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Consumer

Bloomberg Law Reports Litigation Finance is an Investment in National Integrity

The United States Chamber of Commerce Institute for Legal Reform recently warned that litigation finance is a potential risk to national security. Bloomberg Law has published a rebuttal to such claims, hailing Consumer Legal Funding as a cornerstone of many United States households seeking much needed cash flow during the litigation process.  Bloomberg Law claims that Consumer Legal Funding poses no risk to United States national security. Bloomberg Law's opinion piece does draw a distinction between consumer and commercial litigation investment. With a focus on consumer funding, Bloomberg Law concludes that many Americans can only pursue justice through the facilitation of litigation investment as a cash flow facility.  With the average Consumer Legal Funding contact around $2,000-$3,000, Bloomberg Law concludes that national security is certainly not at stake.  Bloomberg goes so far as to call the Chamber of Commerce's position on consumer litigation investment a 'fallacy' of composition logic.
Commercial People Moves

Former LCM Investment Manager Launches Versaras

As we head into 2023, another new funder has entered the growing litigation funding market. Revealed in a LinkedIn post, Matthew Denney announced the launch of Versaras, a new legal finance and consultancy firm which is seeking to provide “outsourced dispute finance and funding solutions, and non-recourse investments in Real Estate.”  Prior to founding Versaras, Denney has accumulated a wealth of experience across the legal and finance sectors, having most recently served as an investment manager and head of origination in EMEA for Litigation Capital Management.
Commercial Fundraising

Boutique Investment Firm Launches with a Focus on Cross-Border Disputes

As the litigation finance industry continues to grow in both established and nascent jurisdictions around the globe, new funders are launching investment firms dedicating a significant portion of their capital to this industry. As we close out the year, this trend does not appear to be slowing, with the launch of a new boutique investment firm: Inweasta. Interviewed by EU Reporter, Inweasta’s Hong Kong CEO, Annie Chan Wai Kwan, discussed the new company’s focus on special situation investing, with an eye towards international disputes resolution and litigation funding. The company is looking to bridge the gap between East and West, bringing expertise to complex cross-border disputes and litigation finance cases that require tailored solutions. Inweasta was founded and is owned by Andrei Elinson, who brings 20 years of experience in commercial disputes, distress assets management and private equity M&A.
Consumer

State AGs Join Chamber of Commerce’s Call for Action Against Foreign Litigation Funding

Recent discussion around the risks of litigation funding have highlighted the potential threat of foreign actors using third-party funding of lawsuits to harm U.S. national security. This claim, which was put forward in a report by the U.S. Chamber of Commerce’s Institute for Legal Reform, a prominent industry antagonist, has now found support among state officials, as a group of 14 state attorneys general have called for action from the federal government to review this alleged threat. Outlined in an article by Reuters, the letter sent to U.S. Attorney General Merrick Garland was signed by these Republican state AGs led by Georgia’s Chris Carr and Virginia’s Jason Miyares. The letter requested that the Justice Department outline what measures it has taken to address the use of third-party funding by foreign entities, stating that the potential of adversarial nations using the process to undermine American economic or security interests was a serious threat. Whilst the Justice Department did not provide Reuters with a comment in response to the letter, the International Legal Finance Association (ILFA) released a statement arguing that the letter was merely a repetition of the Chamber’s claims and was not supported on any factual basis. Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC), stated the following: “The funds that ARC companies provide consumers are not used to pay for the cost of litigation and bringing cases forward. The funds are used to cover household needs, such as keeping a roof over consumers’ heads.”  Schuller went on to note that “If there is a concern as to who is funding the lawsuit itself, then any proposed regulation or legislation needs to concentrate on that aspect, and not on consumers who need funds to make ends meet while their cases make their way through the legal system.”
Announcements Case Developments Commercial

Class action lawsuit progresses in London against Visa and Mastercard to challenge card payment fees affecting UK businesses

