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Case Developments Commercial

Judge Denies Woodsford’s Request for Temporary Restraining Order in Dispute with Hosie Rice

As recently as last week, LFJ reported on the ongoing dispute between Woodsford and Hosie Rice over unpaid fees from a litigation funding deal, as the funder sought to block the transfer of proceeds from the sale of a house owned by Hosie Rice’s founders. An article from Reuters provides an update on the case of Frome Wye v. Hosie Rice, et al. in the Northern District of California, as U.S. District Judge Edward Chen ruled against Woodsford subsidiary Frome Wye’s request for an injunction to stop Hosie Rice disbursing $1.8 million from the sale of the property.  In his denial of the request for a temporary restraining order, Judge Chen stated that Woodsford’s “purely financial” injury should be solved with a damages award. The ruling concluded that Woodsford  “has not shown a likelihood of irreparable injury”, and that the funder “has not submitted any evidence that any or all three Defendants who entered into the funding agreement are insolvent or that they would not be able to pay the amount owed.” Spencer Hosie and Diane Rice, the law firm’s founders, expressed satisfaction with the judge’s ruling and said that they hoped the ruling “puts an end to this long Woodsford saga." However, Woodsford’s Steven Friel noted that the funder would “pursue the debt until full satisfaction”, noting that the case had reinforced the fact that Hosie Rice still owes Woodsford the $1.8 million awarded by the arbitration panel.
Announcements Commercial Deals

Odyssey Marine Exploration Secures Additional Capital as it Pursues NAFTA Claim Against Mexico

As litigation funders are keen to regularly emphasise, third-party financing is not only useful to directly support a company’s legal claims, it is also a valuable tool to allow the business to continue its operations unhindered whilst pursuing meritorious litigation. In a press release from Odyssey Marine Exploration, Inc., the mineral exploration company announced that it has secured a debt financing deal including capital from Drumcliffe Partners, its primary litigation funder. The financing has been secured to support its ongoing operations and strategic initiatives, whilst it pursues an arbitration claim against Mexico over allegations that the country’s government ‘wrongfully denied environmental approval of the ExO Phosphate project in breach of NAFTA.’ The note and warrant purchase agreement was agreed on December 1, with Two Seas Capital leading the financing and additional investors including, Four World Capital Management, and the DP Special Opportunities Fund I, LLC (managed by Drumcliffe Partners). The financing deal includes ‘the issuance of promissory notes with an 11.0% annual interest rate, totaling up to $6.0 million, and warrants that allow them to purchase shares of Odyssey's common stock over the next three years.’ Sina Toussi, founder and chief investment officer of Two Seas Capital, highlighted that the funding would “bridge Odyssey to what we believe will be a just judgment in the arbitration and position Odyssey to pursue several new high-value projects.” James C. Little, CEO of Drumcliffe Partners stated they “continue to believe in the strong merits of the claim and Odyssey’s entitlement to compensation as the result of Mexico’s arbitrary and unfair treatment in breach of international law.”  The arbitration panel’s decision in the NAFTA case is expected in early 2024.
Commercial Deals

Lenders for Indian Airline Considering Litigation Finance Options

Although the litigation finance market in India is currently in a developmental stage, domestic and international funders have repeatedly identified it as a country with huge potential for growth in the adoption of third-party funding. A developing story regarding an insolvent airline suggests that this optimism is well-founded, as the company’s lenders are reportedly investigating third-party funding options to pursue legal proceedings.  Reporting by BQ Prime and Mint provide insight into the legal woes of the bankrupt Indian airline, Go First, whose financial backers are reportedly considering pursuing litigation financing options to fund its legal actions against engine manufacturer Pratt & Whitney. Last month, BQ Prime reported that Go First’s lenders led by the Bank of Baroda were meeting to discuss third-party funding options to support the airline’s litigation against Pratt & Whitney, for its failure to supply engines as contracted.  Following up on BQ Prime’s reporting, an article from Mint suggests that these lenders will move forward with a search for litigation finance providers, with the goal being to secure ‘up to ₹12,000 crore tied up in various lawsuits’. According to an anonymous source who spoke with Mint, the plan would be for the “existing legal costs can be paid off to lawyers by the lenders, and then a credit fund or a large stressed-debt fund can be roped in for financing all the litigation going forward and help Go First win the cases." The source went on to suggest that whilst the actual costs for the various litigation may total “less than ₹100 crore”, the lenders are hoping that “a favourable court verdict may fetch up to ₹12,000 crore."
Commercial

