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Commercial Deals

Harbour Funds Bamboo Law Acquisition of Regional UK Law Firm

As the environment for litigation funders in the UK is set to undergo some turbulence, we will likely see increased efforts by funders to diversify their activities beyond individual case funding. One sub-sector with enhanced activity is law firm funding, and for the second time in as many months, a funder has stepped in to provide capital for the acquisition of a law firm. An article by Insider Media reports on the acquisition of Hawkins Hatton by Bamboo Law, with Bamboo’s purchase financed by Harbour Litigation Funding. The deal to buy Hawkins Hatton was advised on by Ortus Group, which researched a range of potential buyers for the firm before selecting Bamboo as the ideal acquirer.  Colin Rodrigues, partner at Hawkins Hatton, stated the acquisition will provide “real opportunities for growth” and will allow the team to focus on delivering high quality services “while leaving administration in the hands of experienced professionals.” Speaking about the question, Bamboo’s founder, Michael Burne, emphasized that Bamboo “wants to do more sensible deals with great law firms like Hawkins Hatton”. As LFJ reported in July, this will not be the first law firm acquisition funded by Harbour in recent times, as the funder provided financing for Rothley Law’s acquisition of Shoosmiths’ ‘private client practice’.
Case Developments Commercial

Investors in RCR Class Action Raise Concerns Over Prolonged Duration

Investor-led class action cases are often viewed as lucrative targets for litigation funders, bolstered by the fact that they offer an opportunity to support investors in seeking legal redress against companies that have misled their shareholders. However, just like any litigation, the protracted duration of these cases can cause issues with investors, as we are seeing in a class action brought in New South Wales, Australia. Reporting by The Australian Financial Review reveals that investors in the collapsed engineering corporation, RCR Tomlinson, are growing frustrated with the continual delays and lack of progress in a class action brought against the company. The investors’ complaints focus on the lack of a settlement nearly five years after the class action was filed, even though the lawsuit has received funding from both Burford Capital and Omni Bridgeway. The Financial Review heard from investors with ongoing concerns that Quinn Emanuel Urquhart & Sullivan, the law firm leading the case, are not proceeding efficiently and may be benefiting financially from the prolonged duration of the litigation. Damian Scattini, partner at Quinn Emanuel, responded to these concerns by emphasising that they had been unsuccessful in reaching a settlement during a mediation on May 30, but were hopeful that a resolution could be achieved at the next mediation session on August 24. The article also highlights that this is not the first time the case has been hit by criticism, noting that a short seller report published by Muddy Waters in August 2019 alleged that Burford was “misrepresenting some of RCR’s financial data and any recovery from the class action would be “little to nothing”. Burford responded at the time by claiming that the report was “misleading” and not an accurate analysis of RCR.
Case Developments Commercial

Parties in Burford-Funded Argentina Claim Remain Far Apart on Payout Amount 

Cases with a prolonged duration and timelines that span nearly a decade are not uncommon for those in the business of litigation finance. However, even in cases where claimants receive a favourable judgement, there is always the issue of determining the size of the award, which further prolongs these lawsuits. A recent article by Bloomberg Law provides an update on the three-day trial in the case of Petersen Energia Inversora, S.A.U. v. Argentine Republic, which ended with the opposing parties still $6.5 billion apart on what they think the proposed payout should be. The case, which dates back to 2015, was brought on behalf of YPF SA shareholders, who argued that the Argentine government failed to offer a required payout after it re-nationalized the oil company in 2012.  As LFJ previously reported, Judge Loretta A. Preska ruled that Argentina was liable for the shareholders’ losses in a summary judgement in March of this year. During last month’s trial in the Southern District of New York, the shareholders argued that the payout could amount to as much as $16 billion, whilst Argentina provided a much lower estimate of $9.5 billion. The significant distance between the two amounts revolved around a number of key issues, including the date that the government took back control of YPF, with the two parties specifying dates that are three weeks apart.  The outcome of the trial has particular significance for Burford Capital who invested $16.6 million in the litigation, and following the March judgement, had stated that the final award could total in excess of $7.5 billion. This figure is notably lower than Argentina’s proposed payout. However, Judge Preska provided no estimate of when she might deliver a ruling on the payout and attorneys for the Argentine government have already made clear that they will appeal the award, regardless of the Judge’s ruling.
Case Developments Commercial

