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Case Developments Commercial

Patent Lawsuit Funding Back in the Spotlight in Delaware

There may be no area of litigation funding that has attracted more headlines and controversy than the area of intellectual property and patent litigation, particularly in regard to court orders requiring the disclosure of third-party funding and patent ownership. This has been most aptly demonstrated in Delaware, as U.S. Chief District Judge Colm Connolly has pursued a campaign determined to shed more and more light on the involvement of third-party funding in patent lawsuits. Reporting by The Wall Street Journal offers a detailed and comprehensive summary of Judge Connolly’s actions dating back to April 2022, when he first issued a standing order mandating the disclosure of third-party funding arrangements in the lawsuits brought before his court. This has led to numerous back-and-forth disputes with plaintiffs and their attorneys, with the most high profile disputes still ongoing between the court and plaintiffs that are potentially linked to the non-practicing entity, IP Edge.  This saga is expected to evolve further in the coming months, as Judge Connolly has called for a hearing next month in one of these lawsuits, and ordered the disclosure of any records connecting the plaintiff and their attorneys to IP Edge and Maxevar, a patent consulting firm whose principals are also the founders of IP Edge. In an opinion published earlier this month, Judge Connolly provided a severe warning that he has seen evidence “to suggest that Mavexar and its principals may have used Backertop and Ms. LaPray, along with other LLC plaintiffs and their nominal owners, to perpetrate a fraud on this Court.” Maya Steinitz, a law professor at the University of Iowa, told WSJ that the last 12 months of Connolly’s campaign have demonstrated “that there could be situations where there are undisclosed parties who should be considered the real party in interest.”
Announcements Commercial Fundraising

LEGALPAY LAUNCHES USD 3 MILLION FUND TO FACILITATE SPORTS DISPUTE RESOLUTION INDIA

LegalPay, India’s first and largest litigation financier, is breaking into the world of sports law disputes. In a first, the company has announced the launch of a $3 million fund for sports disputes with a focus on supporting the rights of athletes in India while also addressing disputes pertaining to broadcasting rights, endorsement & advertising aiming to boost the sports industry. With a tenure of four years, the sports focused fund has no limit on the ticket size. Over the past decade the sports industry in India has evolved with the advent of major sporting leagues like IPL, ISL, Pro Kabaddi and IHL. This development has been accompanied by rising number of disputes pertaining to contracts between sports players and other parties, doping policies, harassment in sports, liability with regard to sports injuries, broadcasting rights and conflict of interest regarding the endorsement by players. The fund will be utilized to manage these disputes in the Indian legal sector The company has created a robust and fast process mechanism to run the fund in a fair and swift manner. The company has drafted strict rules and regulations which will govern its use. Talking about this, LegalPay CEO Kundan Shahi states “As the country is evolving towards sports, it is our mission and duty to safeguard the interests of our aspiring athletes. Therefore, LegalPay has launched this fund to provide athlete representation, and legal advice as well as help them with dispute resolution which has to encourage more students to take up sports as a career.” While the spirit of this initiative is effectively encapsulated by Shahi, he goes on to add that this fund will be used in an all-encompassing manner to cover all kinds of disputes in this sector. LegalPay is a Fintech startup that focuses on litigation funding and helps people at large to get access to justice through litigation and arbitration. LegalPay has funded over 2500 litigations and arbitrations across the globe in different jurisdictions. It has a network of 2000+ lawyers who work on different assignments as per their expertise. Shahi stated that through litigation funding, LegalPay will help the athletes by funding their commercial litigations and arbitrations as well as provide them embedded finance for their representation and general legal advice. This fund will ensure that every prospective athlete will have the right to dream big and choose sports as a career in India. About LegalPay LegalPay is India’s 1st Fintech startup that specializes in Legal and debt financing. LegalPay through it’s Litigation Financing and embedded lending product has played a pivotal role in the legal market as it helps businesses and individuals at large to get access to justice. LegalPay has funded over 2500 litigations and arbitrations across the globe in different jurisdictions. It has a network of 2000+ lawyers who work on different assignments as per their expertise. LegalPay has played a monumental role over the last 3 years in the revival of various companies which were undergoing CIRP under IBC, 2016. LegalPay through its own NBFC provides funds to corporate debtors that ranges from Rs. 30 Lakhs to 50 Crores.Currently LegalPay has disbursed more than 100 crores as Interim Finance to 17 different businesses. LegalPay is backed by a strong team which comprises of CAs, Lawyers (Alumni of India’s top-ranking college), MBA ands Economists.
Consumer

