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Commercial Deals

Forbes Explores SPAC’s $32.6B Medicare Litigation Enterprise  

A new Medicare/Medicaid technology company is leveraging the fundamentals of litigation investment via SPAC, with billions of dollars on the line. MSP Recovery claims it differs from Omni Bridgeway and Burford Capital, in that the company funds and litigates its own cases. In turn, MSP’s focus is on a 50/50 split of awards received between itself and insurers who have overpaid Medicare/Medicaid expenses. MSP says it is sitting on a $1.5T portfolio, and forecasts $87B in recoverable claims.  Forbes reports that MSP is having trouble actually explaining the value of its corporate enterprise. Based in Florida, MSP Recovery engaged bespoke algorithms to locate claims that insurers billed to the government.  Before going public via SPAC, Forbes reports that MSP booked no revenue. In the Forbes feature, legal scholars suggest that the nature of placing values on litigation finance portfolios is more of assessing the value associated with risk.  Forbes notes that MSP has booked a limited amount of recoveries to date. MSP suggests that this is due to many factors, specifically that many of its cases are still in litigation.
Commercial

Key Takeaways From LFJ’s Podcast With Erik Bomans, CEO and Executive Board Member of Deminor

On the latest episode of the LFJ Podcast, we spoke with Erik Bomans, CEO and Executive Board Member of Deminor. Mr. Bomans discussed recent developments and trends in litigation funding in continental Europe, including what the total addressable market looks like and how that is expected to grow over time, how country-specific jurisdictions are differentiated, some of the main barriers to investing in litigation funding in Europe, and how the regulatory environment across the continent can actually be a benefit to funders. Below are some key takeaways from the conversation, which can be found in full here. LFJ: How big is the European market for funding? How do you assess the total addressable market?  EB: We have conducted our own research and have estimated the total addressable market in Europe at $1.8B, and that includes the UK. It is a small market, we estimate that it is 16% of the total addressable market of litigation funding.  By comparison, we estimate that the total addressable market in the US is $9B. That is nearly 5x bigger than the entire European market.   When we say the total addressable market, we mean the potential for litigation funding. We get to these numbers by looking at the value of the litigation market, and we apply a percentage which is the penetration rate in that specific market.  LFJ: In terms of a country specific breakdown, I imagine most of the activity happening in Germany and France. Your company Deminor has offices in Belgium, Luxembourg and Milan, so there must be a lot of action in these other jurisdictions as well. Is that the case, is there a lot of activity across Europe?  EB: We are active in most European countries. The top countries without a doubt are the UK and Germany.  We estimate the total addressable market in the UK at $800M. The other $1B is spread out over continental Europe. With Germany definitely taking the biggest part, nearly ⅓. . The Netherlands is the third most active country in Europe.  LFJ: What are some of the barriers to investing in the litigation funding market? Can you share some challenges funders find in this market?  EB: There are pitfalls, Europe is a highly regulated market in general. Litigation funding contracts come with mandatory rules with highly regulated rules such as consumer protection. In Germany and France, legal advice can only be provided by practicing lawyers.  One of the areas in Europe where litigation funding has been scrutinized most in Europe is antitrust cases, where some funders have used the assignment level to structure their litigation funding agreements.   LFJ: How does the EU’s regulatory environment provide opportunities for litigation service providers? I want to ask you specifically about Deminor. How does the regulatory environment provide your business with growth opportunities? EB: Antitrust is the next big area of growth, with the UK and Germany taking the lead. With Italy and Spain becoming active in this area as well. Litigation finance is a risky business, but there are new areas of growth in new emerging areas of litigation funding. Definitely, there are new  opportunities there for litigation funders. But it will be important for litigation funders to pick the right cases.  LFJ: What are your predictions for how the EU litigation funding market develops over the next few years? EB: Litigation funding is strongly growing here in Europe. The business is volatile, and no matter how much you diversify, returns may always be volatile.    
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Commercial Regulatory Issues

Scotland Introduces Movable Transactions Bill

Scotland continues to advance new and innovative ways for businesses to thrive via alternative financial vehicles. On May 25, 2022 Scotland’s Parliament introduced a new bill titled, “Moveable Transactions (Scotland) Bill.” In essence, the legislation proposes allowing ‘movable’ property to be engaged as finance collateral. Specific to third party funding opportunities, the Movable Transactions Bill also includes intellectual property (such as patents) to be engaged as a vehicle to secure advance funding.  According to the proposed bill, a ‘pledge’ can be engaged just like traditional litigation finance agreements. Specifically, the pledge would be a facility that can be used as collateral to issue a loan. The loan would be repaid at a later date, similar to a litigation investment contract. In this case, the non-recourse functionality of traditional litigation finance would not be applicable. The bill’s use for funding litigation may sound abstract, however, the overall concept is innovative as Scotland’s alternative finance sector grows.  As we recently reported, the Law Society of Scotland has covered third party funding’s usage in group actions such as the ‘Post Office Scandal.’ Hence, the Movable Transactions Bill may hold potential benefits to help the people of Scotland finance their way to justice.
Commercial Regulatory Issues

State Governments vs. Funded Energy Litigation 

The International Comparative Legal Guide (ICLG) reports that at London’s International Disputes Week attorneys discussed the complicated intricacies of State-investor energy litigation. State governments are becoming more aggressive in entertaining the prospect of investor-focused energy litigation. However, the pitfalls for states can be problematic. State leaders must juggle conceptual impacts of energy litigation at the expense of state credit ratings which could snowball into a host of other potential unintended consequences.   ICLG notes that the normal cross-governmental structure of many state agencies involves complexities in terms of funded energy litigation. Furthermore, litigation investors may approach a case from a totally different perspective if a state party is involved. For these reasons, lawyers discussing the topic at London’s International Disputes Week are hashing out ideas on how to best shape the future of a state’s role in energy litigation.  Similarly, as Litigation Finance Journal has profiled, States are embracing ideas focused on maximizing litigation finance portfolios via savvy litigation investment agreements.   
Commercial Deals