UK Legal Funder Confirms Appointment of Administrators

Since the Supreme Court handed down its judgement on litigation funding agreements last week, there has been much discussion of the difficulties that funders may face to survive in an environment rife with new challenges. However, a recent article offers an important reminder that regardless of this latest ruling, the legal finance industry has always been a challenging market for businesses to survive in. Reporting by The Law Society Gazette provides an update on the struggling law firm funder, VFS Legal, which recently confirmed that it had appointed administrators to handle payments. The article confirms that after VFS had informed the court that it would be appointing an administrator, Alvarez & Marsal Europe LLP has since announced that it would be handling the administration moving forward. Sarah Collins and Mark Firmin are named as joint administrators for the company. According to the Gazette’s reporting, VFS Legal had provided £150 million in funding to support over 25,000 cases across the last eight years, with law firms including Slater and Gordon having previously received funding. However, by 30 June 2022, VFS reportedly owed £38.7 million in repayments within the following year, primarily comprised of a bank loan for £35.6 million. The Gazette notes that VFS’ administrators are considering several routes forward for the company, which could include “finding a buyer for VFS Legal as well as collecting the current book debt from law firms.”
Announcements Consumer

Legal-Bay Pre Settlement Funding Company Reports Syracuse Diocese to Pay $100 Million Settlement to Victims of Childhood Sexual Abuse

Legal-Bay, the Pre-Settlement Funding Company, reports that the Roman Catholic Diocese of Syracuse, New York has just announced a $100 million settlement for sexual abuse plaintiffs. With approximately 400 claimants, settlements average out to $250,000 per case, but some plaintiffs will receive more or less than that amount based on the severity of the abuse incurred. The settlement is part of the diocese's bankruptcy arrangement, a situation they were forced into when faced with the overwhelming number of victims who've come forward with claims of childhood sexual abuse inflicted by clergy members and/or church employees. The case filings really piled up once the state of New York extended their statute of limitations, allowing victims to pursue lawsuits long after the abuse had taken place. If you are a plaintiff involved in an active clergy sexual abuse lawsuit and need an immediate cash advance lawsuit loan against an impending settlement, please visit Legal-Bay HERE or call toll-free at 877.571.0405. Chris Janish, CEO of Legal-Bay, says, "This latest Syracuse settlement shows that victims of childhood abuse can expect to receive justice even if the diocese declares bankruptcy. As six of New York's eight dioceses have already filed chapter 11—and all are facing similar lawsuits—we expect to see many other cases settling in comparable fashion nationwide."
Commercial Regulatory Issues

Supreme Court Judgement Unlikely to Stem Long-Term Appetite for Funding

In a briefing from Clifford Chance analyzing the nature and long-term effects of the Supreme Court’s decision, Claire Freeman and her co-authors examine the background to the case, breakdown the details of the judgement and offer their perspective on the implications for litigation funding.  This analysis suggests that the judgement struck “a powerful blow against the regime for opt-out antitrust collective actions”, which will undoubtedly affect some of the highest profile claims with the largest value of damages being sought for breaches of competition law. The authors note that even those class actions where collective proceedings orders (CPOs) have already been granted are not immune to these effects, with any funding agreements needing to be revisited and likely revised before the claims can move forward. Secondly, the analysis highlights that we may potentially see claimants move away from the Competition Appeal Tribunal (CAT) and instead “seek to expand the scope of representative actions in the English Courts.” However, they highlight the broader concern that the decision will “slow the pace of group litigation more generally whilst funders and claimants alike take stock”, especially when the Supreme Court judgement is taken in combination “with the uncertainty surrounding representative actions in the English Courts (after cases such as Lloyd v Google).” In contrast, the Clifford Chance team suggest that although there will clearly be a significant impact in the short-term, they argue that the fallout from the judgement “is unlikely to stem that appetite in the long-term.” The authors point out that funders will have to adapt to stay compliant with the new requirements, and this will require the use of differing solutions on a case-by-case basis. However, they stress that this will not solely be the concern of one party, as both “funders and claimants alike will need to give careful consideration as to the appropriate arrangements for both current and future claims.”
Announcements Consumer

Legal-Bay Pre-Settlement Funding to Add Mesothelioma Cases for Funding Along with Talc After Large $18MM Verdict

Legal-Bay, The Pre Settlement Funding Company, announced today that they are now adding mesothelioma victims to their list of Johnson & Johnson talc plaintiffs. The pharmaceutical company just lost their most recent court case, resulting in a landmark $18 million verdict. Both J&J and plaintiffs/lawyers await the next steps in what has been a painfully slow process. Plaintiffs allege that J&J talc-based baby powder is directly responsible for causing serious medical issues ranging from skin melanoma to ovarian cancer, and point out that the company has long been aware of the health risks associated with their product. Several studies dating back to the 1970s concluded that talc particles increase a person's chances of developing cancer, and evidence suggests that J&J has been intentionally concealing the results for decades.  Johnson & Johnson Baby Powder Talc cases are on track to rank among the largest mass tort settlements in U.S. history, predicted to cost J&J over $10 billion to resolve the 100,000+ claims. With the newly added mesothelioma verdict, the pressure is on. J&J has attempted to settle the cases via bankruptcy filing and a $9 billion payout. However, plaintiffs say that not only is the offered amount insultingly inadequate when one considers the large number of claimants in these lawsuits, but may be an improper use of the bankruptcy code as well, and are asking the U.S. Justice Department to investigate. If you require an immediate cash advance from your anticipated Johnson & Johnson talc baby powder lawsuit settlement, please visit the company's website HERE or call 877.571.0405  Chris Janish, CEO of Legal-Bay, said, "The time has come to move this litigation forward once and for all. Too many victims are not able to have their day in court due to the severity of their injuries; some have even died before seeing justice prevail. While J&J has offered to settle the cases, the amount seems to be a fraction of what juries are awarding in both talc and mesothelioma verdicts of late." Legal-Bay's sources close to the litigation believe that the parties will try to reach a global agreement by year's end, however, payments could be delayed for another two years due to the sheer number of claims to process. Legal-Bay is one of the few legal funding companies who are providing some financial relief to victims and their families with risk-free, non-recourse cash advance settlement loans.
Commercial Regulatory Issues