Attorneys say Financial Terms are Most Important Factor when Selecting Litigation Funding

For attorneys looking to pursue litigation financing, whether it is for the first time or as a repeat user, these professionals must consider a wider range of factors when choosing the right provider to work with. A new survey reveals some of the most pressing factors and concerns that attorneys are focused on when assessing their third-party funding options. An article from Bloomberg Law highlights findings from its recent State of Practice Survey, which found that the financial terms offered in a funding agreement are the most important factor that lawyers consider when pursuing litigation funding. 26 of the 31 attorneys who responded to the survey’s question about factors considered when assessing litigation funders, answered that the ‘financial terms offered’ were ‘very important’ or ‘somewhat important’. When looking at the top concerns raised by first time users of litigation funding, those attorneys surveyed answered that ‘high financing costs’ alongside ‘maintaining control over the litigation’ were two of the most prominent areas of concern. As the article goes on to note, these answers ‘make sense in light of the high financial stakes in litigation matters that tend to draw the interest of funders.’ The State of Practice Survey included answers from 450 attorneys across a range of topics.
Case Developments Commercial

Woodsford to Receive $7.8M from $26M Settlement in Ardent Leisure Class Action

As LFJ reported in August, a class action backed by third-party funding and brought against one of Australia’s largest leisure companies has reached a settlement agreement. New court documents reveal the court’s approval of the settlement, as well as the details of the final payout to the litigation funder. A court order posted by the Federal Court of Australia on 30 November provides confirmation that the settlement in the case of Colin Graham Ingram & Anor V Ardent Leisure Limited & Ors has been approved and will move forward to distribution. The settlement, which will bring the class action brought in June 2020 to a close, will see Ardent Leisure pay ‘$26 million for compensation, legal fees and disbursements, without admission of any liability.’ The group members were represented in the class action by Piper Alderman, with Woodsford providing litigation funding. The order also includes ‘Deductions from the settlement for the purposes of the SDS (Settlement Distribution Scheme)’, which lists the court approved deductions from the $26 million sum. Of note, is the $7.8 million in “Funder’s Commission”, which will see Woodsford secure a significant return on its investment in the class action. The deductions also include just over $5 million for “Legal Costs Reimbursement Payments” and $737,836 for the “Funder’s Insurance Costs”, the latter of which will cover costs associated with After-the-Event (ATE) insurance cover. The class action focused on allegations that Ardent had misled its shareholders over safety measures at its Dreamworld theme park in the lead-up to the 2016 Thunder River Rapids Ride accident, which led to the deaths of four people.  The final settlement accounts for roughly 10 percent of the $260 million that shareholders lost in the aftermath of the incident in 2016. The full settlement notice can be read here.
Commercial

Examining the Issue of Agency Costs in Litigation Funding

In the ever-present debate around the pros and cons of litigation funding, it is always valuable to step back from highly charged opinion pieces and look at more rigorous academic examinations of the key issues that are contested between third-party funding’s advocates and critics. A research paper from the Vanderbilt University Law School authored by Brian T. Fitzpatrick, professor of law, and William Marra, director at Certum Group, tackles the topic of ‘Agency Costs in Third-Party Litigation Finance Reconsidered’. In the paper, Fitzpatrick and Marra seek to question the oft-repeated critique that third-party funding ‘can increase agency costs for litigants’, suggesting that ‘much of the concern in the third-party litigation finance literature over exacerbated agency costs and who controls the litigation has been mistaken.’ The authors argue that the assumption that the funder will ‘meddle in the lawyer litigant relationship’ is incorrect. They point out that because funders are unable to control litigation ‘due to the ethical rules’, they instead ‘try to align their interests with both the interests of the lawyers and the interests of the litigants.’ As a result, Fitzpatrick and Marra highlight that this approach avoids any need for a funder to try and control the litigation process, as it is much more preferable for a funder to ‘let the invisible hand of incentives do the work for them.’ The paper takes a methodical approach to unpacking the issue of agency costs in third-party funding, firstly by examining the most common criticisms of the practice and the claim that litigation finance ‘will exacerbate lawyer-client agency costs.’ Fitzpatrick and Marra then walk through the standard funding arrangements and the use of the ‘hybrid-fee formula’, before going on to show how this formula is ‘superior to the hourly fees or contingent percentages that clients would otherwise pay without financing.’ Before concluding, the paper also tackles the issue of, ‘if the hybrid formula is so favorable,’ why the legal market does not utilise this formula even in situations with third-party funding present. The full paper can be read here.
Case Developments Commercial

