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.

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’.

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.

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’.

After the Event (ATE) insurance is a crucial tool for those pursuing litigation who are looking to reduce their risk of financial exposure, whether it is the litigants themselves or the funders who are backing the legal action. However, as one industry expert has highlighted, it is not simply a matter of securing ATE insurance when engaging in litigation, but also ensuring that there is a sufficient level of cover to protect against those scenarios where a case is unsuccessful. In a new insights piece by Rocco Pirozzolo, managing director at Harbour Underwriting, the issue of quantifying the right level of protection needed is addressed. Mr Pirozzolo points out that attempting to make an accurate assessment for costs exposure is never ‘a precise science’, but lays out several factors that can be used to make a reasonable determination, such as the claimant’s budget and the number of defendants. The article highlights that the best practice for assessing the level of cover required is to ‘assume the worst-case scenario’, to ensure that both the claimant and litigation funder are protected from any punitive orders. Pirozzolo emphasizes that the initial purchase of insurance is not the end of the story, and that litigants should continuously review the position, especially when an action proceeds to trial and therefore increases the financial risk that needs to be covered.

As LFJ recently reported, despite the gradual relaxation of rules around Alternative Business Structures (ABS) for law firm ownerships in some states, we have yet to see a wider adoption of the practice across the U.S. However, one investment company is already taking advantage of the new rules in Arizona to form a business that acts as both a patent database and a law firm designed to offer an end-to-end service for new tech startups. Reporting in Bloomberg Law details how MDB Capital Holdings, a Dallas-based investment company with a focus on intellectual property, secured approval from Arizona’s ABS committee to launch PatentVest as an approved law firm. MDB’s chief executive, Chris Marlett, described how PatentVest is designed to provide inventors with all the services they need to nurture their technology, protect those inventions with strong patents, and provide an opportunity for some of these startups to go public. Marlett notes that by combining the investment facility and legal services in one business, this will allow clients to reduce the cost of legal services whilst also unifying the entire technology development and patent strategy process in one place. Whilst some critics of outside ownership of law firms have pointed to potential conflicts of interest between the investment incentive and the legal process, Marlett suggests that traditional law firms are incentivized by generating a high volume of billable hours, whilst PatentVest is focused on developing successful technology leaders.

Litigation funding is perhaps most powerful when it is deployed to support consumer claims against large corporations, leveling the balance of power in a way that was previously impossible. One industry that may be ripe for such legal actions is the videogame industry, which includes a massive consumer market and has been the site of repeated allegations of exploitative business practices. An ongoing series of class action lawsuits in Austria highlights this potential, as reporting from GamesWirtschaft covers a series of cases brought against Sony Interactive for its selling of ‘loot boxes’, which the claims allege should be considered as gambling. Five lawsuits were brought on behalf of consumers by the law firm Salburg Rechtsanwalts and financed by Vienna-based funder, Padronus. The class action cases alleged that the value of these digital items is based on chance, and therefore would fall under the Austrian Gaming Act. A ruling from the District Court of Hermagor on February 26 stated that the sale of these loot boxes constitutes ‘illegal gambling’ due to the fact that Sony Interactive does not have a gaming license. The court ordered that without this license, any contracts with consumers are void and Sony must refund the consumer for the loot box purchases. Padronus’ managing director, Richard Eibl, highlighted the significance of the case and said that “the verdict is a bang for the entire video game industry”, as it will have implications for other videogame companies that sell these in-game loot boxes. Whilst the ruling may still be appealed by Sony Interactive, Eibl stressed the importance of these claims in shedding light on how companies are allegedly exploiting the addictive nature of these loot boxes to target consumers.

The development of technology and media channels the support law firms connecting with potential plaintiffs has made it easier than ever to launch mass torts. In combination with the growing availability of litigation funding, this has created an environment that one industry commentator fears is encouraging ‘questionable claims’ and burying defendant companies under massive settlements. In an op-ed for Bloomberg Law, Philip Goldberg, managing partner of Shook Hardy & Bacon, argues that the tremendous volume of these mass tort claims is creating an atmosphere where courts are more likely to give the benefit of the doubt to these claims, rather than diligently assessing their merits. Simultaneously, the large sums of outside investment through third-party legal funding is also driving up the value of settlements, as the emphasis for funders and law firms is on maximizing the financial return. Goldberg also highlights that this litigation is becoming increasingly dominated by multi-district litigation (MDL), with the number of MDLs rising from 73 active cases in 2013 to over 300 at present, with mass torts comprising 90% of those active cases. Goldberg argues that companies turning to bankruptcy procedures, such as in the J&J talcum powder litigation that LFJ covered, is not being done for cynical reasons, but instead as a last resort to resolve these claims. It should be noted that the Appeals Court denied J&J’s attempt to use bankruptcy protections in this case. In closing, Goldberg argues that MDL judges must take a thorough approach to this wave of mass tort litigation, and diligently assess the merits of each of these claims as a starting point, to ensure that the system is not abused.

Coverage of litigation funding often focuses on activity in major Western markets, but there continues to be a growing ecosystem of third-party financing in other jurisdictions around the world. This is especially true in the world of international dispute resolution, where complex cross-border disputes often necessitate outside financing in order to bring cases against foreign entities. In a post on LinkedIn, Indian litigation finance provider Lawsuit Ventures, revealed that it had reached a successful resolution for an international dispute brought by an Indian claimant against a Saudi Arabian entity. Lawsuit Ventures had provided funding for the claim, which focused on a breach of contract by the Saudi Arabian respondent, who had allegedly failed to meet its payment obligations under the contract. Hiren Thadeshwar, founder of Lawsuit Ventures, stated that this case highlighted the value of litigation funding for Indian claimants and that the funding had removed “the significant financial and legal barriers that would have made this otherwise impossible.”