Lexolent CEO Says Funding Industry ‘Not Prepared’ for Supreme Court Decision

As LFJ continues to report on industry reactions to the UK Supreme Court’s decision on litigation funding agreements (LFAs) being classified as damages-based agreements (DBAs), we are finding varied perspectives ranging from cautious optimism to severe concern. In a piece of analysis posted on LinkedIn, Nick Rowles-Davies, CEO of Lexolent, strongly argues that despite attempts among funders to downplay the severity of the judgement, “the industry was not prepared for this.” He highlights the immediate impact on cash flow for both law firms and funders engaged in LFAs, and offers a methodical breakdown of the different ways that opponents of litigation finance will use the judgement to challenge funders. Rowles-Davis points out that many commentators have focused on the idea that the decision will only impact funding agreements whose return is calculated based on a percentage of the recovered damages. However, he raises the pertinent concern that there is no reason why those opposed to litigation funding will restrict their challenges to that interpretation: “One argument likely to be run against funders is that all LFAs are DBAs, as the fees payable come from the damages collected and the calculation of that fee, whether by percentage of damages or by multiple, is merely just method of calculation and is a distinction without a difference.” Rowles-Davies identifies four areas where funders will be challenged because of a judgement that has arguably established the principle that many LFAs are now unenforceable:
  1. Cases funded in the CAT
  2. Cases funded where the LFA refers solely to a multiple return
  3. Cases where there is reference to a multiple and a percentage return
  4. Historic concluded cases
This last category is the one that he suggests “should be the area of greatest concern for the funding community”, given the fact that parties who have previously received funding and then paid out sums to a funder could now seek reimbursement. Rowles-Davies argues that funded parties who also have shareholder responsibilities, such as insolvency practitioners or bankruptcy trustees, may face particular pressure from creditors to seek reimbursement.  Rowles-Davies closes the piece with a stark warning for the industry, suggesting that it is likely “that some of the UK funders will not survive this”, given the trailing effects of satellite litigation and challenges from historic cases that will imperil these funders’ business models. However, he also points out that if we do see a portion of UK-focused funders falter and fail in the short term, this could potentially create opportunities for US and European-based funders to fill that gap when the market settles. Rowles-Davies’ latest venture is Lexolent, a place “where capital meets origination.” In a video posted to LinkedIn, Rowles-Davies explains that Lexolent is designed to allow those who have cases requiring funding to connect with prospective investors, whilst also allowing “non-traditional litigation finance investors”, such as high-net-worth individuals or family offices, to gain access and exposure to the asset class.
Commercial Deals

Funders See a ‘Natural Fit’ with Bankruptcy Litigation

With funding for patent litigation facing a barrage of disclosure requests in the US, and funding agreements in class action claims facing new challenges, funders are keen to keep an eye on sectors that will provide the best opportunities for increased investment. With economic difficulties continuing globally, one area that may prove particularly fertile ground for investment is bankruptcy litigation. An article for Bloomberg Law examines the upward trend in the use of third-party funding in bankruptcy litigation, drawing upon insights from funders who are keen to take advantage of the growing number of opportunities available. Ken Epstein, investment manager at Omni Bridgeway, describes the synergy between bankruptcy plaintiffs and litigation funders as “a natural fit”, with the ever-present concern of high costs weighing on the minds of those pursuing bankruptcy litigation. Marc Carmel, attorney at McDonald Hopkins, credits the rise in adoption to the rise of awareness among bankruptcy practitioners who are now able “to pursue more litigation that they might not have pursued to begin with.” Emily Slater, managing director at Burford Capital, agrees with Carmel’s assessment and speaks to funders’ optimism about increasing activity in this area, highlighting that “as Chapter 11 filings go up, there’s more awareness in the market of litigation finance as a tool.” Looking forward to future areas for growth in litigation funding, Marla Decker, managing director at Lake Whillans Capital, suggests that bankruptcy could be “the most obvious” target area for funders pursuing new engagements. Whilst there is tremendous positivity among funders about these opportunities, Slater recognises that investment in this area also necessitates increased transparency and that funders must pursue these opportunities “knowing that our financing is likely to be disclosed.”