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Commercial Deals

Funder Outlines Key Case Factors that Attract Litigation Funding

As the litigation finance industry enters another year of expected growth in activity and invested capital, the question remains as to what type of cases will attract the most third-party funding. In order to find an answer, one industry leader has used both historical data, and his experience in the legal funding sector, to identify what makes a lawsuit attractive to prospective funders. Writing in a blog post on LinkedIn, Bill Tilley, president and CEO of Amicus Capital Group, examines the important qualities that litigation finance companies look for. Looking at research conducted by Bloomberg Law and by Westfleet Advisors, Tilley notes that commercial litigation is the practice area that receives the most funding, and that patent litigation is continuing its rise in popularity, attracting significantly more commitments from funders in recent years. Turning to the individual case factors that are at the top of a funder’s checklist, Tilley highlights three key markers: a defendant with sound financials, a plaintiff with the will to engage in the challenging fight of the litigation process, and the potential of the case to attract additional plaintiffs or members of the class action.  He also points out that cases where the defendant has a track record of previous misconduct will always increase the proposition’s attractiveness.
Commercial Regulatory Issues

Funder Calls for Change in ABA’s Position Towards Third-Party Financing of Law Firms

The maturation of the litigation funding industry has not only provided a tool to widen access to justice, but has also begun to offer law firms the capital and resources needed to modernise and evolve, in order to better service their clients. However, one prominent funder argues that institutional forces’ long-standing objection to a closer relationship between funders and lawyers is hindering further innovation In an article on Lexology, Ken Epstein, investment manager and legal counsel at Omni Bridgeway, argues that the American Bar Association’s (ABA) unwillingness to reform its policy against non-lawyer ownership of law firms and fee sharing arrangements is a major roadblock. Epstein points out that whilst a number of states have relaxed rules on these practices in recent years, the ABA’s refusal to engage the possibility of changing its own policy is stifling progress towards a more equal justice system. In contrast, Mr Epstein highlights the New York City Bar Association and its Litigation Funding Working Group’s study into such reform, which recommended changes to existing rules in order to permit third-party financing of law firms without breaching ethical guidelines. Whilst Epstein acknowledges that it is not the ABA who writes state legislation, he argues that the organisation can play an important role in paving the way for wider reform.
Commercial Regulatory Issues

Judge Can Request Further Funding Disclosure in Patent Disputes, Says Federal Circuit Panel

The beginning of the new year appears to have continued where 2022 left off, as third-party funding disclosure in patent lawsuits remains a contentious issue in a number of cases. Just as LFJ has reported in the Nimitz lawsuit, the U.S. federal courts are willing to allow a judge’s probing of litigation funding arrangements in another two patent lawsuits. Reported by Bloomberg, a panel of three judges from the U.S. Court of Appeals for the Federal Circuit denied two separate patent owners’ requests to stop Judge Colm F. Connolly’s ongoing efforts to mandate further disclosure of their litigation funding sources. Creekview IP LLC and Waverly Licensing LLC had requested to have their cases dismissed, with the agreement of the defendants in each suit, but the panel ruled that Judge Connolly should be allowed to continue his probe. The Federal Circuit maintained that the Delaware judge was not acting outside the bounds of the court’s authority, and that dismissal of a case does not prohibit the court from “addressing collateral issues.” The panel’s order resembles a ruling in the Nimitz patent dispute, in which the court’s authority to request further disclosure of funding arrangements was similarly upheld.
Case Developments Commercial

Omni Bridgeway Funds Class Action Against Australian Insurer Over Data Breach

Litigation funding of class actions remains a powerful tool for holding large corporates to account, especially within industries such as Healthcare and Insurance, which can see customers outmatched by the financial and legal power of the companies involved. A new proposed class action in Australia looks to bring justice to customers of a major private health insurance provider. Omni Bridgeway recently announced that it is funding a class action against Medibank Private Limited, on behalf of customers affected by the company’s data breach around 12 October 2022. Medibank, which provides insurance policies under the ‘ahm’ brand, suffered the data breach in October of last year, and reportedly compromised millions of customers’ personal data including ‘passport numbers and health claim data’. Omni Bridgeway is inviting both current and former customers to register their interest in the class action, which will be led by the law firm Baker McKenzie.
Case Developments Commercial

LitFin Funds Class Action Against European Truck Manufacturers Over Antitrust Violations

The ongoing rise and potential continued growth in class actions in Europe was a common topic of discussion in 2022, and it appears that this year will continue that trend, as a prominent European funder is backing a significant action against some of Europe’s largest automobile manufacturers. LitFin, a European funding firm based in the Czech Republic, is funding a class action claim in Germany against manufacturers of heavy and medium-duty trucks, who were fined by the European Commission for breaching antitrust laws. LitFin is bringing this claim on behalf of companies who bought or leased this category of vehicles from Daimler, MAN, Volvo/Renault, DAF, Iveco and Scania; all of whom admitted their antitrust violations, with the exception of Scania. These manufacturers were all fined by the Commission for acting as a ‘cartel’, violating antitrust regulations by agreeing to prices on trucks sold in the European Economic Area (EEA) between 1997 and 2011. LitFin had already brought a claim against the cartel in the Netherlands, but due to the statute of limitations rendering these claims ‘time-barred’, the funder is also leading a claim in Germany to offer the manufacturers’’ clients another avenue for seeking compensation. The class action in Germany will be led by the Munich-based law firm, MMG Rechtsanwaltsegesellschaft.
Commercial Deals

