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Case Developments Commercial

Burford-Funded Lawsuit Against Argentina Secures Summary Judgement

The prolonged timescale of litigation is regularly cited as a barrier to entry for some investors, with the uncertain duration of any case making it difficult to predict when those returns will be realized. However, as a recent decision demonstrates, there will always be opportunities available for funders and investors willing to take a pragmatic approach. An article by Bloomberg Law provides an update on Burford Capital’s financing of a long-running lawsuit brought by shareholders of YPF SA, a re-nationalized oil company, against Argentina. The case of Petersen Energia Inversora, S.A.U. v. Argentine Republic dates back to 2015 and has stretched on for long enough that Burford ‘began posting financial results and projections that excluded any returns’ from the case. However, the U.S. District Court for the Southern District of New York (SDNY) released an important ruling last Friday, with District Judge Loretta A. Preska finding that the Argentine Republic is liable for the YPF shareholders’ losses following the company’s re-nationalization in 2012. The ruling from SDNY granted summary judgement to the investors without specifying damages, as Judge Preska stated that further details on the exact ‘timing of the nationalization’ needed to be clarified before damages could be calculated.  According to Bloomberg’s reporting, Burford ‘has already made more than three times its initial investment in the case, after previously selling claims worth more than $230 million.’ Burford had suggested that the shareholders’ claims could be worth more than $7.5 billion.
Case Developments Commercial

Omni Bridgeway Funding Shareholder Class Action Against Downer EDI

Class actions continue to be a top choice for funders looking to pursue meritorious claims with the potential for strong financial returns, buoyed by favourable regulatory regimes in many jurisdictions. In another example of this trend, Omni Bridgeway announced that it is funding a class action against Downer EDI, an integrated services provider operating in Australia and New Zealand.  Omni Bridgeway’s shareholder class action alleges that Downer EDI failed to disclose accounting irregularities to the market, misrepresented the truth about its financial position, and that its shares were trading at an artificially inflated price until December 8th, 2022. Omni Bridgeway has stated that the class action will be run by Piper Alderman. The claim has its origins in two events: a December 8th announcement by Downer EDI that disclosed these ‘accounting irregularities’, and the publishing of restated half-year accounts and the provision of updated FY23 guidance on February 27th, 2023. Downer EDI’s share price fell by 20% following the December announcement and then fell by 24% following the February release. Omni Bridgeway is encouraging any shareholders who acquired Downer EDI shares or an interest in Downer EDI shares between April 1st, 2020 and February 27th, 2023, to register their interest.
Case Developments Commercial

Burford Co-Founders Pen Open Letter to Wall Street Journal

The ongoing dispute between Burford Capital and Sysco Corporation continues to develop, with lawsuits on each side accusing the other party of wrongdoing. Last week saw Burford’s leadership make an emphatic defense of its position and track record in a letter to the Wall Street Journal, in which it categorically stated that ‘the facts of this litigation are on Burford’s side’. The letter from Burford’s CEO and CIO, which was originally published in the WSJ last Thursday, saw Christopher Bogart and Jonathan Molot make the case that this dispute was not ‘exemplary of litigation finance […] but rather of an admitted breach of contract.’ In this letter, Bogart and Molot re-emphasise that the origin of this dispute came from Sysco breaching the original terms of its contract with Burford, which resulted in a negotiated settlement that included a ‘limited consent right’ for Burford. Burford’s letter also reframes Sysco as the party which has ‘already lost twice’ in court, with Burford having been granted both ‘a temporary restraining order and preliminary injunction’. The letter ends by reinforcing Burford’s principle that their ‘standard contract makes client control of their litigation clear’, and that this would have also been the case with Sysco had the client not breached the original terms of the contract.
Case Developments Commercial

An Alternative Perspective on the Dispute Between Burford and Sysco

The dispute between Burford Capital and Sysco Corporation has continued to dominate headlines over recent weeks, with commentators speculating on how this situation will resolve and the potential implications for the wider litigation funding industry. However, a new piece of analysis breaks down what lies at the core of this dispute, reframing the story as one about the breach of a litigation funding agreement and the ensuing consequences, rather than the supposed idea of a funder exerting undue control on settlements. Writing in an op-ed for Bloomberg Law, Dai Wai Chin Feman, director of commercial litigation strategies at Parabellum Capital, offers a comprehensive analysis of the root cause of the dispute: Sysco’s original breach of its agreement with Burford. Dai Wai traces this conflict back to Sysco’s breach of its $140 million funding agreement, by breaching the terms prohibiting ‘Sysco from divesting collateral without Burford’s consent’. Dai Wai explains that in order to maintain access to Burford’s capital, Sysco gave Burford an increased share of the claims’ proceeds and ‘agreed not to settle without Burford’s prior consent’. Having agreed to this consent right and identifying a ‘settlement floor’ for the future resolution of the claims, Sysco then sought to negotiate settlement terms below that floor and ignored Burford’s attempt to exercise ‘its consent right based on the commercial unreasonableness of the terms’. As laid out by Dai Wai, this led to Burford seeking the arbitration panel’s injunction, which was granted by the tribunal and led to Sysco’s lawsuit, along with what the author describes as ‘an aggressive public relations campaign’. Dai Wai concludes his analysis by suggesting that ‘Sysco essentially seeks to benefit from a nine-figure windfall borne out of its own breaches’ and ‘has conducted a master class on how to breach a litigation funding agreement.’
Commercial

