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Commercial Regulatory Issues

UK Government’s Amendment to DMCC Bill Offers a Partial Solution to PACCAR Ruling

The UK litigation finance industry has been closely watching the government’s response to the Supreme Court’s PACCAR decision, with many hoping that there will be a quick legislative fix regarding the enforceability of litigation funding agreements (LFAs). According to one industry expert, a parliamentary debate held earlier this week has offered an indication of what shape a legislative solution may take. A post from Clyde & Co’s director of policy and government affairs, Alistair Kinley, provides insights into the recent debate on the House of Lords over the Digital Markets, Competition and Consumers Bill (DMCC), and its potential consequences for the government’s plans to provide a legislative solution to the PACCAR decision. Kinley highlights two key takeaways from a speech by Minister Viscount Camrose. Firstly, that it appears the government has acknowledged that the current amendment to the DMCC bill only addresses the issue of LFA enforceability for cases in the Competition Appeal Tribunal (CAT). Secondly, the government has indicated that it will attempt to provide a legislative solution for funded cases outside the CAT, as ‘the DMCC Bill is not the place to address this.’ Kinley suggests that this can be considered a mixed result for the litigation funding industry. On the positive side, if the DMCC bill is brought into law then it will solve the enforceability issue for LFAs in the CAT, whilst also having a ‘retrospective effect.’ However, even though there are signs that the government will look for another legislative venue to provide a solution for non-CAT cases, ‘it is likely to be slower in coming to fruition than that proposed for funded opt-out cases in the CAT.’
Commercial Deals

The Funders’ Perspective on Criteria for Case Selection

For lawyers or claimants who have no prior experience in working with litigation funders, it can often seem an opaque process through which funders arrive at a ‘yes’ or ‘no’ decision when choosing whether to fund a case. As a result, it is incredibly useful to understand the funder’s perspective, and through that lens, understand which funders to approach. An article in Concurrences by Thierry de Bovis, director at Equity & Claims Lux, provides an overview of the latest developments in litigation funding and offers useful insights into the factors which funders consider when selecting the most attractive cases for investment. de Bovis begins by exploring the ‘rather undefined concept’ of the term ‘litigation funder’, before examining the different types of litigation finance, from single case funding and the monetization of claims, to law firm funding and special court funding. The article then provides a helpful overview of the main ‘funding criteria’ used by investors, outlining nine separate factors which are often considered by funders during case evaluation and selection. de Bovis identifies the following nine criteria:
  • Matter and financial thresholds
  • Book-building strategy and the passing-on defence
  • The right moment to fund a dispute
  • Dispute Team
  • Recovery of the defendant
  • Which jurisdictions?
  • Pricing the risk
  • Mitigating the risk: Insurance
  • Legal structuring and tax 
de Bovis explains that ‘an investor in litigation finance does not fund a dispute but invests in a legal context that is made up of any criteria’, and that the relative importance of each of these factors to an individual funder ‘will typically be determined by its culture, its legal structure, and its risk appetite.’ Due to this lack of uniformity among funders, de Bovis recommends that ‘the claimant and its counsel should consider the specificity of each funder in relation to these criteria.’ The full article with in-depth explanations for each of these criteria can be found here.
Announcements Consumer

Stellium’s Anthony Johnson Launches New Website

Anthony Johnson launched a new thought leadership website based on customer feedback on December 7, 2023. “The new platform is specifically designed to cater to the needs of legal professionals and firms,” says Anthony Johnson (AJ). “We took extensive customer feedback into account while building this platform, aiming to provide a comprehensive guidance system that enhances operational efficiency, client satisfaction, and profitability.” The new website's mission is clear: to address the frustrations, wants, fears, and aspirations of legal professionals, enabling them to achieve positive business outcomes. AJ understands the importance of sound business management principles and up-to-date legal technology reporting in today's competitive landscape. Transparency fosters trust, collaboration, and innovation within the legal system. Therefore, the site emphasizes the benefits of transparent legal data practices to empower legal professionals and promote excellence in the field. The platform offers a wide array of free educational downloadables and media resources, enabling the audience to navigate the complexities of the legal industry and succeed in their endeavors. AJ is committed to providing valuable content that equips legal professionals with the knowledge and tools they need to excel. The site will continue to deliver high-quality content and empower legal professionals. Visit https://awesomeattorney.io/ to explore the available resources. To learn more about Anthony, click the link below. https://www.linkedin.com/in/awesomeattorney/ For media inquiries contact: Margaret@stellium.co
Commercial