Woodsford Sues Hosie Rice Over Unpaid $1.8 Million Award

Whilst disputes between law firms and funders who have worked together on a case are rare, we have often seen that when these fault lines do appear, the path to an amicable resolution can be quite arduous. This has once again been demonstrated through the latest development in the long-running dispute between litigation funder Woodsford and law firm Hosie Rice over unpaid fees. An article in Reuters provides an update on the fallout between Woodsford and Hosie Rice, as the funder’s subsidiary has filed a lawsuit seeking $1.8 million from the sale of a house owed by the Hosie Rice’s founders. This $1.8 million figure represents the amount that Woodsford was awarded by an arbitration panel in a dispute over unpaid remuneration to the funder. The new lawsuit is asking the court to stop Hosie and Rice from transferring $1.817 million from the sale of the property, with the sale valued at $7.99 million. Woodsford is arguing that without a court order, “it will be costly and expensive (if not nearly impossible)” to secure the amount that is still owed by Hosie Rice. Echoing previous comments on the dispute with the law firm, Woodsford’s CEO Steven Friel described the case as “a straightforward debt collection matter, complicated only by the delay tactics of recalcitrant debtors.” Whilst Hosie Rice provided a much more charged comment, denying that they owed Woodsford any money and saying that the funder is “so crooked it makes Lombard Street seem straight.” The origins of this dispute date back to Woodsford providing around $800,000 in funding for Space Data’s case against Google, with Space Data refusing to pay Hosie Rice after it reached a settlement with Google in 2020. After an arbitrator ruled that Space Data owed the law firm up to $4 million in costs but no contingency fee, Hosie argued that it was not required to award Woodsford any additional fee beyond the original loan repayments.  The $1.8 million award was handed down by an arbitration panel as a result of Woodsford’s subsequent lawsuit against Hosie Rice, in which the funder argued that it was owed additional remuneration as the $4 million client payment constituted a ‘revenue event’ for the law firm. As LFJ reported in September, Judge Colm Connolly ruled that Hosie Rice’s appeal had ‘failed to establish a basis for vacating the $1.8 million award’, thereby concurring with the previous ruling by a magistrate judge.
The LFJ Podcast

Episode 80: Nick Rowles-Davies

Hosted By Nick Rowles-Davies |
In this episode, we sit down with Nick Rowles-Davies to discuss Lexolent, an originations platform for litigation finance transactions. Nick explains how the platform works, how funders, lawyers and claimants can benefit, how Lexolent is planning to disrupt the litigation funding sector, and what trends are happening in the litigation funding space regarding originations. [podcast_episode episode="12255" content="title,player,details"]
Case Developments Commercial

Woodsford-Funded Piper Alderman Class Action Against IC Markets Reportedly Filed

Australia continues to be one of the top jurisdictions for class actions, with both law firms and funders eager to pursue claims which can open access to justice and secure compensation for consumers and groups who have been poorly treated by companies and institutions. Reporting by CDR and Proactive Investors suggests that Piper Alderman is launching a class action against IC Markets, over its sale of contracts for difference (CFDs) to retail investors in Australia. Last month, LFJ had reported that Piper Alderman were at the investigation stage for the class action, but both of the above publications are now reporting that the claim has been filed. The lawsuit will focus on IC Markets’ sale of these products to retail investors between December 2017 and March 2021, alleging that the trading platform failed to ‘adequately assess their [investors] objectives, financial situations and where the risks of investing were inadequately disclosed.’ The claim also alleges that IC Markets broke Target Market Determination rules, from October 2021 onwards.  Piper Alderman has secured funding from Woodsford for the IC Markets class action, and interested parties can learn more on Piper Alderman’s website. Both Piper Alderman and Woodsford are already engaged in separate class actions against another trading company, IG Markets, over their sale of CFD products. Piper Alderman’s class action was filed in May of this year and received funding from Omni Bridgeway, whilst Woodsford is funding a case that was filed by William Roberts Lawyers in August.