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Commercial Deals

Deminor Announces Global Strategic Partnership with the Grimaldi Alliance

The growth and maturation of the litigation finance industry has seen funders increasingly focused on building strategic partnerships with law firms and clients, rather than simply looking to grow the business through individual case investments. A tangible example of this shift in approach comes from leading funder Deminor, which has announced a strategic partnership with the Grimaldi Alliance. Detailed in an announcement by Deminor, the partnership will position the funder as the ‘partner of choice’ for the Italian law firm and its global network of partners. Deminor’s CEO, Erik Bomans praised the new partnership and stated: “Our complementary international footprint, combined with multi-jurisdictional client requirements, have led to a natural fit with the Grimaldi Alliance, both strategically and culturally.” Speaking for the Grimaldi Alliance, Francesco Sciaudone, managing partner at Grimaldi, also highlighted the synergy between Deminor’s global strategy and his law firm’s multi-jurisdictional reach. Sciaudone highlighted the scope of the Grimaldi Alliance’s presence, which includes “the Italian market (with more than 9 offices throughout the peninsula) and in the European and international markets, where Grimaldi Alliance is present with well-qualified and integrated teams, in addition to offices in Brussels, Paris, London, worldwide with more than 60 jurisdictions.”
Announcements Commercial Deals

Three Quarters of Law Firms Would Consider External Ownership

Three quarters of law firms would consider selling a percentage of their business to an external buyer, new research has revealed.

A survey of 200 law firm partners commissioned by Harbour, the world’s largest independent litigation funder and law firm lender, showed that 149 of the 200 partners surveyed said their firm would consider external ownership.

The most willing to sell a percentage were the firms with a turnover of between £5m and £10m with all those questioned saying their firm would consider it.

The next most willing to consider external ownership were firms with a turnover of between £50m - £100m (89%), £30m - £50m (86%) and £10m - £30m (79%).

Those least likely to sell were those with turnovers of £400m - £500m (22%) and £100m - £400m (48%).

Of those who said they would not consider external ownership, loss of control was most cited (51%) as the key issue that would need to be resolved before they would consider selling. Other factors included future partner compensation (47%), obtaining partner consensus (37%) loss of employees (33%) and loss of culture or ethos (31%).

The survey revealed that the vast majority of law firms are willing to consider using alternative funding in the next year to 18 months, though 83% of firms said they would consider using cash reserves or asking for increased investment from partners.

Popular forms of alternative funding included bank loans (82%), greater use of contingency fee or damages based agreements (DBA) (79%), credit or lending facilities from litigation funders (78%) and stock market listing/non-lawyer shareholders (77%).

Ellora MacPherson, Managing Director and Chief Investment Officer at Harbour, said: “These results show that the legal sector is well and truly open for investment from external sources. With 75% of law firms considering external ownership, it is a fascinating time in the market with the trend for mergers and acquisitions set to continue. Our survey shows this isn’t just the smaller firms, but also those with substantial turnovers.

“In addition, with law firms and their partners having weathered turbulent economic times during the pandemic, it is clear that many are looking at alternative forms of investment. At a time of high interest rates, specialist lenders to the legal sector, who understand lawyers and law firms, are well-placed to provide attractive finance options.”

Survey methodology

200 law firm partners were interviewed online by Censuswide between 05.07.2022 - 20.07.2022.

About Harbour Litigation Funding

Harbour Litigation Funding is the world’s largest independently owned litigation funder. Since launching in 2007, the business has been at the forefront of the growth and development of the global funding market.

Headquartered in London, the business funds cases across the globe ranging from one-off disputes valued from circa. £1m to portfolios of multi-million-pound cases. It also funds the growth of law firms by offering credit facilities and through equity investments.

Harbour is a founder member of the Association of Litigation Funders (ALF), a member of the International Legal Finance Association (ILFA) and the Commercial Litigators’ Forum.

Ellora Macpherson is managing director and chief investment officer.