A Mutually Beneficial Approach to Litigation Funding

Discussions around the use of litigation funding often focus on the individual relationships between funders and law firms, or between funders and the claimant, and evaluate these dynamics in isolation. A new blog post takes a step back and looks at the harmonious and mutually beneficial relationship between all three of the core parties, in what it describes as ‘The Litigation Funding Triangle’. An article published on LinkedIn by Mustang Funding examines the funder’s approach to working with clients and law firms, explaining a holistic methodology that is founded on the idea that no funding deal should move forward without the certainty that is wanted by, and beneficial to, all parties.  Mustang begins by noting that one of the core issues that can arise with third-party funding is a situation where litigation is funded and reaches a successful conclusion, but it only amounts to a ‘pyrrhic victory’ where the plaintiff is left with little in terms of financial compensation. Mustang argues that this bare minimum approach to funding is ‘entirely unethical’ and that funders should equally weight both the probability of success and the probability of the claimant receiving tangible financial benefits. Alongside the value to the plaintiff, Mustang points out that the use of funding should also come as a benefit to the law firm involved, thereby allowing counsel to focus on securing the maximum award for their client without concerns about capital shortcomings increasing pressure to reach an early settlement. Mustang concludes by stating that not only must funding be mutually beneficial to all parties, but its use must also be wanted by all parties and not imposed by either the client or counsel without mutual agreement and approval.
Commercial Deals

Funders and Law Firms Report Increasing Demand for Third-Party Litigation Financing

Over the last year we have seen many predictions that the litigation finance industry will benefit from the current economic uncertainty around the world, with rising inflation and supply chain issues putting a strain on corporate budgets in every sector. A new article suggests that these forecasts were broadly correct, as many funders are reporting an increase in the number of requests for funding. Reporting by Bloomberg Law covers this positive trend for litigation funding, featuring insights from several funders who are finding that potential clients are keen to explore third-party funding to move forward with meritorious litigation. Validity Finance co-founder, David Kerstein, stated that the funder generated its highest volume of leads last quarter, as companies find that it is increasingly difficult to borrow the capital they need from traditional sources.  The article notes that this growing trend is reflected in the actual number of funders now active in the US market, with the International Legal Finance Association now counting over 40 funders offering their services. It is not just funders who are recognizing the receptive environment, with Bob Bodian managing partner at Mintz Levin, reporting that his firm frequently takes advantage of third-party funding for its intellectual property litigation. Burford Capital’s co-chief operating officer, David Pela, highlighted that Burford is also seeing growing interest from law firms that do not regularly use contingency fees, stating that “they very often don’t want to take on the full risk, and that is where litigation finance companies come in.” The demand is not just coming from law firms, but also directly from their clients as these companies are “trying to find other sources of revenue and cut back costs”, according to Rebecca Berrebi, a litigation finance broker and consultant.
Announcements Consumer

KBRA Assigns Preliminary Ratings to US Claims LFS Securitization 2023-A

KBRA assigns preliminary ratings to three classes of notes issued by US Claims LFS Securitization, Series 2023-A (LFS 2023A), a litigation finance ABS. LFS 2023A represents the ninth ABS collateralized by litigation finance receivables to be sponsored by US Claims Holdings, LLC (US Claims or the Company). US Claims, originally established in 1996 and acquired in 2014 by Blackstone Tactical Opportunities as a subsidiary of Majestic Financial Holdings, LLC, is a leading provider of non-recourse advances to plaintiffs and attorneys with pending legal settlements across a variety of case types. Through its strategy of keeping “Litigation Funding Simplified”, the Company has funded over $800 million of litigation finance since 2010. The Company has 100 full-time employees across its headquarters in Delray Beach, FL and support offices in Clearwater, FL and Moorestown, NJ. LFS 2023A will issue three classes of notes (Notes). The Notes benefit from credit enhancement in the form of overcollateralization and, for the Class A and B notes, a cash reserve account and subordination. The portfolio securing the Notes has a net advance amount of approximately $126.01 million and an aggregate discounted projected receivable balance (ADPB) of approximately $164.99 million, including assumed prefunding, as of April 26, 2023 (Cutoff Date) based on the illustrative discount rate of 7.96%. The ADPB is the aggregate discounted collections associated with USC LFS 2023-A’s litigation receivables. The discount rate used to calculate the ADPB is a percentage equal to the sum of the weighted average anticipated interest rate on the Notes, the servicing fee rate of 0.50%, and an additional 0.10%. As of the Cutoff Date, the total net advances are made up primarily of plaintiff advances (97.97%) and pre-settlement advances (98.12%). The average advance to expected case settlement value is 13.53%. The transaction also features a $22.8 million prefunding account that is funded through the note issuance and may be used to purchase additional eligible receivables during the month after closing. To access ratings and relevant documents, click here. Click here to view the report.
Commercial Regulatory Issues

