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Commercial Legal Innovation

Bloomberg Research Indicates Litigation Finance Industry Set to Grow in 2023

Despite global economic instability, litigation finance has been touted by industry leaders as a resilient industry that remains insulated from market fluctuations, and stands out as a lucrative alternative investment. New research from Bloomberg indicates that the industry is still in a period of growth with further room to expand, but in doing so, will have to tackle ongoing concerns around disclosure and transparency. A new article by Bloomberg Law analyzes the results of its 2022 Litigation Finance Survey, which found that while a minority (10%) of lawyers have used or considered litigation finance, a third of these legal professionals indicated they are more likely to utilize third-party funding than they were in 2021. The survey’s results also indicated future growth on the horizon, with three-quarters of respondents who had previously accessed outside funding saying they would likely do so again. Funders remain confident that in spite of ongoing economic turbulence, three-quarters of the funders surveyed expected their deal volume to rise even if there was a further economic downturn in 2023. This expected appetite for litigation funding during a potential recession was also reflected in the fact that a third of funders believed they would raise additional capital if the economic situation continues to deteriorate. However, Bloomberg identified increasing calls for disclosure as a key issue in the litigation funding industry. According to the survey, industry participants are divided on the necessity of mandatory disclosure for funding agreements, with 50% of lawyers agreeing that this should be mandated, whilst over 75% of funders opposed such a requirement. Despite this opposition, the survey found that funders are coming to terms with this reality, as the number of firms who said they have never disclosed a funding agreement dropped from 30% to 10% in the last year.
Case Developments Commercial

Nigeria Loses Funded Claim Against Shell and Eni

While the majority of lawsuits between corporates and national governments tend to see litigation funders working with the corporate party, there are examples of states seeking third-party funding to finance their own claims. However, gaining the backing of a funder is no guarantee of success, as was recently the case with a claim by the Nigerian government failing to secure damages. Outlined in an article by Energy Voice, an Italian appeals court in Milan denied the Nigerian government’s request for over $1 billion in damages against Shell and Eni. The dispute with these energy companies concerned the OPL 245 scandal, in which the two companies were accused of bribing senior government officials to secure drilling rights to the OPL 245 block of water. The Nigerian government’s case was funded by US litigation funder, Drumcliffe Partners, who according to reporting, could have received in excess of $350 million return on its investment. Nigerian officials have said that they will appeal the ruling to Italy’s administrative court, whilst Eni is engaged in arbitration at the International Centre for Settlement of Investment Disputes (ICSID) to secure rights to the OPL 245 area.
Commercial Regulatory Issues

New Zealand Funders Call for Changes to Method of Awarding Costs

The primary benefit of litigation funding for plaintiffs is the ability to seek justice where they lack the capital to cover the costs involved in the process. However, the current system of awarding costs in New Zealand has come under criticism from a leading funder, who argues that the current method of costs being awarded on a scaled basis incentivizes delaying tactics from defendants and fails to deliver adequate restitution to successful litigants. In a press release, LPF Group argued that unlike the UK and Australia where costs are awarded on an indemnity basis, New Zealand’s current model negatively impacts both plaintiffs and the overall court system, which is being bogged down by defendants looking to draw out the process for as long as possible. If full recovery of costs was adopted, LPF said, then defendants would be discouraged from utilizing delay tactics and plaintiffs would receive proper compensation when their cases are successful. LPF’s CEO, Phil Newland, stated that this would not be a one-sided solution, as it would also benefit defendants who are cleared of wrongdoing in court and would represent another disincentive for parties who would bring frivolous or baseless lawsuits. While the courts should still retain the authority to award lesser costs, Newland argued that everyone in the legal industry, including insurers, should support this change that would continue the process of widening access to justice.
Commercial Deals

US Funder Makes the Argument for Financing Law Firms  

With recent developments in a small number of states in the US, namely in Arizona and Utah, the possibility for non-legal entities to own or found law firms is becoming a more tangible possibility for those with the capital to do so. When paired with the explosive growth of litigation funding, one leading US funder suggests that the industry should look for investment opportunities that go beyond cases, and instead fund law firms themselves. Writing in the New York Law Journal, Joshua Libling, director of risk analytics at Validity Finance, argues that ‘financing the business of law itself’ is the next step in the natural evolution of third-party funding. Just like traditional litigation funding, this type of investment would seek returns from fees earned pursuing successful litigation cases, but in this scenario, the collateral could include contingency and hourly fees. Libling argues that whilst case-led litigation financing is a great method for supporting plaintiffs and seeking returns, by supporting law firms with broader investment, funders can enable growing firms to improve and innovate on a larger scale. Whilst the risks are more varied in this scenario, Libling notes that this kind of action is not an equity investment, but a broader partnership between a funder and the law firm. In alignment with the wider goal of widening access to justice for individuals and entities who lack the necessary capital, Libling points out that this kind of funding would do the same for lawyers who might otherwise struggle to access the necessary levels of investment to launch their practice.
Commercial Deals

