Litigation funding is perhaps most powerful when it is deployed to support consumer claims against large corporations, leveling the balance of power in a way that was previously impossible. One industry that may be ripe for such legal actions is the videogame industry, which includes a massive consumer market and has been the site of repeated allegations of exploitative business practices. An ongoing series of class action lawsuits in Austria highlights this potential, as reporting from GamesWirtschaft covers a series of cases brought against Sony Interactive for its selling of ‘loot boxes’, which the claims allege should be considered as gambling. Five lawsuits were brought on behalf of consumers by the law firm Salburg Rechtsanwalts and financed by Vienna-based funder, Padronus. The class action cases alleged that the value of these digital items is based on chance, and therefore would fall under the Austrian Gaming Act. A ruling from the District Court of Hermagor on February 26 stated that the sale of these loot boxes constitutes ‘illegal gambling’ due to the fact that Sony Interactive does not have a gaming license. The court ordered that without this license, any contracts with consumers are void and Sony must refund the consumer for the loot box purchases. Padronus’ managing director, Richard Eibl, highlighted the significance of the case and said that “the verdict is a bang for the entire video game industry”, as it will have implications for other videogame companies that sell these in-game loot boxes. Whilst the ruling may still be appealed by Sony Interactive, Eibl stressed the importance of these claims in shedding light on how companies are allegedly exploiting the addictive nature of these loot boxes to target consumers.

The development of technology and media channels the support law firms connecting with potential plaintiffs has made it easier than ever to launch mass torts. In combination with the growing availability of litigation funding, this has created an environment that one industry commentator fears is encouraging ‘questionable claims’ and burying defendant companies under massive settlements. In an op-ed for Bloomberg Law, Philip Goldberg, managing partner of Shook Hardy & Bacon, argues that the tremendous volume of these mass tort claims is creating an atmosphere where courts are more likely to give the benefit of the doubt to these claims, rather than diligently assessing their merits. Simultaneously, the large sums of outside investment through third-party legal funding is also driving up the value of settlements, as the emphasis for funders and law firms is on maximizing the financial return. Goldberg also highlights that this litigation is becoming increasingly dominated by multi-district litigation (MDL), with the number of MDLs rising from 73 active cases in 2013 to over 300 at present, with mass torts comprising 90% of those active cases. Goldberg argues that companies turning to bankruptcy procedures, such as in the J&J talcum powder litigation that LFJ covered, is not being done for cynical reasons, but instead as a last resort to resolve these claims. It should be noted that the Appeals Court denied J&J’s attempt to use bankruptcy protections in this case. In closing, Goldberg argues that MDL judges must take a thorough approach to this wave of mass tort litigation, and diligently assess the merits of each of these claims as a starting point, to ensure that the system is not abused.

Coverage of litigation funding often focuses on activity in major Western markets, but there continues to be a growing ecosystem of third-party financing in other jurisdictions around the world. This is especially true in the world of international dispute resolution, where complex cross-border disputes often necessitate outside financing in order to bring cases against foreign entities. In a post on LinkedIn, Indian litigation finance provider Lawsuit Ventures, revealed that it had reached a successful resolution for an international dispute brought by an Indian claimant against a Saudi Arabian entity. Lawsuit Ventures had provided funding for the claim, which focused on a breach of contract by the Saudi Arabian respondent, who had allegedly failed to meet its payment obligations under the contract. Hiren Thadeshwar, founder of Lawsuit Ventures, stated that this case highlighted the value of litigation funding for Indian claimants and that the funding had removed “the significant financial and legal barriers that would have made this otherwise impossible.”

As the litigation funding industry continues to mature, there has been a lot of discussion about how funders can build relationships with in-house counsel and legal teams within companies of all sizes. With funders stressing the benefits of legal departments taking advantage of third-party funding, a new report provides insights into the current state of the relationship between funders and in-house legal teams in the UK. Crafty Counsel and Exton Advisors have released their white paper on ‘Dispute management and litigation funding - an in-house perspective’, which provides an overview of the challenges facing legal departments, as well as the opportunities available to improve their litigation management strategies. Most notably, the report found that “less than 7% of legal teams have used litigation funding”, demonstrating both a lack of awareness with the availability and differing use cases for outside funding. However, the report also highlighted that those legal departments who had experience working with litigation funders came away with a positive impression, as 86% of those who had accessed third-party financing expressed interest in using it again. In one particularly interesting insight, 64% of legal teams noted a desire for law firms to provide additional support and education for in-house counsel around options for litigation funding and alternative fee structures.

Class actions remain a popular target for litigation funders as 2023 progresses, driven by developments in countries’ regulatory framework for these actions, as well as particularly active sectors such as securities litigation. A new report by Broadridge Financial Solutions has found that not only is the volume of securities class actions on the rise, but the value of settlements resulting from these cases has experienced an even more dramatic increase. An article by The Global Legal Post provides an overview of Broadridge’s Global Class Actions Report for 2022, which highlights the factors powering this continued growth in class action activity. Broadridge identified that whilst new securities class action filings have yet to reach their pre-pandemic levels, 2022 saw an increase of 22% for a total of 160 individual filings, and the total value of settlements increasing by 142% to reach over $7.4 billion. Broadridge put the spotlight on both cryptocurrency and ESG-related litigation as drivers for growth, as well as the evolution of legislation around the process for opt-in class actions, such as the EU’s Representative Action Directive. This has also been supplemented by countries looking to develop new regulatory structures for the involvement of litigation funders in class action litigation, including New Zealand and Singapore, where the involvement of funders has been a key consideration.

Given the rapid pace of innovation and expansion in the global litigation funding space, it is helpful to engage reference tools to separate the wheat from the chaff. Mondaq's new Litigation Funding Comparative Guide guide spans 12 chapters, serving as an interactive tool for worldwide litigation franchise comparisons.  Mondaq's new guide includes a bevy of options, including 12 global jurisdictions with subgroups, such as ethical considerations, legal framework, tips and traps. From there, additional information allows for comparative analysis by including a list of 60 subjects that are key to litigation finance business systems and processes for each jurisdiction.  The guide aims to engage internationally recognized litigation finance professionals as subject matter experts to provide responses for comparative research. Mondaq claims that over time, the guide will expand to offer more detailed analysis of the litigation investment landscape globally.

International arbitration is a target sector for many funders, with a wide variety of cases that could yield significant rewards. Litigation Capital Management (LCM) has recently achieved success in one such dispute, having won a partial award in a case before the International Criminal Court (ICC). An article in Morningstar covered LCM’s announcement that it had been granted a partial award on liability and quantum in a case before the ICC’s International Court of Arbitration tribunal. With the claim having been successful, LCM must now await the determination of a costs award, although the funder maintained that such an award would not affect its return on investment. LCM had reportedly invested around $2 million in this claim, with the financial return from the award apparently being “in line with management expectations. Whilst the award can still be challenged, LCM expressed confidence that the judgement and award would be upheld. LCM’s chief executive, Patrick Moloney stated that the positive result continued “to demonstrate the non-cyclical and uncorrelated nature of the returns from litigation funding."