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Commercial Legal Innovation

The Intersection of Litigation Funding and Litigation Risk Insurance

Litigation funding represents an important tool for litigants and law firms in providing the capital to pursue meritorious cases, as well as fundamentally rebalancing the levels of financial risk involved in the process. However, the benefits can be more powerfully realized when funding is paired with the smart use of litigation risk insurance. A recent Q&A hosted by Woodsford’s director of litigation finance and legal counsel, Bob Koneck, dives into the world of litigation risk insurance and discusses current market trends with Megan Easley, senior vice president at CAC Speciality. The discussion covers the wide variety of contingent risk insurances available to customers, from stop-loss policies to judgement preservation insurance, and the growing expansion of portfolio solutions. The booming litigation market has also seen a correlated growth for litigation risk insurance products, with CAC having ‘placed approximately $3Bn in limits in the contingent risk markets in just the last three years’. Speaking to the growth of these portfolio offerings, Easley highlights that they can be useful for a variety of clients, including litigation funders, which hold a diverse array of investments, and law firms who have multiple contingency fee interests. More so than insurance products offered for individual legal assets, these portfolio solutions are tailored and constructed to fit the bespoke needs of the client. Discussing the interactions between funders and insurers, Easley points out that funders can secure insurance to protect their own investments, and also can be involved via litigants and law firms by providing the capital needed to cover the premiums for insurance. Easley also addresses the similarities between the due diligence conducted by funders and insurers, adding that beyond internal approval, the insurer’s process also includes ‘a submission to insurance markets that have to engage with the risk, quote it, and ultimately issue policies’.
Announcements Consumer

Pre-Settlement Funding Firm Expects Johnson & Johnson Talcum Based Baby Powder Cases to Settle By Year’s End

Legal-Bay, The Pre Settlement Funding Company, announced today that they expect a global settlement to be reached in the landmark Johnson & Johnson Baby Powder Talc cases. It will be one of the largest mass tort settlements in U.S. history, costing J&J over $10 billion to resolve over 100,000 claims.  Plaintiffs allege that J&J talc-based baby powder is directly responsible for causing their ovarian cancer, and point out that the company has long been aware of the health risks associated with their product. Several studies dating back to the 1970s concluded that talc particles increase a woman's chances of developing serious medical issues, and evidence suggests that J&J has been intentionally concealing the results for decades.  J&J has attempted to settle the cases via bankruptcy filing and a $9BB payout; however, plaintiffs' lawyers believe that this is woefully insufficient compensation for the damage their product has inflicted, leaving the average settlement amount at less than $200k per plaintiff. If you require an immediate cash advance from your anticipated Johnson & Johnson talc baby powder lawsuit settlement, please visit the company's website HERE or call 877.571.0405 Last week, Federal Judge Michael Kaplan put a hold on all trials as he examines Johnson & Johnson's second bankruptcy filing. Claimants are not only challenging J&J's strategy, but asking the U.S. Justice Department to investigate the pharmaceutical giant for improperly using the bankruptcy code. With the legal rhetoric now at a fever pitch, Judge Kaplan has requested the parties head to mediation to work out their differences. Chris Janish, CEO of Legal-Bay, said, "Our sources close to the litigation have indicated that although a settlement is not imminent at this time; they believe decisive action toward a compromise could be taken by the end of this year. Typically, a fair transaction is when all parties walks away a little disappointed. Therefore, while we predict that J&J will come up on their nine-billion-dollar offer, it will still be well short of the settlement values plaintiffs feel they deserve for their devastating injuries." If you're a plaintiff in an active Johnson & Johnson talcum powder lawsuit and need an immediate cash advance from your anticipated settlement, please visit the company's website HERE or call 877.571.0405 where agents are standing by to hear about your specific case.  Legal-Bay reports that the average settlement value for a case at $9B would be less than $100K. If J&J were to raise their offer, these figures could push the awards closer to $200K per average case, which would be a rather large award considering that 100K total claims are expected to be filed. Legal-Bay is one of the best lawsuit loan companies when it comes to mass tort litigations, and is currently the #1 talc funding company in the industry. Legal-Bay is also funding Round Up cases, Essure, Juul e-Cigarettes, Hernia Mesh, IVC Filters, and Exactech hip and knee recall cases. Legal-Bay assists plaintiffs in all other types of lawsuits, including personal injury, slips and falls, car, boat, or construction accidents, medical malpractice, dog bites, police brutality, sexual assault, judgment or verdict on appeal, commercial litigation, contract dispute, Qui-tam or whistleblower cases, False Claims Act, patent litigation, copyright infringement, and more. Their lawsuit funding programs are designed to provide immediate cash in advance of a plaintiff's anticipated monetary award. The non-recourse law suit loans—sometimes referred to as loans for lawsuit or loans on settlement—are risk-free, as the money doesn't need to be repaid should the recipient lose their case. Therefore, the lawsuit loan isn't really a loan, but rather a cash advance. To apply, please visit the company's website HERE or call toll-free at: 877.571.0405 where agents are available to answer your questions.
Commercial Regulatory Issues