Examining the ‘Uncorrelated’ Nature of Litigation Funding as an Asset Class

It is often said that one of the most attractive qualities of litigation funding is that it stands as an uncorrelated asset class, largely insulated from market forces and the macroeconomic situation. However, given the extremely turbulent global economic conditions, one industry leader has provided a blog post analysing whether this commonly accepted statement can be taken at face value. Writing in for Thomson Reuters’ Dispute Resolution Blog, Tets Ishikawa, managing director at Lionfish Litigation Finance, suggests that in the wake of SVB’s collapse ‘it would be a mistake to sit back and watch the mayhem with the comfort that litigation funding is uncorrelated.’  Looking at how the current market downturn could affect the litigation finance industry; Ishikawa highlights the inherent complexity of this sector that can dissuade outside investors who lack expertise in the area. This sits in contrast to some investors’ preference to return to safe and familiar investments in times of disruption. Ishikawa pairs this with the fact that in such an environment, there could be a naturally occurring ‘pinch on capital raising’ for litigation funders, which could even lead to ‘some industry consolidation’. Furthermore, Ishikawa points out the current economic environment can substantially raise the risk of litigation investments, especially where the defendants’ underlying assets could be devalued by outside pressure, and therefore impact the ability to make accurate predictions on the true return on investment. Building on his previous analysis of the ways defendants can ‘arbitrage the time value of litigation’, Ishikawa states that these same economic pressures could encourage defendants to drag out litigation rather than settle, in order to effectively manage their liquidity. However, Ishikawa suggests there are naturally positive correlations from the market downturn, such as the other commonly held belief that litigation activity increases during economic disruption. Moreover, he returns to the idea that much like how the litigation funding industry benefited from the 2008 financial crisis, there is equal potential that this period could lead to similar growth driven by corporates turning to third-party funding in order to continue to pursue meritorious litigation whilst managing their own cashflow pressures.
Announcements Case Developments

Legal-Bay Lawsuit Funding Reopens Underwriting Department for Victims of Sexual Abuse

Legal-Bay, The Pre Settlement Funding Company, announced today that they are reopening funding for victims of sexual abuse in light of recent settlements in the McLaren sports facility and multiple Los Angeles detention center lawsuits. The McLaren case centers on the alleged sexual abuse of hundreds of children by a former Olympic coach, Bahram Hojreh. Hojreh was accused of sexually abusing young female gymnasts who were under his care at the Los Angeles-based gym where he coached. The allegations of abuse first surfaced in 2017, and Hojreh was arrested in April 2018. In March 2020, the case was settled for a staggering $8.125 million, with each victim receiving $125,000 on average. According to reports, Hojreh pleaded no contest to charges of sexually abusing 13 female gymnasts, aged 7 to 14 years old, between 2014 and 2017. He was sentenced to 10 years in prison, but the sentence was later reduced to 6 years and 8 months, though he will have to register as a sex offender for life. Also in Los Angeles, probation and detention officers at various juvenile centers are being accused of sexually assaulting approximately 300 boys and girls during their incarceration. The lawsuit was filed this past December, and alleges that the minors suffered multiple incidents of sexual abuse at the hands of the very staff employed to watch over them. The abuse dates back as far as the 1970s right on up through 2018, and specifically names the following facilities: Camp Scott, Camp Kenyon Scudder, Los Padrinos, Barry J. Nidorf, and the Challenger Memorial Youth Centers. The lawsuit claims that there were times when employees were granted unsupervised access to the detainees, subjecting them to verbal as well as physical and sexual abuse. Lawyers for the plaintiffs argue that reasonable supervision should have been enacted to keep the incarcerated juveniles safe. In January 2020, a California state law opened a three-year window for victims to file suit, allowing any victim of sexual abuse to seek damages regardless of the amount of time that had passed since the assault took place. While that specific filing window has since closed, new cases have emerged similar to the ones outlined above that will need to be resolved. As it stands now, the law only allows victims to file suit prior to their 40th birthday or within five years of becoming aware of the childhood abuse if they are over 40. However, The Justice for Survivors Act is presently being debated in the state, and if passed, would end the statute of limitations to file claims of childhood sexual abuse. Legal-Bay reminds plaintiffs that the legal system is backlogged, creating an indefinite wait for sexual abuse survivors to see justice. Chris Janish, CEO of Legal-Bay, commented, "The issue of sexual abuse of minors has been an ongoing problem for years, and unfortunately, still continues today. The California sports facility and juvenile detention center cases are just two examples of the ongoing problem of sexual abuse within youth organizations. While it's encouraging to see settlements being reached, it's clear that much more needs to be done to prevent abuse from occurring in the first place. This includes greater advocacy for the children. Only by taking bold steps can we ensure that kids are kept safe and protected while in the care of youth-based institutions. In the meantime, Legal-Bay stands at the ready to assist survivors and their families with their lawsuit funding needs." If you've been a victim of any type of sexual assault and need an immediate cash advance against your impending lawsuit settlement, please visit Legal-Bay HERE or call toll-free at 877.571.0405.
Case Developments Commercial

