding, but Shepard points out that the district’s Local Rule CV-33 does allow ‘parties to use interrogatories to identify publicly-owned non-party companies that have financial interests in the outcome of the litigation.’ In the Northern District of California, Shepard explains that whilst a local rule requires ‘disclosure of non-parties having a financial interest in the case’, rulings in this jurisdiction have largely favoured plaintiffs’ desire to maintain the confidentiality of their funding arrangements.  
Consumer

Jordan Litigation Funding Listed Among Law Firm’s Creditors in Bankruptcy Filings

With the ongoing maturation of the litigation funding industry, we regularly hear funders discussing opportunities for growth around investing directly into law firms rather than simply investing into cases. However, these investments are clearly not without risk, as a recent law firm bankruptcy has demonstrated. Reporting in The Legal Intelligencer highlights the news that Sacks Weston LLC, a Philadelphia-based law firm, filed for Chapter 11 Bankruptcy last week. Sacks Weston had previously made headlines last year, when its former partner, Scott Diamond, pled guilty to stealing legal fees in excess of $319,000 since 2018. The bankruptcy documentation reveals that the law firm still has between $10 to $40 million in funds available for its creditors, with Jordan Litigation Funding listed among those creditors.  Jordan Litigation Funding has already filed a lawsuit against Sacks Weston, alleging that the law firm has failed to repay two loans, with the separate loans valued at $90,000 and $60,000. However, in its bankruptcy filing, Sacks Weston reported that the total amount owed to Jordan Litigation Funding is only $124,000, which leaves a $26,000 disparity between the two parties’ figures. Sacks Weston is represented in its bankruptcy filings by David Smith, founding partner at Smith Kane Holman, who stated that they “expect that the Firm will successfully reorganize its affairs and emerge from its chapter 11 case.”
Commercial Regulatory Issues

ABA Innovation Leaders Don’t Want Non-Lawyers Owning Law Firms

Many say the future of law is linked to financial structures such as litigation finance, and similar legal investment products that expand access to justice. Yet, ABA innovation unit leaders have firmly stated their position that non-lawyers should be prevented from holding a stake in law firm ownership. Bloomberg Law reports that ABA Innovation leaders are arguing that the expansion of law firm ownership structures could jeopardize lawyer independence, at the detriment to claimants and the broader legal system. A majority of jurisdictions in the United States have adopted decades-old ABA rules that do not allow fee sharing agreements between lawyers and non-lawyers. Yet reducing costs and barriers to entry for quality legal services should be paramount, according to proponents for legal innovation quoted in Bloomberg's feature.  The ABA innovation unit was founded in 2016 with an annual budget of approximately $400,000, earmarked mostly to establish greater access to legal aid services for the underprivileged. According to Bloomberg, the ABA innovation budget was cut to around $300,000 a year. With such cuts to investment in innovation, some legal scholars suggest greater urgency to further the ABA's iconic legacy.