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Commercial Regulatory Issues

ESG Alert: Funders Pursuing Vast Opportunities in Climate Litigation

Many industry observers, surveys and reports have found that ESG litigation and particularly climate litigation will continue to grow as a dominant force in the legal landscape, and there will undoubtedly be a major role for litigation funders to play. A recent article provides an overview of the current state of third-party funding of climate litigation, looking at some of the most notable cases as well as the growing pool of opportunities available to investors. In a feature for The Wave, Isabelle Kaminski speaks to industry leaders and looks at the growth of litigation finance as a tool for empowering legal cases against those entities that violate environmental protections and regulations. Assessing the unique nature of third-party funding, Anna Carolina Salomão, partner and head of litigation finance at Pogust Goodhead, states that the differentiating factor is that funders are willing to take on the significant risks of funding litigation. As a result, third-party funders are creating “a vast ocean of opportunities for those that have their rights abused.” Kaminski highlights the fact that whilst litigation funders can choose to pursue whichever type of cases they choose to, many are actively seeking out ESG-focused cases, and avoiding those which would be representing claimants on the opposing side of environmental issues. Thomas Kohlmeier, co-founder and co-CEO of Nivalion, highlighted an example where the funder considered a case being brought by a mining company against a state government, and declined to move forward despite the fact that the “case looked at first glance meritorious”. Salomão also took aim at critics of litigation funding, particularly the lobbying efforts from the likes of the Chambers of Commerce and large multinational corporations seeking to curtail third-party funding. In particular, she questioned why these entities are opposed to funders supporting financially poor communities seeking justice, and suggested that the reason is “because it's not beneficial for the big polluters that people now have ways to seek redress.”
Case Developments Commercial

Woodsford-funded Class Action Against Rail Companies Expands its Scope

The UK’s Competition Appeal Tribunal (CAT) has become a hotbed of activity for class action style lawsuits, as consumers look to achieve legal and financial redress against powerful companies. Many of these claims would not be able to succeed without the support of litigation funders, as is once again being demonstrated in a claim brought against British rail firms, which is being funded by Woodsford. Original reporting by the Evening Standard provides details on the claim brought against Southeastern and South Western Railway, as it attempts to expand its targets to include Southern, Thameslink and Great Northern, as well as these firms’ parent companies. The focus of the claim centers on alleged failures by these rail companies to offer customers with Travelcards lower-cost ‘boundary fares,’ instead selling them more expensive tickets from central London. The hearing before the CAT will also examine whether the case should allow for the intervention of the Department of Transport, and whether the claim should include ‘season ticket holders’ as well as the existing ‘single ticket’ customers. The claim’s existing scope covers approximately 240 million train journeys dating back to November 2015, with an estimate of 3.2 million customers who were supposedly charged higher fares.
Commercial

Impact of Litigation Funding on Patent Monetization

The topic of litigation funding as it relates to patent litigation has most recently been dominated by discussions around court battles over disclosure, with critics of the industry honing in on this area as one they claim is most at risk of abuse from third-party funding. However, as a recent podcast highlighted, these arguments overlook the benefits provided to those seeking to acquire or enforce patents to protect their technology. In the latest episode of IPWatchdog’s Clause 8 podcast, this perspective was shared by Lillian Shaked, a founding partner of Shaked & Co., and the vice president of licensing for Transpacific IP. In the interview which covered a wide range of topics, Shaked noted that litigation funding had a transformational impact on the patent monetization industry.  This was due to the fact that patent acquisition and licensing had become a process that could take three to five years to complete, and without the financial resources provided by third-party funders, it would have been extremely difficult for both businesses and individuals to adequately assert and license their patents. Shaked also stated that one of the biggest changes she has witnessed in the activity of litigation funders is a switch from a passive to proactive approach to securing deals. Funders are actively seeking out deals that align with their own interest and experience, rather than waiting to be approached by those seeking capital.
Commercial Regulatory Issues