Woodsford Discusses Approach to IP Litigation Funding

There has been much commentary in recent months on the role of litigation finance for intellectual property disputes, as it continues to represent a large share of all third-party funding commitments. In a new podcast, Woodsford shared its perspective on this area of funding, breaking down why litigation funding is so sought after in this industry, and what types of cases funders will pursue. In the latest episode of the On Intellectual Property podcast, Jeff Harty interviewed Robin Davis, chief investment officer, and Bob Koneck, director of litigation finance at Woodsford. Davis explained that the ‘basic but unfortunate truth’ is that IP litigation is extremely expensive because of the need for expert witnesses, technical analysis and even the fees for IP specialist lawyers, due to their own technical expertise and training. As a result, litigation funding has emerged as a unique solution to solve the capital needs of potential plaintiffs. Discussing how Woodford evaluates and selects IP cases, Davis highlighted that the main criteria for the funder is that the expected damages from a successful outcome must have a 10:1 ratio over the commitment required. She noted that when looking at the whole array of actions, patent and trade secrets litigation tend to meet this bar more often than trademark disputes, and that cases with multiple patent infringements are often the best opportunities. Responding to the oft-stated criticism that litigation funding encourages patent troll litigation, Davis argued that Woodsford’s ESG and access to justice priorities align with inventors and small companies who have been infringed by large corporates. However, the funder also works with larger private and public companies who have had their IP infringed, as third-party funding can alleviate cost pressures for legal departments at these businesses.
Commercial Regulatory Issues

Omni Bridgeway Analyzes Potential Pathways for Irish Legislative Reform

As reported by LFJ in September, the Irish government announced plans to introduce legislation permitting litigation funding for international arbitrations and disputes. However, the exact roadmap for what kind of regulatory system will be adopted is yet to be defined, as we wait to see which other jurisdiction Ireland will emulate. A recent piece of analysis by Camilla Godman, Investment Manager at Omni Bridgeway, outlined the various factors that may be at play in the formation of Ireland’s new regulatory regime. Godman suggests that beyond any initial legislation passed to define this new structure, it will be up to the Irish courts themselves to further refine and interpret how it is to be applied and which cases could benefit from the new rules. One significant question that Godman explores is to what extent the new legislation will detail requirements around third-party funding agreements and the operations of funders within the country. Godman contrasts the system in the UK where funders are mostly self-regulated, versus that of Singapore, which has specific guidelines for the types of organisations that can fund cases.  Finally, this analysis raises the added influence of the European Union, which may lead to Ireland legalising the use of litigation funding in a broader range of cases, but will also be affected by the ongoing regulatory developments since the approval of the Voss Report proposals, earlier this year.
Announcements Commercial Deals

M&A Dispute Volume Is Rising in Climate of Economic Uncertainty and Geopolitical Upheaval, BRG’s 2022 M&A Disputes Report Finds

Mergers and acquisitions disputes accelerated in 2022 even as deal activity slowed, with the darkening economic outlook expected to fuel further disagreements over deals in the coming year, according to the 2022 M&A Disputes Report from Berkeley Research Group (BRG) released today.

Now in its third year, the report examines the global M&A disputes landscape and features qualitative and quantitative research from some of the world’s leading deal and disputes experts. The latest survey found that macroeconomic concerns are surpassing COVID-19 disruptions as primary dispute catalysts, a trend that dealmakers, lawyers and private equity executives expect to extend into 2023.

Continuing last year’s global scope, the 2022 report examines M&A dispute activity and insights from the Europe, Middle East and Africa (EMEA), North America and Asia–Pacific (APAC) regions, investigating recurring themes while posing additional questions and revealing new trends as the pandemic’s effects begin to subside.

The report draws from a quantitative survey of 181 lawyers, private equity professionals and corporate finance advisors, with additional perspectives from more than 20 of the world's top lawyers and experts working in M&A, disputes and private equity. Outside contributors come from leading firms including Quinn Emanuel Urquhart & Sullivan, Jones Day, Hogan Lovells and Linklaters.

Key takeaways include:

  • The dispute pace likely will pick up in the coming year amid continued market volatility due to concerns over inflation and a possible recession, as well as geopolitical uncertainty and lingering effects of COVID-19.
  • Financial Technology (FinTech), Energy & Climate and Traditional Financial Services are the top-ranked sectors for increased dispute activity in 2022. Respondents expect the Construction & Real Estate sector to take the lead in 2023.
  • Environmental, social and governance (ESG) disputes are brewing as regulations take shape and businesses strive to meet evolving, multifaceted ESG criteria.
  • EMEA is the region expected to drive dispute activity in the coming year, with strict regulatory regimes and political strife seen as significant disruptive factors.