Key Takeaways from LFJ’s Digital Event: Legal Tech and LitFin

On December 6th, 2023, Litigation Finance Journal produced its final event of the year: Legal Tech and LitFin: How Will Tech Impact Litigation Finance Globally? Tets Ishikawa moderated an insightful and pertinent discussion on the use of legal tech in the litigation finance industry. Panelists included Nick Rowles-Davies (NRD), Founder of Lexolent, Isabel Yang (IY), Founder of Arbilex, and Joshua Masia (JM), Co-Founder and CEO of Dealbridge.ai. Below are some key takeaways from the event (answers have been truncated for the purpose of this article): Legal tech is quite a broad term.  What does the legal tech landscape mean to you, and how does it fit into your business? IY: We’re in a very exciting time in legal tech. Where I sit, I primarily deal with the underlying technology being artificial intelligence (AI). The primary advances in advanced AI have primarily occurred out of language being the source data. A lot of these text-based AI advancements all hold great significance for the practice of law. At Arbilex, we are taking advantage of large language modeling (LLM) to reduce the cost of data acquisition. When we take court briefings and unstructured data and try to turn that into structured data, the cost of that process has dramatically decreased, because of Chat GPT and the latest LLMs. On the flipside, because AI has become so advanced, a lot of off-the-shelf solutions have tended towards a black box solution. So the model’s output has become a more challenging task. At Arbilex, we have always focused on building the most stable AI—so we focus on how we can explain a particular prediction to our clients. We are increasingly investing a lot of our time and human capital into building that bridge between AI and that use case. How relevant has legal tech been, and will it be, in the growth of the litigation finance sector?  JM: When we look at scaling operational processes, a lot of times we have to put our traditional computer science hat on and ask, ‘how have we historically solved these problems and what has changed in the past several years to evolve this landscape?’ A lot of the emphasis with technology has been about normalizing and standardizing how we look at these data sets. There’s a big issue when you look at this approach and what existing platforms have been doing—this is a very human business. Because of that, there’s a lot of ad hoc requests that get mixed in. So what gen-AI is doing, we’re getting to a point where you don’t have to over-structure your sales or diligence process. Maybe the first few dozen questions you’re asking of a given data set are the same, but eventually we want to be able to ask questions that are specific to this deal. So being able to call audibles and ad-hoc analysis of data sets was really hard to do before the addition of generative AI. NRD: Legal tech is becoming increasingly relevant, but the real effect and usefulness has grown over time. It makes repetitive tasks easier, and provides insights that are not always readily apparent. But in terms of the specific use of AI to triage outcoming matters, we identify matters in different areas—is this something we simply aren’t going to assess, will it be sent back for further information, does it fit the bucket of something we would fund per our original mandate, or does it go on the platform for the purpose of others to look at and invest in that particular matter. AI is having an increasing impact and is being used with more regularity by litigation funders who are funding they can increase efficiency and get to a ‘yes’ much more quickly. A lot of lawyers would say, this is fascinating, but ultimately this is a human industry. Every circumstance will be different, because they will come down to the behaviors of human beings in that time. Is there a way that AI can capture behavioral dynamics? IY: In general, we need to have realistic expectations of AI. That comes from, what humans are uniquely good at are not necessarily the things that AI is good at. AI is really good at pattern-spotting. Meaning, if I train the model to look for recurring features of particular cases—say, specific judges in specific jurisdictions, when coming up against a specific type of argument or case—then AI in general has a very good ability to assign the weighting to a particular attribute in a way that humans instinctively can come to the same place, you can’t really quantify the impact or magnitude of a specific attribute. The other thing that we need to be realistic about, is that cases are decided not just on pattern, but on case-specific fact attributes (credibility of a witness, availability of key evidence). If you train AI to look for things that are so specific to one case, you end up overfitting the model, meaning your AI is so good at looking for one specific variable, that it loses it general predictive power over a large pool of cases. What I would caution attorneys, is use AI to get a second opinion on things you believe are a pattern. In arbitration, attorneys might use AI on tribunal matters—tribunal composition. AI models are way better at honing in on patterns—but things like ‘do we want to produce this witness vs. another witness,’ that is not something we should expect AI to predict. For the full panel discussion, please click here.
Past Event

Legal Tech & Litfin: How will tech impact Litigation Finance globally?

Watch this expert panel discussion to understand the growing role of technology in the litigation finance sector. Gain valuable insights into how AI, machine learning, and other advancements are reshaping key aspects of the industry, from origination to risk management. Originally presented in December 2023, this discussion remains highly relevant as technology continues to reshape the litigation finance landscape. Key takeaways include:
  • How is technology driving growth and efficiency in litigation finance? Explore the key advancements and their impact on the industry.
  • Discover how firms are using technology to enhance case origination, underwriting, CRM, and risk management strategies.
  • Examine how firms are measuring the value of technology investments and what their expectations are for ROI.
  • Understand the challenges firms face in implementing new technologies and integrating them with existing systems.
  • Explore emerging trends and predictions for the future of technology in litigation finance.
Listen to Replay
Commercial Deals