Lake Whillans Analyzes Potential Impact of GAO Report

In December of last year, the GAO published its report on third-party litigation finance, detailing the current trends and characteristics of the industry in the U.S. The report aimed to provide a much-needed resource of publicly available data on the market, and examine the potential policy implications of its result, which has led to industry commentators looking to analyze what, if any, impact the report will have. In a new piece of analysis by Lake Whillans on Above The Law, the GAO report is praised as being ‘a generally helpful and balanced overview of the state of the funding industry’, both in terms of providing a factual resource, as well as its value to future policy discussions. Importantly, the analysis notes that while this report came about due to the requests of legislators at the federal level, the actual findings of the report avoid dictating any prescriptive regulatory recommendations. This stands in stark contrast to the European Union’s Voss Report. Regarding the potential impact of the report, this article suggests that the report will be a disappointment to those parties looking for ‘ammunition’ to bolster their calls for increased disclosure requirements, and that it instead demonstrates the US regulatory structure as being broadly aligned with other prominent jurisdictions. Lake Whillans argues that the most notable aspect of the report are its findings on the lack of publicly available and accurate data, which may prove beneficial by incentivizing other industry bodies and third-party organizations to increase their research into the litigation funding industry.
Case Developments Commercial

Burford Capital Faces Lawsuit Over Allegations of Interfering in Client Settlements

Whilst the relationship between funder and client is usually mutually beneficial and harmonious, like any type of business partnership there are going to be examples where the opposite is true. In one of the more high profile examples in recent times, one of the world’s leading litigation funders has found itself on the receiving end of a lawsuit from a client, which is claiming the funder is stopping it from settling a number of cases. Reporting from Bloomberg Law reveals that Sysco, an American wholesale food distributor, is suing Burford Capital for blocking its attempts to resolve cases, alleging that Burford is “prioritizing its greed over Sysco’s rights and interests as the plaintiff.” In response to the claim, Burford stated that the settlement amounts are not sufficient in comparison to the value of the claims it had funded, having previously secured an arbitration rule that blocked Sysco from closing these settlement deals. Burford asserted in a statement to Bloomberg that Sysco had broken the terms of the funding agreement, which led to Burford enforcing its right to block the settlements. Burford’s CEO, Christopher Bogart, stated that the breach of the funding agreement had “led to a fundamental economic misalignment between Sysco and Burford of no fault of Burford’s, that in turn led to a unique set of contractual provisions and ultimately to this dispute.” Sysco’s lawsuit aims to secure a court order to set aside the arbitration panel’s ruling, arguing that “Sysco has been forced to litigate against its will against key suppliers who have offered fair and reasonable settlement payments.” Boies Schiller Flexner is also involved in this lawsuit as the original law firm that represented Sysco in the antitrust claims that Burford had funded, with the law firm stating that it “strongly disputes” the allegations made by Sysco in the lawsuit against Burford.
Commercial Deals

Omni Bridgeway Co-CIO Discusses Bankruptcy, ESG and Patent Litigation Funding

With the global litigation funding industry growing to new heights each year, the world’s leading funders are keen to ensure that they stay at the head of the pack by looking for the best opportunities now and in the near future. In a new interview, one of Omni Bridgeway’s senior leaders offers his view on what key areas define litigation finance at present, and where the biggest growth opportunities are located. In a wide-ranging interview with Global Restructuring Review, Jim Batson, co-chief investment officer for Omni Bridgeway, provides an overview of the firm’s involvement in bankruptcy and insolvency activity. Speaking on the evolution of financing for bankruptcy litigation, Batson highlights that parties have become increasingly comfortable with the practice as awareness and experience has evolved. He also notes that Omni has become involved with more complex bankruptcy proceedings in jurisdictions such as Texas, New York and Delaware, where there is more familiarity with third-party funding.   Outside of bankruptcy litigation, Batson argues that whilst litigation funding has always been an ESG investment product due to its focus on widening access to justice, there are now more opportunities for focused ESG investment, and Omni is exploring the creation of a fund exclusively dedicated to ESG legal funding. Outside of Omni’s core markets, Batson sees opportunities for growth in both the Latin American and Asia Pacific regions, as countries such as Hong Kong and Singapore continue to evolve their regulatory approach to litigation funding. In terms of other sectors that Omni Bridgeway is focusing on, Batson spotlights the antitrust arena which has benefitted from the Biden Administration’s policies. In addition, it is no surprise to hear that patent litigation remains a top priority, with Batson emphasizing that it is particularly active in both the US and in Germany.
Commercial Fundraising