A significant class action lawsuit against Visa and Mastercard has progressed at the UK’s specialist competition tribunal. The Competition Appeal Tribunal (CAT) has set a date in April 2023 for a Collective Proceedings Order hearing, which will determine whether the claim – on behalf of a large number of businesses seeking damages for allegedly unlawful charges – can proceed to a full trial.  Harcus Parker, a UK-based commercial litigation law firm specialising in group litigation, competition litigation and class action lawsuits, has brought the corporate card claim at the CAT, the UK’s specialist judicial body for hearing competition cases. The class action seeks compensation for UK businesses, which were charged Multilateral Interchange Fees (MIFs) for accepting payments using corporate* credit cards, as well as for both credit and debit cards used by overseas visitors.  The CAT has published the claim on its website and has now agreed to hear the application for a Collective Proceedings Order.  Harcus Parker claims that Visa and Mastercard have forced banks to agree to a level of MIFs set by the two giants, which are “anti-competitive and unlawful”.  “We want to ensure businesses across the UK economy are properly compensated.  We are making a stand against unlawful interchange fees, which should be abolished. Both the UK Supreme Court and the Court of Justice of the EU have condemned this practice for consumer credit and debit cards. The UK courts should now clamp down on commercial card fees and consumer card inter-regional fees,” said Jeremy Robinson, competition litigation partner at Harcus Parker.  Mr Robinson added: “UK businesses in the travel, hospitality, retail and luxury sectors are particularly hurt by Mastercard and Visa’s multilateral interchange fees and we are pleased that this important claim has been endorsed by a number of leading trade bodies including UKHospitality and ABTA.”  Multilateral Interchange Fees make up the greater part of the service charges levied by banks on businesses when customers pay by card.  Typically, for every £100 spent, up to £1.80 is charged on payments made by corporate cards, or cards used by overseas visitors – costs which are borne by companies throughout the UK.   Since 2015, EU law capped Multilateral Interchange Fees at 0.3 percent on consumer credit card transactions, and 0.2 percent for consumer debit cards. However, this cap did not apply to corporate cards or for consumer card inter-regional transactions.  These sales have continued to attract fees of up to 1.8 percent per transaction.  Harcus Parker accuses Mastercard and Visa of requiring banks to charge anti-competitive MIFs on businesses. These MIFs for corporate and inter-regional payments should be zero per cent, say Harcus Parker.  The class action is open to all businesses, including large international companies and local businesses, as well as some non-UK companies. Many of these businesses, particularly in the travel and hospitality sectors but also the luxury sector too, have been particularly hard hit by Brexit, Covid-19 and the current economic climate.  UK businesses are invited at this stage to register their interest online at www.commercialcardclaim.co.uk.  Those businesses with an annual pre-Covid turnover of £100 million or more will be invited to opt-in to the claim.  Businesses with a turnover under this threshold who have registered online will be automatically included unless they choose to opt out.  A number of trade bodies have endorsed the claim, including: 
  •     ABTA, which represents over 3,900 leading UK travel brands; 
  •     UK Hospitality, which represents 740 members representing many businesses across the UK; 
  •     UKinbound, which represents 330 businesses; 
  •     Tourism Alliance, which represents 65 associations and organisations, which in turn comprise thousands of potential claimants; 
  •     Advantage Travel Partnership, which represents 350 businesses with over £4.5billion annual turnover and which officially endorsed the case at its 2022 annual overseas conference. 
The CAT will hold a ‘certification hearing’ between 3-5 April 2023, when it will decide whether the case can go forward to trial, which is likely to take place in stages in 2024 and 2025.  The case is financed by a third party litigation funder, Bench Walk Advisers, and is fully insured.  *Corporate cards are a type of commercial card, sometimes known as a company or business card.  The served claims can be found on the Competition Appeal Tribunal website:  Harcus Parker is a commercial litigation firm.  It specialises in bringing and defending complex claims, often involving large groups of claimants.  Founded by Damon Parker in 2019, the firm is a recognised market leader in group litigation, case management and litigation funding. 
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Announcements Commercial Fundraising

Contingency Capital Holds Final Closing of First Commingled Fund

Contingency Capital, a global asset management business focused on credit-oriented legal assets, has successfully completed the capital raise for its first commingled fund, with over $490 million in new discretionary capital across the fund and related managed accounts. The firm launched in November 2020 and has raised and deployed in excess of $700 million across a series of strategies and transactions. Its investor base includes university endowments, pension funds, family offices and consultants.