Announcements Consumer

Gain Brand Launches, Commits to Leveling the Insurance Playing Field

Gain, a comprehensive medical lien servicing and legal funding company with an artificial intelligence-powered platform, launched today. Previously, the company had been doing business as a variety of operating companies, including Cherokee Legal Holdings, Cherokee Funding and Gain Servicing. The rebrand is meant to streamline the companies and build efficiencies in order to serve as a centralized, AI-powered hub to those with medical lien servicing and legal funding needs. “Since 2011, we have provided legal and medical funding services. Over the years, we have added new companies, new divisions and expanded offerings. Our exceptional growth has led us to today. An exciting time has come in the evolution of our organization and that is the need to streamline all of our services and capabilities under one go-to-market brand,” said Gain Founder and CEO Reid Zeising in a recent letter to clients. “Under our new company name, we aspire to provide solutions and services that are undeniably Gain.” With two-year revenue growth of 251%, Gain recently ranked no. 83 on Inc. magazine’s list of the Southeast Region’s Fastest-Growing Private Companies. Between 2005 and 2022, Gain, doing business as Cherokee Legal Holdings, Cherokee Funding and Gain Servicing, has provided $250 million in medical care and serviced $800 million in medical liens. Honored with three Inc. 5000 designations, 15,000 law firm partners, and over 3,000 health care clients, Gain is well-positioned for continued growth. The new brand identity and company consolidation was launched initially on an updated website, www.gainservicing.com. The company headquarters are and will remain in Atlanta, Ga. About Gain Gain is the fastest growing medical lien servicing and legal funding company in the United States. Gain’s innovative artificial intelligence-enabled servicing platform and its collective services and solutions come together to meaningfully serve the personal injury ecosystem and create better outcomes. Gain is the critical hub connecting medical providers, lawyers and personal injury plaintiffs. Gain’s industry-leading platform serves as the source of truth, providing both needed transparency and efficiency for all of those supporting personal injury cases and plaintiffs. Gain is committed to leveling the insurance playing field for those injured through no fault of their own. To learn more, go to gainservicing.com. Contact: Kris Altiere (470) 713-6621 kris@gainservicing.com
Commercial Deals

Singaporean Bondholders Seeking Funding for Class Action over Credit Suisse Rescue

Last month saw the dramatic collapse of a trio of mid-size U.S. banks including Silicon Valley Bank, and in the aftermath, Credit Suisse found itself in dire need of rescue via its sale to UBS. However, the emergency deal to save Credit Suisse did not come without negative consequences, and in the ensuing weeks, it has appeared increasingly likely that bondholders will be pursuing several lawsuits across various jurisdictions. Reporting in Reuters covers the potential scope of the upcoming litigation, which has been prompted by the $3.4 billion rescue plan’s arrangement to write down around 16 billion Swiss francs of Additional Tier 1 (AT1) Credit Suisse debt. Bondholders in the United States, Switzerland, and Singapore are all reportedly exploring claims, with law firms including Quinn Emanuel Urquhart & Sullivan, Pallas Partners and Korein Tillery, all seeking to represent the claimants. Additionally, there are a number of class actions being proposed in the U.S. that would be brought on behalf of Credit Suisse shareholders. Additional reporting by Business Times zooms in on the bondholder litigation in Singapore, with lawyers representing Singaporean Credit Suisse AT1 bondholders looking to bring a class action lawsuit against the Swiss Government. Jonathan Lim, partner at WilmerHale, stated that the class action was seeking outside litigation funding to support a claim which alleges the bond write-down violated rules against ‘unfair state actions’ codified under the 2003 Singapore-European Free Trade Association.
Commercial

Providing Budgetary Certainty to In-House Counsel Through Litigation Funding

It has become increasingly clear that as the commercial litigation funding market continues to grow more competitive, funders are looking to broaden their client base with a focus on offering services to in-house counsel. Among the advantages that outside capital can provide to legal departments, one funder is stressing the value of providing budget certainty amidst the always unpredictable timing of litigation spending. In a feature in Legal Dive, Burford Capital’s co-COO, Aviva Will, highlights the common issue faced by general counsel that whilst they have a set quarterly budget to account for, outside law firms cannot always make those litigation costs reliably fit within quarterly constraints. As a result, Burford is looking to support GCs where possible by covering legal costs that would exceed the department’s litigation budget, allowing clients to have ‘certainty around when they [are] going to spend their capital’. Another solution which Burford Capital provides to CFOs and general counsel is a form of factoring, where a company expects to receive an award, and Burford will pay a portion of that award in advance, in return for being first in line for any payment if the award is granted.  Will also points to the value Burford can offer clients from a strategic perspective, arguing that it’s not simply about providing lump sums of capital in one go, but instead finding out what the pain points are for the legal department, and then Burford can ‘think creatively about how we can support the company.’
Commercial Regulatory Issues

Is Litigation Funding Responsible for Rising Insurance Settlements?