Capital & Centric Funding Launches Dedicated Litigation Fund

Australia has always been one of the most prominent markets for litigation funding, with a healthy array of major funders operating. And the funding industry has recently been bolstered by the Aussie government’s plans to relax regulation around the practice. As a result, it is no surprise that we are seeing the emergence of new funders, as well as other fintech companies now looking to diversify and take part in third-party funding. A feature by Australian FinTech reveals that there is a new entrant to the Australian market, as an existing fintech company, Capital & Centric Funding (CCF), announced that it would be dedicating resources to pursuing litigation funding opportunities. Mona Chiha, CEO of CCF, stated that the firm is aiming to achieve ‘a positive impact on our community’ through its litigation funding activities, and will continue to partner with leading Australian law firms. CC&F had previously launched its Litigation Disbursement Loan product in October of last year, which will now be complemented by the Litigation Fund. Chiha emphasized that the fund would prioritize financing litigation for ‘victims of crime and negligence,’ and that its engagements with third-party funding would enable it to pursue ‘both financial gains and social responsibility’.
Commercial Legal Innovation

Lexolent Network Aims to Fill Gaps in the Funding Market

The demand for third-party litigation funding continues to remain high, and there are no shortages of providers out there. However, there are those in the industry who see an opportunity for an intermediary party who can connect funders, investors, brokers and other parties, in order to create more opportunities for access to justice.  An article by Commercial Dispute Resolution covers the launch of the Lexolent network, which is aiming to be the ‘world’s first globally coordinated origination network for legal finance professionals’. Lexolent was officially launched in January by Nick Rowles-Davies, who brings vast experience in the industry having previously co-founded Vannin Capital, founded Chancery Capital and held senior positions at both Burford Capital and Litigation Capital Management. Rowles-Davies intends for Lexolent to play a pivotal role connecting investors to obscure or niche litigation that they might not have otherwise found, whilst also creating opportunities for the established funders. Lexolent also boasts its own Early Execution Fund, which will enable the network to finance a number of cases by itself, with the aim to sell these claims after 12 to 18 months, unless they conclude beforehand.
Commercial Legal Innovation

Highlights from the Second Edition of LITFINCON

As litigation funding continues to grow in size and impact, a vibrant conference and event circuit is beginning to materialize. Now in its second year running, LITFINCON returned to Houston and provided two days of engaging discussion and insights from industry leaders and analysts. Reporting from Above The Law provides an overview of the event, with Gaston Kroub, founding partner at Kroub, Silbersher & Kolmykov, highlighting it as a ‘conference best not to be missed’. The article highlights the event’s judicial panel as a standout feature of the agenda, which included current and former judges from both federal and district courts. The presence of Judge Alan Albright from the Western District of Texas was particularly highlighted, as he shared his insight into the huge volume of patent cases on his docket in 2022, around the topics of disclosure and damages presentations. Kroub also emphasized the collegiate environment at LITFINCON, noting that despite the presence of industry figures who would consider one another competitors, there was a ‘cooperative spirit’ among panelists which enhanced the event. Finally, Kroub pointed out that the event stood out for the differing and creative approaches to litigation funding demonstrated by those in attendance, and stated that ‘the litigation funding space is in no danger of becoming a stale segment of the broader legal landscape’.