Brandon Baer, Founder and Chief Investment Officer of Contingency Capital, stated: “We are very grateful for the support our business has received from institutional investors in the United States and Europe. Since launch, we have continued to see strong interest from investors seeking diversifying strategies that are generally uncorrelated to the broader equity and fixed income markets. The asset class has evolved considerably in recent years, and our capital raise reflects a growing appetite for legal asset-related investments as well as the increasing institutionalization of the asset class more generally.”

Contingency has a multi-strategy approach, focusing on a broad spectrum of legal assets, including loans to law firms, portfolio financing and distressed and special situations investments where the primary driver is related to a legal, tax or regulatory process. The firm combines litigation expertise with a fundamental credit approach, building structured, diversified pools of legal assets to create sustainable, credit-like returns.

About Contingency Capital  

Contingency Capital is a global asset management business focused on credit-oriented legal assets. For further information on Contingency Capital please see www.contingencycapital.com.

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Commercial Regulatory Issues

Schulte Roth & Zabel Partners Criticize Key Recommendations in the Voss Report

Regulation will be a key industry focus in 2023, with the stage having been set by the Voss Report passed by the European Parliament in September. However, the report’s proposals have received significant criticism, and one law firm has offered careful analysis of issues posed by five of the Voss Report’s central recommendations. In an article for ThoughtLeaders4 Disputes, partners at law firm Schulte Roth & Zabel, Polly O’Brien and Boris Ziser, have examined the following recommendations from the report: capital adequacy, adverse costs, fiduciary duty, a cap on fees, and disclosure of funding arrangements. O’Brien and Ziser note that it already benefits funders to ensure they have sufficient capital to finance activities, and question how a universal standard could be applied, whilst also questioning whether industries outside of litigation finance are held to such standards. Regarding the proposal to make funders liable for adverse costs, the authors highlight that this seems to sit at odds with the report’s stated aim to lower the costs of litigation and widen access to justice, as enforcing such a measure would increase the risk for funders and thereby necessitate higher fees. On the suggestion that funders should maintain a fiduciary duty to the claimant, O’Brien and Ziser observe that while such a duty appropriately exists for a funder to its investors, there seems to be no reason for this to exist for clients who have no need for financial recourse where a claim is unsuccessful. The recommendation for a cap on fees is highlighted as an idea that seems misguided in trying to use a one-size-fits-all approach to all cases, regardless of individual differences in risk and capital required, and would also lead to funders being hesitant to finance cases in the EU. Finally, the authors criticize the similarly blanket approach to disclosure by highlighting that the details of a funding arrangement should have no relevance to a claim’s merits, and that enforcing such detailed disclosure will only encourage defendants to prolong cases where they can see the financial burden will drain a claimant’s funding resources.
Case Developments Commercial

Judge Recommends Confirmation of $1.8 Million Award for Woodsford

\Despite the mutually beneficial partnership between litigation finance companies and lawyers, one ongoing dispute in U.S. federal court had placed a spotlight on a strained relationship between a funder and law firm. However, the dispute between Woodsford and Hosie Rice, which LFJ originally reported on in September, looks closer than ever to being resolved. A recent article by Bloomberg Law details the latest development in the case, after a recommendation was issued by US Magistrate Judge Sherry Fallon, saying that the federal district court in Delaware should confirm a $1.8 million award to Woodsford. The judge found that Hosie Rice had not provided sufficient legal reasoning to overturn the award set by a panel of three arbitrators. This arbitration found that Woodsford was entitled to collect fees from Hosie’s case against Google, where the funder had provided $800,000 in funding. Woodsford’s chief executive officer, Steven Friel, reiterated the company’s position that the basis of the dispute was a “straightforward debt collection matter”, whilst the law firm said that it would continue to fight the award despite Judge Fallon’s recommendation. Both parties will now await the Delaware federal judge’s decision as to whether it will grant the award to Woodsford.