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Commercial Deals

Funders See Opportunity in Class Action Suits Targeting UK Banks

As LFJ reported earlier this week, the UK has experienced a surge in class action lawsuits over the last year, and there are no signs that this trend is slowing as we begin 2023. Whilst Big Tech companies were identified as one of the main targets in our previous article, new research suggests that the UK’s largest banks are also a top target for class actions, and litigation funders are playing a key role in driving these claims. An article from Financial Reporter highlights new research by law firm RPC, which has identified 109 class or group actions against some of the UK’s largest financial institutions. Among the industry-leading firms targeted by these claims, Barclays is facing 41 actions, whilst HSBC and NatWest are also on the receiving end of a significant volume of cases, with 31 and 28 apiece.  One of the key drivers of these claims is the aftermath of the LIBOR interest rate manipulation scandal, with 41 cases focusing on this wrongdoing and another 18 are targeted at banks alleged to be in breach of the US Anti-Terrorism Act. However, RPC’s Daniel Hemming argues that the “quantum of these cases” is high enough that it is regularly attracting the interest of litigation funders who are enthusiastically pursuing investments in these class actions. Simon Hart, another partner at RPC, states that whilst many of these claims focus on compliance violations, he expects ESG-related class actions to increasingly dominate the space in the years to come.
Commercial Regulatory Issues

Confidentiality and Litigation Funding Agreements in the U.S.

The use of litigation funding has been seen by many as a method for equalizing the balance between plaintiffs and defendants, providing the needed capital to enable parties to seek legal redress against larger and more well-financed entities. However, some legal analysts are concerned that despite its growing role in the litigation area, third-party funding is not being held to the same levels of transparency and disclosure as other parties involved in litigation. In an article on The National Law Review, Malerie Ma Roddy and Jonathan Judge of ArentFox Schiff LLP, raise the issue of litigation funders being exempt from the disclosure requirements applied to “corporate interests and insurance agreements”, which critics claim is creating an inequality in the system. The authors point out that while corporates with a financial stake in the plaintiff’s company and agreements with insurers face mandatory disclosure, courts have largely been hesitant to apply the same standards to funders. Roddy and Judge highlight the lack of commonality between states in terms of legislation outlining disclosure requirements, citing states such as Wisconsin, West Virginia and New Jersey as jurisdictions that have enacted mandatory disclosure rules for third-party funding of cases, whereas Illinois’s laws on litigation funding do not require automatic disclosure. The lack of federal legislation to unify disclosure requirements for funding agreements is pinpointed as the cause of this inconsistency.
Case Developments Commercial

France Financial Regulator Fines London’s H2O €93 Million for Fund Misrepresentations 

UK-based H2O Asset Management is under regulatory investigation by the French financial crime enforcement auditors. H2O is accused of breaching financial instrument ownership laws.  Pensions and Investments reports that Bruno Crastes (H2O Group CEO) received a €15M penalty, with Vincent Challiey (H2O Group CIO) panelized €3M. Furthermore, regulators assigned €75M in fines for H2O AM totalling €93M or $99MUSD.  French assessors claim H2O's mismanagement yielded significant investor losses. As of June 30, 2022, H2O maintained €12.3B in assets under management. In November, 2020, Natixis Investment Managers elected to cancel a 10 year agreement with H2O, liquidating 50.01% stake ownership in two tranches, immediately capitalizing 26.61%. Natixis plans a six year horizon for complete divestiture.  H2O has claimed innocence of wrongdoings, suggesting French authorities issued the group penalty in the absence of fraud or mismanagement by H2O.  Deminor announced that it is financing litigation for victims of H2O's Natixis managed asset fund. Deminor is representing 1,500 individuals on a non-recourse basis. After meeting with French authorities, H2O announced formalizing a reserve allocation to cover the maximum potential fine as a cash flow precaution. 
Commercial Fundraising

LegalPay Launches New Bond Targeted at Retail Investors

Established litigation funders play an important role in leveling the balance of power in the legal system for those plaintiffs who lack the capital to see their case through to completion. However, India’s leading litigation funder is now looking to rebalance the scales for retail investors, offering a new product to their customers that will allow them to diversify their portfolios in a manner previously only available to high-net-worth individuals. Reporting in Financial Express covers LegalPay’s latest announcement, which sees the launch of Interim Financing Bonds for its retail customers. Available for a minimum investment of Rs 10,000, equivalent to approx. $122, retail investors will be able to take advantage of bonds which are used by LegalPay to provide capital to companies who are in the Corporate Insolvency Resolution Process. LegalPay’s CEO, Kundan Shahi, said that the Interim Financing Bonds are designed to offer retail investors a new avenue of diversification beyond traditional securities, as part of a plan “towards democratizing equity markets investing”. The company also assured prospective retail investors by stating that all the bonds have had thorough risk assessment and due diligence performed.
Commercial Regulatory Issues

Irish Legislature Publishes Draft Amendments Legalizing Third-Party Funding for International Arbitration