Dispute Between Burford and Sysco Escalates, as U.S. Chamber Files Amicus Brief

Disputes between funders and their clients are uncommon occurrences, and those that spill over into public headlines are an even rarer sight. However, the ongoing dispute between Burford Capital and Sysco Corporation appears to be accelerating in magnitude, with third parties now weighing in and taking sides in this high-profile conflict. Reporting by Reuters provides the latest updates on the fight between funder and client. In a new filing to the U.S. District Court for the Northern District of Illinois, Burford accused Sysco of a ‘case of blatant forum shopping’ for attempting to ‘transfer oversight of the arbitral proceeding’ from New York to the Illinois court.  This was in response to Sysco’s attempts to have the New York arbitration tribunal’s temporary restraining order overturned, which had prohibited Sysco from settling the antitrust cases that Burford had funded. Burford is already engaged in a lawsuit in New York against Sysco, seeking to confirm the arbitration panel’s previous judgement. Meanwhile, the U.S. Chamber of Commerce has waded into the dispute by filing an amicus brief with Illinois District Court this Monday, which it also used as an opportunity to repeat its routine criticisms of third-party litigation funding. In the brief, which argued for the Court to grant Sysco’s petition, the Chamber of Commerce stated that the case demonstrated ‘how litigation funding creates conflicts of interests, interferes with attorney-client relationships, and allows opaque interests to control litigation.’
Commercial Deals

Regional UK Funder Looks to Fund Larger Claims

The UK funding market has seen continuous growth in both the demand and supply of funding, with newer market entrants seeking to serve markets outside of London. Thaxted Capital launched last July, aiming to serve the litigation funding needs across the North and Midlands, and has now expanded its services to offer financing for larger cases. An article in The Law Society Gazette details the announcement that Thaxted will be lifting its £1 million cap on funding cases, and will be looking to support commercial disputes requiring over £1 million of funding. Jack Bradley-Seddon, founder and partner at Thaxted, stated that the funder will ‘continue to serve the market for smaller claims’, but will now be able to support larger claims in these regional markets. In Bradley-Seddon’s announcement on LinkedIn, he explained that with the current economic conditions contributing to an increase in the volume of commercial disputes, it has left many businesses without the capital necessary to pursue claims. With the lifting of the £1m cap, Thaxted is looking to ‘offer businesses in this situation the funding to pursue litigation cases for these larger commercial disputes.’
Consumer

California State Senator Introduces Bill to Regulate Lawsuit Lending

2023 is shaping up to be a year in which legislation focusing on the regulation of litigation finance will become a regular feature, ranging from the potential implementation of the Voss Report’s recommendations in the EU, to state-level legislation in the United States. A new development in California has seen a State Senator introduce a bill to more closely regulate the consumer legal funding industry. Writing in Capital Weekly, California State Senator Anna M. Caballero and Linette Lomeli, executive director of Madera Coalition for Community Justice, put forward an argument in favour of a new bill that would increase consumer protections against predatory lawsuit lending practices. Senate Bill 581 (SB 581) was introduced by Senator Caballero on February 15 and aims to implement new rules around the funding of civil claims and class actions.  Among its provisions, the bill would require: litigation financiers to be registered with the Secretary of State, litigation financing agreements to be shared with ‘all parties to the litigation, without awaiting a discovery request’, and would prohibit the funder from ‘charging the consumer an annual fee of more than 36% of the original amount of money provided to the consumer for the litigation financing transaction’. In advocating for the bill, Caballero and Lomeli provide examples of predatory and malicious lawsuit lending practices, including the ongoing Girardi Keese lawsuit, and that the ‘absence of regulation enables bad actors to take advantage of borrowers’. The authors do not advocate for consumer lawsuit lending to be prohibited entirely, but instead argue for reforms which they argue ‘strike a balance between protecting vulnerable borrowers and ensuring the lawsuit lending industry can continue to serve an important role for those in financial need.’ With regards to the section of the bill requiring disclosure of litigation funding agreements to all parties in civil and class action cases, Caballero and Lomeli suggest that this will increase transparency whilst revealing any conflicts of interest between financiers and parties involved in the lawsuit.