The report examines how rising concerns around the volatility of markets and political upheaval are influencing M&A deals and dispute behavior. BRG’s research found that the dramatic events of the past year—including the energy crisis in Europe and elsewhere, falling stock prices and real-estate market disruptions—have shifted the sectors experiencing the most disputes compared to 2021, when COVID-19’s effects heavily impacted hospitality, life sciences and technology. The report also tracks steps that lawyers and advisors are recommending to reduce the likelihood of disputes, such as a greater emphasis on conducting enhanced due diligence while deemphasizing material adverse change and material adverse effect clauses for sellers.

"With geopolitical tensions, macroeconomic concerns and lingering COVID-19 disruptions impacting increasingly complex M&A deals, this report emphasizes the need for a clear understanding of the fundamental issues driving disputes. A multidisciplinary approach will be required to address these challenges effectively," said BRG Managing Director Mustafa Hadi. “The data and expert analysis collected within the 2022 report offer deep insights on the volatility and uncertainty that will drive disputes in the months ahead.”

Download a copy of the 2022 BRG M&A Disputes Report.

About BRG Berkeley Research Group, LLC is a global consulting firm that helps leading organizations advance in three key areas: disputes and investigations, corporate finance, and performance improvement and advisory. Headquartered in California with offices around the world, we are an integrated group of experts, industry leaders, academics, data scientists and professionals working across borders and disciplines. We harness our collective expertise to deliver the inspired insights and practical strategies our clients need to stay ahead of what's next. Visit thinkbrg.com to learn more.

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Commercial

Woodsford Outlines the Benefits of Litigation Finance for Corporates

An increasingly common talking point among litigation funders is that in-house counsels and CFOs are growing more open to using third-party funding when pursuing legal action. However, as LFJ recently reported, one of the biggest hurdles for funders to overcome when persuading corporates to consider outside financing is the difficulty in demonstrating what the tangible benefits are for these businesses beyond shifting legal costs off the balance books. In an article for Reuters, Bob Koneck and Alex Lempiner of Woodsford, outline what they see as the key advantages for corporates utilising third-party funding. Firstly, the authors highlight the ability to lower the risk of pursuing costly litigation in a time of financial strain, referencing a survey from Burford Capital that showed nearly 50% of companies avoided pursuing legal judgments in 2022 as a result of cost. Additionally, funders are often experienced in facilitating alternative fee arrangements with a company’s outside law firm, going beyond simply reducing flat costs as a reason for pursuing litigation. This reduction in costs is also beneficial as it frees up an in-house legal department’s budget to be spent on important operational modernisation, and in onboarding technological advancements.  Woodsford also raises the value of expertise a funder can bring when evaluating whether a claim is even worth bringing in the first place. Whilst litigation finance primarily assists by providing capital, this argument reinforces the idea that in order to demonstrate value to corporates, funders must move beyond their most direct value proposition.
Announcements Consumer

MedResolve Offers Unique and Innovative Personal Injury Legal and Medical Funding Products

Harrison, New York based Altuitive Partners LLC (Altuitive), an investment management company led by alternative investment veteran, Robert Cannon CFF, MBA, AIFA, announces the launch of MedResolve, a litigation financing company dedicated to providing funding solutions to personal injury plaintiffs, healthcare professionals and attorneys. The company was founded by a group of dedicated professionals with decades of experience in finance, law and health care services, resulting in an unrivaled offering of services. Spearheading the day to day operations of the Company is Richard Berman, who brings more than 15 years of experience, both in the legal field, and since 2016, as an underwriter and originator of nearly $100 million in personal injury litigation fundings on thousands of underlying cases. Being injured in an accident can be a life altering experience, causing disruptions such as lost time from work, long-term disability and the need for specialized medical care. MedResolve helps alleviate this burden and allows personal injury plaintiffs to turn a portion of their future settlement into cash by offering non-recourse advances for life needs, expenses and true to the company’s name, surgical advances to help uninsured patients fund the cost of surgery that is related to the ongoing case. Unlike traditional loans, these fundings are structured as purchases of the plaintiff’s future settlement or award. MedResolve also helps medical professionals who treat injured plaintiffs and the attorneys who represent such injured plaintiffs accelerate the collection of a portion of their medical bill or legal fee receivables by offering practice-specific factoring and revenue cycle management solutions to normalize income streams and help these professionals grow their business. To learn more about MedResolve and its personal injury funding solutions for plaintiffs, doctors and lawyers, please call (866) 744-5242 to speak with a funding representative. Or visit www.med-resolve.com.
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