With 2023 set to be an important year for regulatory developments in the litigation funding industry, an early sign of progress has emerged in Europe. Whilst the European Union may still be in the process of examining tighter restrictions and oversight of third-party funding, Ireland has moved another step closer to legalize certain types of legal funding. In an article on Lexology, Nicola Dunleavy and April McClements, partners at Matheson LLP, have examined the draft rules concerning third-party funding of international arbitration in the Irish legislature’s Courts and Civil Law Bill. The amendments in the bill would mean that dispute resolution proceedings are exempt from the prohibition on maintenance and champerty. This would include international commercial arbitration matters, and any court, mediation or reconciliation proceedings as a result of such arbitration. Dunleavy and McClements note that the amendments would ensure that funding agreements for these types of proceedings would also be legal, although it is expected that additional criteria for these agreements will be set out by the government. As the draft legislation is currently at the committee stage, it is not known how soon the bill could become law, but the authors suggest that this could happen by the end of Q1.
The LFJ Podcast
Hosted By Siltstone Capital |
Our guests today are Mani Walia and Robert Le of Silstone Capital. Siltstone is an alternative asset investor that hosts an annual conference in Houston, Texas called LitFinCon. The 2nd annual LitFinCon will take place March 1st and 2nd, 2023, and will bring together stakeholders from across the litigation funding sector to network and share ideas and best practices. More information can be found here. [podcast_episode episode="10817" content="title,player,details"]
Case Developments Commercial

Law Firm Continues to Fight $1.8 Million Award to Woodsford

An ongoing dispute between a funder and law firm continues, as Hosie Rice lodges objections to a US Magistrate Judge’s recommendation that Woodsford receive a $1.8 million award. This follows on from LFJ’s reporting last month that the Magistrate Judge Sherry Fallon had recommended the federal district court in Delaware confirm the award to Woodsford. Reporting by Legal Newsline illuminates the latest development in the dispute, as Spencer Hosie and Diane Rice, partners at Hosie Rice, filed their objections to Judge Fallon’s recommendations. Hosie Rice had originally brought the dispute to federal court after an arbitration panel had ruled that the firm owed Woodsford $1.8 million. Hosie Rice maintains that the arbitration panel had erred when it classified the two partners as guarantors rather than co-borrowers, and that the panel had “rewrote the plain meaning of the law firm funding agreement (LFFA).” The ultimate decision as to whether the award will be confirmed will still rest with Judge Colm Connolly of the District Court of Delaware.
Announcements Consumer

Legal-Bay Pre-Settlement Funding Announces Uptick in Wrongful Termination Cases Due to Sexual Harassment and Discrimination Awareness

Legal-Bay LLC, The Pre Settlement Funding Company, reports today that a large portion of their pre-settlement cash advance funding capital will be directed toward victims of wrongful unemployment. Legal-Bay has vast experience with unlawful termination lawsuits related to sexual harassment and retaliation as well as racial, gender, or age-related discrimination. Based on recent court case trends, Legal-Bay anticipates even more wrongful termination lawsuit filings to come. Legal-Bay delivers financial assistance to people who've recently found themselves wrongfully unemployed, providing cash advances to plaintiffs while their cases are tied up in litigation.  The service is a huge help for people dealing with the financial strain of lost pay or benefits, not to mention the emotional stress of being let go due to a situation you had no control over. Chris Janish, CEO, commented on the company's focus of assisting plaintiffs in similar situations, "As the world has changed with the #MeToo movement, we continue to see more wrongful termination lawsuits and settlement values at higher levels than in the past. Many victims are unable to get new jobs, and sometimes a cash advance from Legal-Bay is the only way to pay the bills." If you're an attorney or plaintiff in an ongoing wrongful termination, sexual abuse, sexual harassment, retaliation, racial, age, or gender discrimination lawsuit and require an immediate cash advance from your case, please visit our website HERE or call 877.571.0405. Legal-Bay's settlement loan programs can offer immediate cash in advance of a plaintiff's anticipated monetary award. The non-recourse lawsuit loans—sometimes referred to as loans for lawsuit or loans on settlement—are risk-free, as the money doesn't need to be repaid should the recipient lose their case. Therefore, the law suit loans aren't really a loan, but rather a cash advance. Legal-Bay has some of the quickest turnaround in the industry, normally getting plaintiffs cash-in-hand within 48-hours of filing an application. If you require money now, please visit the company's website HERE or call 877.571.0405 where skilled agents are standing by.
Commercial Deals

Litigation Funders Driving Anti-Competitive Class Actions in UK

Following on from LFJ’s reporting last week that highlighted new research which demonstrated the growth of class actions in the U.S., similar trends are also taking hold in the UK, according to an upcoming study by Thomson Reuters. At the heart of this rise in the volume and value of class actions in Britain is the presence of a well-capitalized funding industry, combined with high-profile targets in the form of technology multinationals. An article by City A.M. places a spotlight on new research by Thomson Reuters, which examines class action activity in the UK last year and found anti-competition claims against global tech leaders to be a growing feature of the industry. The research found that the number of anti-competitive claims rose from six to eight, between 2021 and 2022, whilst the value of these claims skyrocketed from £4 billion to £26 billion in the same period. These high-value claims included actions brought against the likes of Google and Sony, with the UK’s reformed rules allowing for opt-out claims being identified as another catalyst. Thomson Reuters’ Warsha Kalé also pinpointed the litigation funding industry in the UK as playing a key role in this growth, indicating that funders still have plenty of capital to deploy, and have shown a willingness to take on these high-profile actions to hold these corporate giants to account.