Arbitration and Third-Party Funding in Asia

The use of third-party funding in international arbitration is on the rise, and as its use grows more commonplace, parties are increasingly keen to understand the nuances of accessing funding in jurisdictions that do not have the same established practices as countries like Australia, the UK or US.  In a new article for the China Business Law Journal, Yang Xueyu and Mariana Zhong, partners at Hui Zhong Law Firm, examine the different third-party funding practices and relevant legislative frameworks across Asia.  Singapore has one of the most-established legal structures for legal funding, having permitted the use of third-party funding in international arbitration since 2017, and then widened this permission structure to include domestic arbitration matters in the Singapore International Commercial Court. However, the authors highlight that third-party funding is only permissible where the funder meets the required criteria of having at least 5 million SGD in paid-up share capital or managed assets. Whilst Hong Kong does not allow the broader use of litigation funding, it does permit the use of third-party funding in both domestic and international arbitration proceedings, and in 2022, legalised “outcome-related fee structures” in order to offer parties a wider array of permissible fee arrangements. Importantly, Hong Kong has well-defined disclosure regulations, which require the existence of funding agreements to be disclosed, including the identity of the funder. Finally, while mainland China does not have established legislation around third-party funding, there have been no indications that it is prohibited, and contingency fee agreements are also recognised as valid. Xueyu and Zhong do highlight that some of China’s arbitration bodies, such as CIETAC and BAC, have set out guidelines for third-party funding regarding investment arbitration that more closely align with international standards.
Case Developments Commercial

Intel and VLSI Seek Dismissal in Microchip Patent Dispute

Patent dispute cases have dominated industry news in recent months, both due to them being among the most active areas for litigation finance involvement, and also due to the number of high-profile cases that have put the spotlight on funding disclosure. One of these cases appears to have found a resolution just before the end of the year, as VLSI and Intel have both agreed to drop their respective claims and counter-claims in the microchip patent dispute. Bloomberg Law covers this latest update which has been ongoing since June 2018, with a joint filing revealing that both parties are seeking dismissal and moving to drop their claims, with neither side receiving any financial payout. According to the article, the resolution contains no remuneration for either party, and also affirms that VLSI will agree to not take any further legal action regarding these microchip patents. The case had attracted attention as VLSI was caught in the crosshairs of Judge Colm Connolly’s April standing order, which mandated additional disclosure around the plaintiff’s litigation funding arrangements. Whilst VLSI had provided further disclosures, Judge Connolly and Intel both argued they were still failing to comply, and then in October, Connoly requested briefs from all parties as to whether the suit should be dismissed for VLSI’s failure to meet the court’s disclosure requirements. Whilst additional briefs were expected in January, these are unlikely to go ahead, after both Intel and VLSI have requested the case be dismissed. However, observers will now likely be closely watching the Nimitz patent case, which has faced increasing scrutiny from Judge Connolly regarding disclosure of its litigation funding arrangements.
Commercial Legal Innovation

Tokenization of Litigation Funding Could Widen Access to Justice

Litigation finance represents a potent solution to the access-to-justice issues facing America’s legal system. However, third-party funding still faces barriers to entry, both in terms of a lack of general awareness of its availability, and how it can be best accessed and utilized. Writing in Law.com, Ron Lasorsa, managing general partner at Victory Litigation Fund, argues that digital transformation, and in particular, tokenization, is the key to unlocking access to litigation funding by opening pathways for more capital and further democratizing the judicial system. Lasorsa points out that it has been three years since the first lawsuit was tokenized, and has since become a more commonplace practice by funders. By embracing tokenization and thereby allowing for the effective crowdfunding of lawsuits, the litigation funding market can expand beyond the borders of the small group of established litigation funders. By widening the number of sources of capital, the individual risk can be reduced, and in the process, increase the liquidity of the market. Furthermore, Lasorsa highlights that ‘smart contracts’ on the blockchain would avoid the difficulties of ensuring payouts from funded wins are delivered on-time and without difficulty. Finally, he argues that tokenization would increase opportunities for activist investors, rather than commercial funders to finance litigation, especially within the ESG arena.
Consumer

RNC Funding of Trump’s Legal Campaign Undermines GOP State AGs’ Attack on Litigation Funding

Litigation Finance Journal recently reported on a group of 14 state attorneys general that have called for action from the Department of Justice to review potential threats to U.S. national security from foreign adversaries' engagement of litigation investment. Litigation funders and industry advocates have new ammo in response to the AGs’ claims, given recent news of the RNC funding former President Donald Trump’s various legal entanglements.  According to ABC News, RNC leaders earmarked $1.6M in legal funding to support President Donald Trump's defense over lawsuits brought by New York Attorney General Letitia James. Meanwhile, the United States Chamber of Commerce Institute for Legal Reform's research has prompted 14 state attorneys general to ask for the Justice Department to assess national security risks of adversaries 'undermining' the United States by engaging litigation funding and third party investment vehicles.  The group of 14 state attorneys general are concerned about foreign adversaries 'weaponizing' United States legal frameworks via litigation investment, to attack critical national industry and infrastructure, such as energy sectors. The group of 14 seeks the Department of Justice to detail how a network of federal agencies could engage a blueprint for defending United States independence from international litigation investors, hostile groups, agencies or governments such as Russia and China. This latest attack on the industry, prompted by the U.S. Chamber of Commerce, is simply another attempt to undermine the nascent and growing litigation funding sector. It is ironic, given that in the case of Consumer Legal Funding–which the Chamber specifically targets–the funding in question does not go to support legal fees, but rather to finance claimants’ livelihoods while they remain injured and unable to work.  While the RNC’s funding of Trump’s legal battles does not constitute foreign investment, it illustrates the acceptance of third party legal funding across political lines, and should be noted by industry advocates looking to respond to the negative publicity put forth by the U.S. Chamber.