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The LFJ Podcast

Episode 78: James Bedell, Yieldstreet

Hosted By James Bedell |
In this episode, we sat down with James Bedell, Director of Legal Finance at Yieldstreet, a platform that offers retail investors the opportunity to access alternative investments, including litigation finance. James discussed investor attitudes towards litigation finance, how the sector performs vs. other asset classes on the platform, and what the benefits are for funders who launch deals on the platform. [podcast_episode episode="11913" content="title,player,details"]
Case Developments Commercial

Delta-Funded Arbitration Against Tanzania Reaches Conditional Settlement Agreement

The funding of international arbitration brought by corporations against governments is not without its challenges, as funders must endure lengthy proceedings whilst taking on sovereign states who often attempt to frame these disputes as examples of corporate greed. However, where funders are able to find examples of meritorious disputes in which companies have fallen victim to state wrongdoing, significant returns on investment can be achieved. A press release by Winshear Gold Corp. reveals that the company has suspended arbitration proceedings against the Republic of Tanzania, as both parties have found terms for a conditional settlement agreement. Winshear emphasized that “there is no guarantee that the conditional settlement agreement will be concluded,” and that they will provide updates as further developments in the settlement process are reached. In December 2020, Winshear announced it had secured up to $3.3 million in litigation financing from Delta Capital Partners Management LLC (Delta) to support the legal proceedings against the Tanzanian government. The dispute began with Winshear seeking compensation for Tanzania’s “illegal expropriation of the SMP Gold Project and loss of the asset”, with the most recent arbitration hearing held in February of this year. Winshear clarified that “any settlement or judgement paid to Winshear from the Tanzanian government is subject to a formula whereby a portion of any proceeds are paid to Winshear's funders and legal counsel.” The announcement of this conditional settlement agreement with Tanzania is noteworthy, as in July of this year LFJ reported on a ruling by an ICSID ad hoc arbitral panel, which ordered Tanzania to pay over $109 million to Indiana Resources. That arbitration also received third-party funding in the form of $4.65 million from Litigation Capital Management.
Case Developments Commercial

Hearings in Gutmann v Apple Suggest Potential Impact of PACCAR Decision

Ever since the Supreme Court handed down its judgement in the PACCAR case, which saw the court rule that litigation funding agreements (LFAs) should be classified as damages based agreements (DBAs), we have been waiting to see what the impact on funded collective proceedings will be. New analysis suggests that recent submissions heard by the Competition Appeal Tribunal (CAT), in Mr Justin Gutmann v Apple Inc., Apple Distribution International Limited, and Apple Retail UK Limited, may give us an idea of the short-term impact of the Supreme Court’s decision. A market insight article by Clyde & Co’s partner & chair of the global arbitration group, Ben Knowles, looks at the implications of the application for certification of opt-out collective proceedings in the Gutmann v Apple case. Knowles explains that the first day of the hearing revealed that, in light of the PACCAR ruling, the class representative had not yet reached a finalized LFA with Balance Legal Capital. Mr Gutman’s lawyers explained that discussions over this matter are still ongoing between their client and the funders, but asked the CAT to still hear the remaining points relevant to certification. Knowles highlights that this is most likely emblematic of the issue facing litigants, counsel, and funders, as they all are faced with the difficulty of how to adequately amend their LFAs to comply with DBA regulations. Knowles goes on to explain that it is possible to conclude that “there isn't a lawful way to fund opt-out claims in the CAT post PACCAR, or to put it another way, there is no proven way to fund opt-out claims in the CAT post PACCAR.” He suggests that this will not be the last example of class representatives asking for more time to finalize their LFAs. As other industry leaders have argued, Knowles argues that the only tangible solution for this issue is “primary legislation that effectively reverses PACCAR or at least excludes its application to certain sorts of cases, such as opt-out collective proceedings in the CAT.”
Commercial Legal Innovation

Darrow Raises $35M for AI Platform that Identifies Potential Class Action Lawsuits

