This Sunday’s “60 Minutes” featured a segment on the growth of litigation funding. Host Leslie Stahl highlighted the industry’s important role within the Legal Services sector, but also pointed out the lack of regulatory oversight which can lead to ethical concerns. “Litigation funding can help in cases where otherwise the little guy who’s suing would just get crushed or lowballed by defendants with deep pockets,” Stahl explained as part of her opener on the necessity of the funding industry. “The problem is, this market is exploding, with almost no rules or oversight.” Stahl profiled a litigation funding claimant: Craig Underwood’s family farm. Underwood had one customer—a hot sauce maker. When that customer pulled out of a contractual obligation, Underwood faced financial ruin. He sued his former client and won a breach of contract claim.  But the hot sauce maker appealed, and Underwood couldn’t afford to keep fighting. That’s when he heard of litigation funding, and found Burford Capital. Underwood took $4MM from Burford to continue fighting, and won the appeal and the $23MM. When it was all said and done, Underwood still had to pay his attorneys, and then compensate Burford to the tune of $8MM. Asked whether he thought that payment amount was predatory, Underwood emphatically said no, given that Burford stepped in and funded his case when no one else would. “They basically rescued us.” Christopher Bogart, co-founder and CEO of Burford, noted that on average, the funder will double its money on a successful outcome, explaining that funders take enormous risk, given the non-recourse nature of their investments. He emphasized that Burford has a roughly 90% success rate. Stahl then interviewed Maya Steinitz, law professor at University of Iowa, who pointed out the ethical considerations at play here. Steinitz explains that although funders like Burford claim not to interfere in how a case is managed, there is nothing legally stopping a funder from compelling a client to settle. Consumer Legal Funding was also featured prominently in the program, where Stahl explained that the funding helps poor people pursue their legal claims. Yet she also pointed out how claimants are routinely charged very high interest rates by funders, highlighting RD Legal Funding’s alleged ‘predatory behavior’ in the 9/11 victims’ compensation fund case. The program concluded by pointing out how essential litigation funding is to American society. “Accessing the courts in a civil process is a luxury good in America” explained Maya Steinitz.  “It’s simply too expensive to bring your case in a court.”  That said, Steinitz is calling for more oversight of this largely unregulated industry.

ESG financier and litigation investor Woodsford is proud to announce a new class of team members joining the firm's global enterprise.  Amar Singh Mann, David Haighan and Jordan Howells will join Woodsford's London, United Kingdom office. Cody Nguyen is slated to enter Woodsford's Brisbane, Australia office. Additionally, Woodsford announced that former Australian Federal Magistrate, the Honorable Neil McKerracher KC will join the firm's global investment advisory panel. Woodsford says that Australia continues to be an emerging market for litigation finance innovation. Woodsford's appointment of Howells as Senior Investment Manager is rooted in his wealth of experience, including 14 years of public and private organizational investigation, litigation and negotiation for ESG malfeasance. Woodsford plans to engage Howells' prosecutorial acumen that includes liaising with the United States Department of Justice, Securities and Exchange Commission and Serious Fraud Office. Steven Friel, Woodsford's Chief Executive Officer, says that the firm's new international appointments are indicative of cross border litigation investment innovation. Friel goes on to say that Woodsford's international footprint in ESG justice is expected to represent some of the highest standards in the world.

The nature of litigation funding means that it is often most sought after and most valuable in situations where unforeseen events lead to dire consequences for a wide array of parties. As a new piece of analysis suggests, the interconnected nature of the global economy and financial markets means that such situations could increase in frequency and trigger a higher volume of lawsuits requiring funding. This analysis by Jason Levine, investment manager and legal counsel at Omni Bridgeway, uses the example of the latest scandal in the cryptocurrency world: the collapse of FTX, to illustrate the danger of these ‘black swan’ events. Levine points out the unanticipated and massive financial losses that occur in such events, acting as a catalyst for a strong litigious response which can be enabled and bolstered by the use of third-party funding. Levine highlights that in situations where corporate plaintiffs are damaged by these black swan events, they may lack the liquidity to pursue litigation due to the financial strain imposed by the event. He also points to the fact that during these challenging times, taking on the costs of litigation may result in a hit to company valuation, and so, the use of litigation finance to shift these costs off the balance book can become particularly important. Levine concludes that if we do see an increase in the number and scale of these black swan events, particularly in the currently unstable financial markets, litigation funding will be a vital tool for corporates to seek redress and compensation through the legal system.

Although the issue of disclosure has primarily been discussed in recent months with relation to US plaintiffs being required to disclose details of their funding arrangements to the courts, a ruling in another jurisdiction appears to signal a victory for clients looking to disclose confidential information to their funders.  Detailed in a piece of analysis by Ogier, a law firm specializing in offshore matters, a new ruling by the Court of Appeal in the British Virgin Islands (BVI), affirmed the right of clients to disclose certain confidential case details to their funders where necessary. In the case of Fang Ankong v Green Elite Limited, the Court agreed with the precedent set by the English High Court, that the ability of funders to access such information does fall within the ‘purposes of proceedings.’ Ogier’s analysis noted that this is an important victory for funders and their clients, as it ensures they will be able to share information that could be used to assess the viability of future funding, thereby creating a more transparent process and one in which funders are less likely to be blindsided by information relevant to evaluating funding decisions. However, the analysis did note that this ruling only applies to cases within the BVI, and where cases involve proceedings in other jurisdictions, this guarantee is not automatically assured.

The volume and scale of class actions is on the rise in jurisdictions around the world, mirroring the regularity and broad scope of proceedings that are more commonly experienced in the US. Many industry commentators see Europe as a market with huge potential, driven by the expansion of litigation funding on the continent, and the regulatory development that could act as a catalyst for growth. In an article in Strategic Risk, Henning Schaloske, partner at Clyde & Co, argues that the European Union’s ‘Directive on Representative Actions’ will set the stage for a significant rise in class action activity, as it will create a uniform structure that will enable collective actions to be taken across all member states. Schaloske argues that this directive will be the mechanism to open the door for increased class actions, but it will be litigation funders who will play a key role in realising this opportunity. Whilst Schaloske does not see the EU completely emulating the US model, he does see an opportunity for funders to drive further activity, especially in cases related to data privacy misconduct which are enabled through the EU’s General Data Protection Regulation (GDPR). He does note the counter-balancing factor of proposed regulations that would restrict third-party funding, but argues that the trend of high-profile and high-value cases would suggest that litigation funding will still play an important role.

Patent dispute funding has been a prominent topic in recent headlines, largely due to ongoing cases where the area of third-party funding disclosure has become a divisive issue. However, according to new research, this is unlikely to have a dampening effect on this type of litigation finance activity, and in fact, indicators suggest that it will continue to be a dominant sector. An article by Bloomberg Law highlighting the results of its recent Litigation Finance survey suggests that patent litigation remains one of the most active areas of third-party funding, with 23% of lawyers surveyed indicating they had obtained funding specifically for patent cases in 2022. This activity is reflected by the response from funders, with 68% of these companies having committed capital to patent litigation. Of particular interest for those looking ahead to 2023 is the fact that interest in exploring funding for patent law cases has risen dramatically in recent years, with 30% of lawyers expressing interest in 2022, compared to only 11% when asked two years prior. Unless a major regulatory development appears to discourage the use of third-party funding in patent litigation, it seems likely based on this data that we will see continued growth next year.