Analyzing EU Regulatory Reforms Against the Australian and British Systems

Following last year’s release of the Voss Report and its recommendations for further regulation of litigation funding within the European Union, there has been much discussion over the individual proposals within the report. However, it is also worthwhile to look at the proposed reforms through a comparative lens and see how their impact could mirror or differ from regulatory structures in other key markets for litigation funding. A new piece of analysis from Chris Martin of Augusta Ventures looks at the future of litigation funding regulation in the EU, comparing the potential outcomes against the existing regimes in Australia and the UK.  Martin highlights the recent developments in Australia, where the government has rolled back certain pieces of regulation to ensure that litigation funders are able to facilitate access to justice. However, Martin points out that Australia’s previous regulatory regime created an environment in which certain cases, ‘particularly class actions against large and well capitalized corporate wrongdoers’, were no longer viable investment opportunities for smaller funders.  The analysis contrasts this stricter approach with the more ‘self-regulating’ model that exists in the UK, where the Association of Litigation Funders (ALF) provides an industry body that can set standards that ensure there is a competitive market and level playing field. Martin argues that the ALF’s code of conduct tackles the same issues that the EU is trying to solve through regulation, including issues such as ‘control of case strategy, approval of settlements and withdrawal from cases’. Martin concludes by suggesting that the EU should not ignore the potential for increased regulation to ‘end up limiting funding options for litigants’, by increasing barriers to entry and driving up existing funder prices.
Commercial Regulatory Issues

Trial Attorney Says Litigation Funding as a National Security Risk is a Myth

As LFJ reported earlier this week, the calls for tighter regulation of litigation funding in the US based on the claim that it threatens national security have continued to grow from politicians, corporations and lobbying groups around the country. However, litigation professionals are speaking out to critique these claims and suggesting that these arguments are simply being made to protect those threatened by litigation, rather than out of a genuine fear about foreign entities exploiting the US judicial system. In an op-ed for Bloomberg Law, Adam Mortara, a trial attorney and former clerk to the US Supreme Court, argues that this supposed risk to national security is vastly exaggerated. Mortara emphasises that despite the Chamber of Commerce’s repeated claims that this is a genuine threat, it has failed to ‘address how confidential information is protected in discovery’, nor has it provided any ‘any actual examples of litigation funders (foreign or domestic) gaining access to sensitive corporate secrets.’ Mortara highlights that Federal Rules already protect defendants from ‘unwarranted disclosure through the issuance of a protective order’, which can also be extended to include an “attorney’s eyes only” provision. Mortara goes on to state that he has never seen a situation in which a litigation funder was allowed access to such protected and confidential information, neither intentionally nor through accidental leaks.  Mortara concludes his argument with a harsh rebuttal of the Chamber of Commerce’s attacks: “Corporations might not like litigation funding because they generally don’t need it and get sued by the people who use it. Fine. But litigation funding isn’t a national security risk.”
Commercial Regulatory Issues

SEC Approves Mandatory Disclosure of Litigation Funding by Private Equity Firms

Whilst the involvement of major industry-leading litigation funders is widely publicized, outside of these household names are a wide range of investment firms that are keen to take part in a sector which promises lucrative returns for those willing to accept the high levels of risk. A new ruling from the Securities and Exchange Commission (SEC) means that whilst private equity firms may still not publicly discuss these investments, they will now be required to privately disclose their litigation finance activities. Reporting by Bloomberg Law details the results of a vote by the SEC earlier this week, which approved new rules governing required disclosures by private equity firms. These companies had previously been able to avoid making disclosures about litigation finance investments, but will now be required to privately report to the SEC ‘the percentage of their capital targeted for use by law firms as part of an investment strategy’. The article also covers additional plans to increase reporting of litigation funding activity by private funds, as the SEC is working to finalize rules that would also require hedge funds to confidentially disclose the proportion of litigation finance in the total value of their assets. The current plans would see hedge funds make this disclosure using a net asset value calculation, and would allow them to report using the percentage of the firm’s capital that is allocated to litigation funding.
Consumer