As LFJ reported last week, the worldwide momentum behind class actions continues to gain steam, as countries like New Zealand look to implement formal class action regimes. With no signs of slowing down, legal technology companies are looking to provide tools to support law firms and funders, as they search for those cases with the highest valuations and probabilities of success. Reporting from TechCrunch covers the news that Darrow, a startup which uses AI research to find and select opportunities for class action lawsuits, has raised $35 million in funding to continue its growth and expand its services. The Series B funding round takes Darrow’s total funding raised to nearly $60 million, with the company claiming that its data insights have led to around $10 billion in claims that are being actively pursued. Darrow boasts a client base of around 50 law firms at present, with the CEO, Evyatar Ben Artzi, stating that the goal for the startup is “to be the place where they can find cases that will be impactful.”  Speaking from the investor’s perspective, Margo Wu, lead investor at Georgian, highlighted that “Darrow’s founders recognized a gap in the $63 billion class and mass action market and developed an innovative language model to transform the scale and impact of litigation teams.” Whilst Darrow’s primary client base is still lawyers, as they are one of the parties most interested in finding new viable cases, the company’s leaders clarified that they hope to expand to serve individuals who may have interests in a potential case. The company’s CTO, Gila Hayat, explained that consumers “are part of the long-term vision” and that “they are the reason we started this.”
Commercial Special Features

Member Spotlight: Jonathan Stroud 

Jonathan Stroud is General Counsel at Unified Patents, LLC, where he manages a growing team of talented, diverse attorneys and oversees a docket of administrative challenges, appeals, licensing, pooling, and district court work in addition to trademark, copyright, administrative, amicus, policy, marketing, and corporate matters. Prior to Unified, Jonathan was a litigator with Finnegan, Henderson, Farabow, Garrett & Dunner LLP, and prior to that, he was a patent examiner at the USPTO. He earned his J.D. with honors from the American University Washington College of Law; his B.S. in Biomedical Engineering from Tulane University; and his M.A. in Print Journalism from the University of Southern California. He enjoys teaching, writing, and speaking on Federal Courts, administrative law, competition, and IP policy. Company Name and Description: Unified Patents, LLC is a 350+ international membership organization and trade group that seeks to improve IP protection and patent quality and deter unsubstantiated or invalid assertions in defined technology sectors through its activities. Its actions include analytics, prior art, invalidity contests, patentability analysis, administrative patent review (PTAB), amicus briefs, economic surveys, and essentiality studies. Unified works independently of its members to achieve its deterrence goals.
Company Website: www.unifiedpatents.com Year Founded: 2012 Headquarters: 4445 Willard Ave., Suite 600, Chevy Chase, MD Areas of Focus: Competition and IP Policy, NPEs, Patent and Trademark Law, Economics, Commentary, Quote on Litigation Funding:
 
From Jonathan Stroud: “Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser---in fees, expenses, and waste of time. As a peacemaker, the lawyer has a superior opportunity of being a good man. There will still be business enough."
Commercial Regulatory Issues

Will The UK Supreme Court Decision In PACCAR Affect Hong Kong Litigation Funding?

The Hong Kong Department of Justice's approach to litigation finance and third party funding is coming into greater focus following the UK Supreme Court’s July 26, 2023 ruling on R. (on the Application of PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28. Mondaq reports that PACCAR has defined "damaged-base agreements" or "DBAs" in the United Kingdom. DBAs are strictly regulated in the UK, now including litigation funding agreement contract law. Many UK courts have operated under the assumption that funding of litigation agreements does not fall under the purview of DBAs. PACCAR's Supreme Court decision has sparked a fervent debate around this topic.  Mondaq says that Hong Kong DBA relevancy differs from the UKs DBA approach. Specifically, in Hong Kong, champerty and maintenance are illegal factors that can lead to a fine and prison sentence.  It’s important to note that Hong Kong does allow waivers to the general prohibition of litigation investment if: 
  1. Third parties share a common interest in funding the outcome of a case.
  2. Accessible justice is a prime consideration.
  3. Insolvency proceedings are necessary.
Commercial People Moves

Aon Joins The European Litigation Funding Association (ELFA)