Many insurers claim that litigation funding is a major contributor to so-called ‘nuclear settlements’, which are large settlements and damages awards that are based on intangible factors. However, a new article interviewing industry experts suggests that there is less consensus on the topic than might be expected. An article by PropertyCasualty360, looks at the issue of rising insurance settlements and the associated rising cost of civil litigation, known as social inflation. Examining litigation funding’s ties to these increases, the author found that there were those who do see a link, such as John C.S Pierce who investigated a social inflation task force at the Defense Research Institute. Pierce argues that the presence of third-party funders and the huge amount of capital they bring, naturally increases costs overall, stating that as the funding industry grows ‘we will see more of these big verdicts and […] more big settlements.’ However, there are experts who disagree with this assessment, including Tom Baker, professor of law at the University of Pennsylvania, who argues that even if social inflation is real, ‘there is no solid evidence, and certainly no published, peer reviewed research, showing that litigation funding is the cause.’ Baker also criticized a publication by insurer Swiss Re, which claimed third-party funding had increased costs in commercial trucking litigation, but failed to note that lawyers in this area do not regularly engage litigation funders. Anthony Sebok, professor at Cardozo School of Law, goes even further and suggests that when looking at litigation funding and social inflation, ‘there are so many reasons to think that the two have nothing to do with each other’. Instead, Sebok argues that industry leaders should look to the wider socio-political conditions at play here, namely the rise in populism that will naturally lead to an environment which is increasingly hostile to corporate defendants. 
Case Developments Commercial

Funder Files Lawsuit Against Another Funder, Alleging Fraud in Law Firm Financing Dispute

As LFJ recently covered, there is growing enthusiasm among litigation funders to invest capital in portfolio and law firm financing, in addition to the single case funding that is a staple of the industry. However, such engagements do not come without their own risks, as has been demonstrated by a dispute where one funder is suing both a law firm and another funder over allegations of fraud. An article by Bloomberg Law provides an overview of the lawsuit in the Supreme Court of the State of New York, where Contingency Capital has brought a complaint against ACAP Litigation Fund. Contingency’s lawsuit alleges that ACAP and the Houston-based Dunken Law Firm defrauded the funder, by using an $8.8 million loan provided to pay off Dunken’s entire existing debts to ACAP. Contingency claims that ACAP lied that this loan would cover the debt, only for ACAP to claim that Dunken was ‘in default of a new loan that it had agreed not to extend’. Whilst Dunken is not the target of Contingency’s lawsuit, they are simultaneously facing another lawsuit from ACAP in Texas, and Bloomberg Law’s reporting found that Dunken has been the target of multiple lawsuits, including allegations of ‘fraud and breach of contract over its handling of transvaginal mesh and talcum powder cases.’  Rebecca Berrebi, CEO of Avenue 33 and a litigation funding broker, stated that the case demonstrates that due diligence cannot always prevent these situations, and that in every litigation funding agreement ‘you presume good faith and fair dealing and that people aren’t lying.’
Case Developments Commercial

District Judge Denies Sysco’s Request to Bundle Burford Dispute with Antitrust Claim

Whilst public conflicts between funders and clients are a rare sight, when a major dispute erupts between the two parties it is sure to be a drawn-out affair. The dispute between Burford Capital and Sysco Corporation is proving to be just such a conflict, as Sysco has failed to bundle its motion to vacate Burford’s existing injunction with one of the antitrust lawsuits at the heart of this dispute. Reporting in the Cook County Record gives us another update on this dispute, highlighting the decision by U.S. District Judge Thomas Durkin to deny Sysco’s reassignment motion. Sysco had argued in its request that resolving its primary dispute with Burford would allow it to settle its ‘Broiler Case’ chicken pricing lawsuit, but Judge Durkin refuted this argument and stated that ‘the two cases are as different as night and day.’ He went on to explain that as Sysco’s dispute with Burford was wholly concerned with the financing agreement, whilst the antitrust litigation still contains ‘unresolved questions of law and fact’, there was no relation between the two cases. Judge Durkin also refuted the idea that bundling the disputes together would create no efficiencies, as he was not even familiar with the details of the litigation finance agreement and its related dispute in the first place. Judge Durkin’s decision included a strong rebuke of the assumptions made in Sysco’s request, stating: ‘While district judges sometimes mediate settlement, it is never appropriate to presume settlement. And it is certainly inappropriate to decide whether Case 1451 should be reassigned on the assumption that Sysco’s claim in that case is meritorious.’
Commercial Regulatory Issues

European Union Explores Regulation of Third Party Funding and International Arbitration 

As litigation finance continues to expand worldwide, political factions look to regulate the sector. New guidance from the European Parliament aims to foster "responsible private funding of litigation."  Mondaq reports that the European Union aims to create an independent supervision body to regulate third party funding activities, creating universal terms and conditions for litigation finance in Europe.  The overarching premise is that EU funders who sponsor agreements may be on the hook for adverse effects related to the litigation. The directive also looks to ensure that litigation investors have enough liquidity available to support both their enterprise and their litigation finance agreements, proven on an annual basis. Transparency is central to the EU directive, along with capping potential litigation funder awards at 40%. If litigation funders look to meddle in the decision of a case, the directive's oversight body may elect to terminate the litigation funding agreement. The European Commission is debating the incorporation of these rules. Further scrutiny will be applied by the European Parliament and European Council. Ultimately, each member state of Europe will need to ratify the rules before they can be enforced.