Omni Bridgeway’s Loewith Discusses Canadian Litigation Finance Market

Whilst the North American litigation finance market is dominated by the huge volume of cases in need of funding in the US, the industry’s leading funders are keen to exploit the potential of a Canadian market that is ripe for growth. An article by Law360 Canada provides insight into the country’s litigation funding market through an interview with Naomi Loewith, director of strategic partnerships - Canada, at Omni Bridgeway. Loewith explains that whilst third-party funding is still in its early developmental years in Canada, “the courts are comfortable with it and sophisticated lawyers know about it.” Reflecting on her own career move into the world of litigation finance, Loewith highlights that she relishes “the idea of defining people’s expectations about helping establish the industry, helping clients realize why it’s so attractive and important to them.” Discussing the value that Omni Bridgeway can bring to clients through its team of experienced litigators and specialists, Loewith notes that funders can provide clients with both “capital and assistance if they want it.” Looking at the future of litigation funding in Canada, Loewith states that “another trend we’re likely to see is law firms working with litigation finances to enable them to offer more creative fee arrangements to their clients.” Comparing the developing market with the United States, Loewith says that “many more top tier firms are comfortable acting on a partial success fee basis,” and expects to see that trend reflected in Canada moving forward.
Announcements Commercial Regulatory Issues

Triple-I: Plaintiffs Should Disclose Third-Party Funding Arrangements

Ohio’s defendants should know whether a third-party litigation funding firm is financing a lawsuit against them, the Insurance Information Institute’s (Triple-I) chief insurance officer, Dale Porfilio said, in testimony today before the state Senate’s Judiciary Committee. Third-party litigation funders (TPLF) provide billions of dollars each year to U.S. plaintiffs and their legal counsel, yet only a handful of U.S. states, such as Indiana and Montana, have required plaintiffs to disclose in court whether a TPLF is financially supporting a civil lawsuit. "Without any direct ties to litigated cases and minimal transparency, institutional investors and even sovereign nations are contributing significant amounts of capital toward litigation suits for the sole intent of making a profit," Porfilio stated. "Without transparency, we are not able to provide deep data-driven insights about TPLF’s impacts on consumers and the insurance industry. Therefore, Triple-I supports mandatory disclosure of TPLF so we can study the impacts on consumers and carriers alike." A Swiss Re Institute report published in 2021 estimated more than half of the $17 billion in TPLF monies deployed globally in 2020 were in the U.S. Moreover, while TPLF investments offered internal rates of return exceeding 25 percent, commercial liability plaintiffs who used TPLF firms to finance their litigation saw the settlement proceeds allocated to them decrease by 12 percent, this same Swiss Re Institute report estimated. "The insurance industry retains claim adjusters, litigation managers, and defense attorneys to help settle claims. The portion allocated to defense costs are defined as ’Defense and Cost Containment Expenses’ (DCC). These expense dollars across all P&C (property and casualty) products increased 30 percent from 2016 to 2022, while increasing 60 percent for general liability (GL) products across these same years. GL products are where more of the complex and high-limit litigation occurs for large corporations. Because TPLF is not disclosed in Ohio as well as most other states, Triple-I cannot today quantify how much TPLF is contributing to the increase in DCC and the industry’s financial results," Porfilio testified. Triple-I has been educating and informing consumers about its growing concern with third-party litigation funding under the broader umbrella of what the organization refers to as "legal system abuse." Triple-I defines legal system abuse as policyholder or plaintiff attorney practices which increase costs and time to settle insurance claims. While litigation is considered a policyholder’s last resort, Porfilio continued, legal system abuse exploits litigation when a disputed claim could have been resolved without judicial intervention. Legal system abuse contributes to higher costs for insurance operations and policyholder pricing, Triple-I’s chief insurance officer concluded.
Consumer

American Tort Reform Foundation Calls Louisiana a Judicial Hellhole, Citing Influence of Litigation Funding

Among the critics of the litigation finance industry, some of the loudest and harshest voices are associations representing the businesses and industries, who view funders as a driving force behind the increasing volume of lawsuits targeting American corporations. A press release from the American Tort Reform Foundation (ATRF) highlights its ongoing objections to litigation funding, describing it as a ‘multi-billion-dollar industry influencing legal outcomes with, often, zero transparency.’ The release focuses on Louisiana’s place in the ATRF’s 2023-2024 Judicial Hellholes report, where the state was ranked at no.7, and places much of the blame on outgoing Governor John Edwards’ veto of legislation that sought to impose additional disclosure requirements on litigation funding. Tiger Joyce, president of ATRF, cited the case of law firm McClenny Moseley & Associates (MM&A) as an example of the negative impact of litigation funding. MM&A were sanctioned for fraudulently filing claims on behalf of victims of hurricane damage, having received around $30 million in third-party funding. Joyce described it as “a potentially fraudulent scheme between a Texas trial lawyer firm, litigation funders, and a roofing company.”  Joyce failed to note that, as LFJ recently reported, the two funders who lent money to MM&A are also petitioning to recoup their investments from the law firm. ATRF expressed hope that governor-elect Jeff Landry represented a ‘glimmer of cautious optimism for legal reform,’ and stated that ‘there might be an opportunity for the state to improve its civil justice environment.’ The ATRF’s press release makes clear that it hopes the new governor will reverse his predecessor’s position on legislation reforming disclosure requirements.
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.