California Litigation Funding Bill Drops Mandatory Disclosure Requirements

Attempts to regulate litigation funding and provide additional oversight into the practice have been gaining momentum, not only on a national level in several countries, but also by individual state legislatures in the United States. As LFJ reported in March, one such attempt has begun in California where State Senator Anna M. Caballero introduced the Predatory Lawsuit Lending Prevention Act, SB 581. However, a new development suggests that the scope of this bill will be significantly reduced if it does become state law. Reporting in Bloomberg Law highlights the news that a new version of SB 581, which was unveiled last week, had removed the requirement for mandatory disclosure of third-party funding in all cases. The latest draft of the bill has softened these requirements, by only requiring disclosure where it is ordered by a judge in situations where they believe the funding violates state law. Additionally, these disclosures will also be permitted to be made in private to the court, rather than disclosed publicly. Senator Caballero also clarified that the types of funding arrangements included in the bill’s oversight has been narrowed ‘to the situations where the plaintiff needs some kind of financial support in order to get them through the litigation process.’ As a result, Caballero stated the new law would provide an exemption for ‘business-to-business kinds of transactions that help attorneys pay for the litigation costs’. Groups who have been lobbying in favour of amendments to the bill included Consumer Attorneys of California, whose legislative director Nancy Peverini, described the changes as ‘a big victory’. Consumer Attorneys of California has been working with industry associations including the International Legal Finance Association (ILFA), the Alliance for Responsible Consumer Legal Funding and the American Legal Finance Association, to lobby for appropriate changes to the bill. ILFA’s executive director, Gary Barnett, stated that a key concern around the bill’s scope was ensuring that it ‘does not conflate the consumer litigation funding industry and the separate and distinct commercial legal finance industry’.
Commercial Regulatory Issues

Former US Senator Calls for Mandatory Funding Disclosure in Patent Lawsuits

Criticisms of third-party litigation funding of patent disputes have focused on the perceived lack of transparency and oversight, with the U.S. Chamber of Commerce going so far as to suggest that this represents a threat to national security. These calls for a crackdown on litigation finance in patent lawsuits have found a warm reception in some corners, with a former US Senator from Vermont being the latest high-profile political figure to come out in support of the proposed reforms. Writing in an op-ed in Bloomberg Law, former US Senator Patrick Leahy echoes the Chamber of Commerce’s warnings that third-party funding is a tool for America’s competitors to undermine economic and national security. Leahy argues that ‘as more than half of US patents are issued to foreign entities’, there is a broader concern about the lack of transparency regarding patent ownership, with litigation funders offering the potential for ‘foreign competitors to advance their strategic interests’. Whilst Leahy acknowledges that ‘third-party litigation funding is not always problematic’ and can provide access to justice for those who cannot afford it, he maintains that there is an issue if ‘funders are able to influence litigation without revealing themselves’. Leahy highlights recent events including the patent lawsuits in Delaware that saw the court order disclosure around funding, and the ongoing dispute between Burford and Sysco, as examples of the dangers litigation funding poses. Leahy argues against creating complex legislation to regulate litigation funding, and instead argues for a straightforward approach that mandates the disclosure of any third-party funding in all patent lawsuits. Leah concludes by stating that such a requirement ‘poses no threat to good-faith actors, but will expose litigation investors that are weaponizing the US legal system’.
Commercial Deals

RBG Holdings Moving Forward with Sale of LionFish

Coverage of the litigation funding industry often focuses on the successes and returns on investment, but those victories do not eliminate the high levels of risk involved in third-party funding. This has been highlighted by the struggles faced by LionFish Litigation Finance, and its parent company, RBG Holdings. Reporting by Legal Futures reveals that RBG Holdings is taking steps to sell LionFish, its litigation funding subsidiary, which had previously reported £4 million in losses. RBG’s group chief executive, Jon Divers, said that the decision was made following a strategic review of the level of investment required to minimize risk, stating that ‘the group did not have the balance sheet to support the growth required and that LionFish’. RBG’s statement confirmed that the selling process was underway and that it had already received four offers to purchase LionFish, with Mr Divers emphasizing that RBG would conduct the necessary due diligence to ensure ‘an offer that will both deliver cash back to the group and a share of the upside in successful cases’. Looking towards the company’s future, RBG’s group chair Keith Hall added that with a new executive team in charge, ‘the group is well placed to deliver its goal of sustained shareholder value’, once the sale is complete.
Case Developments Commercial

LCM Funds Fashion Label Founder in Trademark Dispute with Katy Perry

When litigation funding is involved in patent or trademark litigation, we most commonly see it associated with cases in the technology sector and in disputes between startup companies and established multinational corporations. However, a recent victory in a trademark lawsuit in Australia saw a prominent commercial funder back a fashion label in a dispute with the world-famous pop star, Katy Perry. Reporting in Business News Australia covers the recent judgement in the Federal Court of Australia, which provided fashion label founder, Katie Taylor, with injunctive relief and damages in regard to her trademark dispute with Katy Perry, whose real name is Katheryn Hudson. Taylor had registered the trademark for ‘KATY PERRY’, and had sold clothing through a business with that name, which she founded in April 2007, had alleged that Hudson’s businesses infringed on the trademark by selling merchandise for the artist under that trademarked name. The Federal Court’s Justice Makovic found in favour of Taylor, stating that the respondents were aware that their conduct was infringing, and yet still ‘engaged in what can only be described as a 'calculated disregard of [Ms Taylor’s] rights.’ Taylor had launched formal legal action in October 2019, and only did so when she became aware of the availability of litigation funding. Justice Makovic elaborated on Taylor’s funding arrangements by saying, ‘It took some time for Ms Taylor to secure litigation funding.  Ultimately LCM Operations Pty Ltd was identified as a firm prepared to fund the litigation.’