Mining Bosses Short on Liquidity Turn to Litigation Finance 

Recent actions taken by international governments are forcing many mining companies into contractual re-negotiations specific to mining rights. With sweeping reforms of this nature, the rights of foreign investors may be violated as they seek to claw back any promised proceeds associated with mining investments. With the average investor-state arbitration lasting 4.28 years, costing upwards of $7.49M, many mining executives are looking to litigation finance vehicles to help prime the pump.  Mining Digital Magazine reports that litigation investors such as Burford Capital are looking to profit off the fragile state of the mining industry.  With oil and gas litigation dominating the news cycle, mining businesses are on track for a decade (or more) of intense litigation. Arbitration finance is becoming increasingly popular for mining claims, as mining operators seek to profit from governments who may not be prepared to dole out funds while seeking to protect a country's environment.  Click here to read more about Mining Digital Magazine’s findings.
Commercial

2022 Lawdragon Global Litigation Fiance Who’s Who 

With the litigation finance ecosystem growing hand over fist, Lawdragon Global has put together a list of 100 leaders in the space. Lawdragon suggests that the worldwide pool of litigation finance talent includes leaders in law, business and finance.  Lawdragon maintains a list of the 100 top litigation finance professionals. Burford Capital scored nine leaders on the list, while Omni Bridgeway tallied 12. Burford and Omni’s scores topped all other firms in terms of the number of talent recognized by Lawdragon.  Lawdragon says the list has been collated through independent research and peer review, claiming its team spends time meeting with litigation finance professionals around the world to assess emerging talent that may find a spot on the next top 100 list.  Click here to review Lawdragon’s full list, and toggle between country, firm and first/last name.
Consumer

IL Governor Signs Consumer Legal Funding Law

The following piece was contributed by Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC). Illinois becomes the latest State to bring proper regulation to the Consumer Legal Funding industry with the signing of SB 1099. The Alliance for Responsible Consumer Legal Funding, a major Trade Association for the companies that offer Consumer Legal Funding, were proud to work with Illinois Senator Jackie Collins and Representative Curtis Tarver in the drafting and passage of this bill.  Additional sponsorship was offered by Senators John Collins, Mike Simmons, Mattie Hunter, and Ann Gillespie along with Representatives Elizabeth Hernandez and Jay Hoffman. The legislation was also supported by the Woodstock Institute, the leading consumer advocate organization in Illinois. SB 1099 brings some of the strongest consumer protections in the country involving Consumer Legal Funding. It prohibits companies from:
    • Paying or offering a commission or referral fee
    • Accept a commission or referral fee
    • Make false or misleading statements in advertising
    • Make any decision in the consumers legal claim
    • Knowingly pay or offer to pay court costs, filing fees or attorney fees
    • Provide legal advice to the consumer regarding the funding or underlying legal claim
    • Attorneys who represent the consumer are prohibited from having a financial interest in the funding company
It also mandates that companies that will offer this product must be registered with the Illinois Department of Financial and Professional Regulations and pass a background check and post a surety bond. Illinois will be the first state that will require companies that offer Consumer Legal Funding to Illinois residents that they must make them aware of Financial Counseling programs. “I would personally like to thank Senator Collins and Representative Tarver for their dedicated efforts in getting this important piece of legislation passed.” stated Eric Schuller, President of Alliance for Responsible Consumer Legal Funding, They were not swayed by the opponents of the legislation and ensured that this product can be offered to the consumers of Illinois in a fair and responsible manner.” Illinois joins Maine, Ohio, Nebraska, Oklahoma, Indiana, Vermont, Tennessee, Nevada and Utah in bringing proper regulation to the industry. Brian Garelli the President of Preferred Capital Funding said: “I would like to thank Governor Pritzker and the Illinois legislature for making SB 1099 law in Illinois. The bill added over a dozen consumer protections.  It also balances the playing field between multibillion dollar insurance companies and injury victims that might not otherwise be able to wait for a fair settlement while their case winds its way through the court system.” The law goes into effect immediately.
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The LFJ Podcast
Hosted By Erik Bomans |
In this episode, we sat down with Erik Bomans, CEO and Executive Board Member of Deminor. Erik discussed recent developments and trends in litigation funding in continental Europe, including what the total addressable market looks like and how that is expected to grow over time, how country-specific jurisdictions are differentiated, some of the main barriers to investing in litigation funding in Europe, and how the regulatory environment there can actually be a benefit to funders. [podcast_episode episode="9934" content="title,player,details"]
Case Developments Commercial

What Sberbank’s Liquidation Means for Litigation Finance

Litigation Finance Journal has been covering the Sberbank CZ liquidation. New details are emerging regarding the liquidator’s intent to recover creditor losses. Sberbank CZ’s liquidator is trying to deliver on a single sale of the bank’s assets to one buyer, rather than dicing the assets up into numerous packages. In other words, the liquidator is trying to flip the bank in a quick sale.  Seznam.cz reports that Sberbank CZ’s assigned liquidator is debating if liquidation is the best approach, as opposed to insolvency proceedings. Sberbank CZ was classified as a relatively healthy bank before the war in Ukraine.  Seznam reports that the value of Sberbank CZ is similar to a car hitting a wall … In that the bank’s value was still relatively stable before the accident (‘the wall’ being the war in Ukraine).  Click here to read Sezam.cz’s complete update on the Sberbank CZ liquidation.