The European Litigation Funding Association (ELFA) is pleased to announce Aon’s Litigation Risk Group, the litigation risk solutions arm of Aon’s M&A and Transaction Solutions, has joined ELFA as an associate member.  “ELFA founding members are on the forefront of litigation finance in Europe”, said Paul Jeroen van de Grampel, Managing Director and Global Co-Head of Aon’s Litigation Risk Group. ”As a pioneer of litigation risk and insurance capital solutions, it is important for Aon to offer its leadership as part of ELFA and continue to shape this industry. ”  Van de Grampel added, “We are delighted to join ELFA and look forward to collaborating with like-minded professionals and industry leaders to build a deeper understanding of litigation funding within the industry. Aon is well positioned to contribute valuable insight on how litigation funding can be leveraged as a valuable tool for access to justice and, where possible, seek combinations with insurance solutions, to better support the growth of fair and effective dispute resolution mechanisms and shape better decisions.”  Omni Bridgeway Managing Director and ELFA Chairman, Wieger Wielinga commented: “ELFA was established to serve as the European voice of the commercial litigation funding industry, and we are immensely proud to welcome reputable and knowledgeable professional services firms such as Aon. The members of ELFA look forward to collaborating with Paul Jeroen and the entire Aon Litigation Risk Group who have decades of experience with the practice of litigation funding globally and particularly in the context of European civil law. Their expertise with litigation risk transfer through insurance will create deeper understanding in the market and help clients leverage bespoke insurance solutions.”
Commercial

LCM Announces Record Financial Results

A year of strong financial returns for litigation funders continues as Litigation Capital Management (LCM) released its full year audited results for the year ending 30 June 2023. The Sydney-based funder announced that it had achieved ‘record results’ with a realised income of A$181 million, with A$84 million of that income directly attributable to LCM. LCM also reported A$0.66 billion in total funds under management and its portfolio of investments are now valued at A$428 million. Praising the hard work of the LCM team, Jonathan Moulds, non-executive chairman, described the year as “LCM's most successful 12 months since inception” and provides the company “a platform from which to continue to expand our asset management business and develop scale.” With such a strong showing in the last year, Moulds highlighted that LCM had declared a final dividend of 2.25p per share, to be paid to shareholders on 27 October.  The funder also finished this period with A$104.5 million of gross cash, of which A$83 million was attributable to LCM. This marked a significant increase from its FY22 figures of A$50 million of gross cash, of which A$29m was attributable to LCM. Patrick Moloney, CEO of LCM, provided the following comment on the results: "Our fund management strategy is delivering third party capital for investment. Our referral network in Europe and APAC is delivering the high-quality investment opportunities that will underpin our generation of value and cash to Fund investors and LCM shareholders. As we continue to grow, increased activity levels will not need to be matched with proportionate increases in overall costs and this in turn means greater profitability and cash generation. This is a critical differentiator for LCM."
Commercial Regulatory Issues

Opportunities for Intra-EU Treaty Award Enforcement in the UK

Whilst it does not receive as much coverage as patent litigation or class action funding, the opportunities for litigation funders around investment treaty disputes are becoming increasingly tangible. As we have seen in the last year, whether it is disputes around bilateral investment treaties or the Energy Charter Treaty, one of the most important considerations for claimants is the selection of jurisdiction for enforcement. In a recent insights piece, Timothy Mayer, senior investment manager at LCM, provides an analysis of the recent developments around international treaty awards and how the UK’s departure from the European Union may make it a more appealing venue for enforcing arbitral awards in this area. Mayer looks at some of the significant judgements over the past five years, which illustrate how the EU has steadily become a less hospitable environment for those companies looking to enforce investment treaty awards. He highlights the path from decisions by the Court of Justice of the European Union (CJEU), such as Achmea vs Slovakia and Republic of Moldova vs Komstroy LLC, which both appeared to reinforce the idea that the court’s view was that ‘ECT based intra-EU arbitrations were contrary to EU law.’ However, Mayer also notes that since these decisions, all but one arbitral tribunal have still found that they have jurisdiction to hear these investment treaty disputes, despite the CJEU’s ‘Intra-EU Objection’. Furthermore, this year’s ruling by the English and Welsh High Court in Infrastructure Services vs Spain provided further reasons for optimism, as the court ruled that there were no reasons to set aside the award and ‘that EU law did not override the UK’s pre-accession treaty obligations to implement the ICSID Convention’. As a result of this pattern of decisions, Mayer suggests that claimants may increasingly look to enforce their investment treaty awards in non-EU jurisdictions, with the US and Australia being examples of creditors looking outside Europe for enforcement. Therefore, Mayer concludes, it is possible that the UK will see a ‘small Brexit-inspired benefit’ when it comes to dispute stakeholders looking to maximize their recovery in intra-EU disputes.