California Legislature’s Litigation Finance Bill On Hold Until 2024

As we have seen in recent weeks and months, there has been accelerated momentum behind state legislatures moving forward with legislation to govern and more heavily regulate the use of third-party litigation funding at the state level. However, in an unexpected turn of events, it appears that California’s proposed bill to impose stricter guidelines on litigation financing will not be moving forward this year. An article by The Recorder covers an announcement by California State Senator Anna Caballero that the advancement of SB 581, a bill which would have increased restrictions on the funding of consumer litigation, is now on hold until January 2024. According to the reporting, this decision was announced alongside numerous other bills as part of the Legislature’s ‘suspense file day’, when decisions are made as to the future progression of bills in the committee stage. Whilst Sen. Caballero’s announcement did not offer any explanation as to why the bill’s advancement had been stalled, it is notable that SB 581 had already seen its scope reduced from the initial draft text published in February. The revised bill announced in April had shed the mandatory disclosure requirements for third-party funding, and narrowed its scope to focus on lending to small-scale consumer litigation, rather than commercial litigation. With these changes made after significant criticism from the likes of ILFA and Consumer Attorneys of California, it is difficult to predict what the final version of SB 581 will look like, if it indeed moves forward in 2024. 
Commercial Regulatory Issues

Mastercard Class Action Representative Discusses State of Collective Redress 

The UK’s collective redress regime has received significant attention for its positive developments in recent years, and particularly for the involvement of litigation funders in supporting collective claims against large corporations. At a conference in London this week, the class representative for the high profile claim being brought against Mastercard spoke about the current state of class actions in the UK. Reporting by The Law Society Gazette highlights comments made by Walter Merricks, a former solicitor and financial ombudsman, at the London International Disputes Week event.  Speaking on a panel discussion about the future of collective redress in the UK, Merricks argued that defendants have an incentive to settle before trial under the current collective redress regime. He highlighted that in a settled claim, unclaimed damages may be returned to the defendant whilst unclaimed damages in a trial are distributed to charity, which he argues should incentivize defendants to look at settling ‘when the doors of the court loom.’  However, Merricks stated that those involved with collective claims are ‘all a little nervous’ at the moment, as they await the Supreme Court’s ruling on the DAF appeal, which could have a huge impact on the future of litigation funding in ongoing and future claims. Merricks also announced the formation of the Class Representatives Network, a new organization designed for class action representatives to come together and share their insights and experiences. 
Commercial Deals

An Analysis of Litigation Funding’s Potential Growth in Italy

As LFJ reported last week, we are seeing more and more evidence that litigation funding is becoming more widely adopted in Italy and is being put forward as a capital solution for a wide range of litigation across the public and private sector. A new article looks at the potential future for the litigation financing market in Italy, examining what sectors would benefit most from its adoption and how the market may be helped by legislative reforms. A blog post on HUB | Area Centro Meridionale’s LinkedIn, provides analysis on this topic by Daniela Saitta, president of LFAA (Litigation and Financing Arrangement Advisory) and Stefano Previti, managing partner of Studio Previti and founder of LFAA.  Saitta and Previti highlight bankruptcy proceedings as one of the biggest areas which could benefit from a growth in litigation funding in Italy, stating that there are around 100,000 ongoing insolvency proceedings in the country. They also point to litigation areas such as international arbitration, banking and finance disputes, and compensation claims as potential beneficiaries of third-party funding. Looking at the effect of legislative reforms that could pave the way for an increase in litigation finance usage, the authors highlight two decrees which reformed the civil process and worked to simplify judicial activity in order to increase efficiency and reduce case duration. Saitta and Previti point out that if these decrees are successful in reducing the duration of proceedings to match the standards in other European jurisdictions, cases in Italy may become more attractive to litigation funders.
Commercial Deals

Opportunities and Challenges for Litigation Funding in India

When discussing the future growth of litigation funding in new jurisdictions around the world, India is often highlighted as one of the most attractive opportunities, given the size of its economy and the associated scope of its litigation market. An article by Business Today provides an overview of the current state of litigation financing in India, with insights provided by industry leaders from different organizations involved in the sector. Ashish Chhawchharia, partner and head of restructuring services at Grant Thornton Bharat, points to the combination of rising legal costs and the huge volume of cases, as being a key driver for the industry’s growth in India.  To demonstrate the size of the potential market, the article includes data from the National Judicial Data Grid, which reveals that as of May 1, 2023, there are nearly 43.5 million pending cases throughout the Indian court system. With such a large volume of cases, new funders like FIGHTRIGHT Technologies are turning to analytics tools to help assess cases and perform the necessary due-diligence, with FIGHTRIGHT’s CEO Nitin Jain highlighting that by utilizing technology, they can make litigation funding ‘one of the least risky products’.  However, obstacles remain for litigation funding’s growth in India as Sumit Agrawal, founder of Regstreet Law Advisors, states that ‘the regulators are monitoring this trend closely to ensure that it is properly regulated and does not lead to any financial misconduct or illegal activities.’ Jain argues that increased regulation will be inevitable as the industry matures, and suggests that some degree of legislative standards will be beneficial, stating that ‘the more formal it becomes, the better it is for the industry.’