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Case Developments Commercial

LitFin Funds Class Action Against European Truck Manufacturers Over Antitrust Violations

The ongoing rise and potential continued growth in class actions in Europe was a common topic of discussion in 2022, and it appears that this year will continue that trend, as a prominent European funder is backing a significant action against some of Europe’s largest automobile manufacturers. LitFin, a European funding firm based in the Czech Republic, is funding a class action claim in Germany against manufacturers of heavy and medium-duty trucks, who were fined by the European Commission for breaching antitrust laws. LitFin is bringing this claim on behalf of companies who bought or leased this category of vehicles from Daimler, MAN, Volvo/Renault, DAF, Iveco and Scania; all of whom admitted their antitrust violations, with the exception of Scania. These manufacturers were all fined by the Commission for acting as a ‘cartel’, violating antitrust regulations by agreeing to prices on trucks sold in the European Economic Area (EEA) between 1997 and 2011. LitFin had already brought a claim against the cartel in the Netherlands, but due to the statute of limitations rendering these claims ‘time-barred’, the funder is also leading a claim in Germany to offer the manufacturers’’ clients another avenue for seeking compensation. The class action in Germany will be led by the Munich-based law firm, MMG Rechtsanwaltsegesellschaft.
Commercial Deals

Arbitration and Third-Party Funding in Asia

The use of third-party funding in international arbitration is on the rise, and as its use grows more commonplace, parties are increasingly keen to understand the nuances of accessing funding in jurisdictions that do not have the same established practices as countries like Australia, the UK or US.  In a new article for the China Business Law Journal, Yang Xueyu and Mariana Zhong, partners at Hui Zhong Law Firm, examine the different third-party funding practices and relevant legislative frameworks across Asia.  Singapore has one of the most-established legal structures for legal funding, having permitted the use of third-party funding in international arbitration since 2017, and then widened this permission structure to include domestic arbitration matters in the Singapore International Commercial Court. However, the authors highlight that third-party funding is only permissible where the funder meets the required criteria of having at least 5 million SGD in paid-up share capital or managed assets. Whilst Hong Kong does not allow the broader use of litigation funding, it does permit the use of third-party funding in both domestic and international arbitration proceedings, and in 2022, legalised “outcome-related fee structures” in order to offer parties a wider array of permissible fee arrangements. Importantly, Hong Kong has well-defined disclosure regulations, which require the existence of funding agreements to be disclosed, including the identity of the funder. Finally, while mainland China does not have established legislation around third-party funding, there have been no indications that it is prohibited, and contingency fee agreements are also recognised as valid. Xueyu and Zhong do highlight that some of China’s arbitration bodies, such as CIETAC and BAC, have set out guidelines for third-party funding regarding investment arbitration that more closely align with international standards.
Case Developments Commercial

Intel and VLSI Seek Dismissal in Microchip Patent Dispute

Patent dispute cases have dominated industry news in recent months, both due to them being among the most active areas for litigation finance involvement, and also due to the number of high-profile cases that have put the spotlight on funding disclosure. One of these cases appears to have found a resolution just before the end of the year, as VLSI and Intel have both agreed to drop their respective claims and counter-claims in the microchip patent dispute. Bloomberg Law covers this latest update which has been ongoing since June 2018, with a joint filing revealing that both parties are seeking dismissal and moving to drop their claims, with neither side receiving any financial payout. According to the article, the resolution contains no remuneration for either party, and also affirms that VLSI will agree to not take any further legal action regarding these microchip patents. The case had attracted attention as VLSI was caught in the crosshairs of Judge Colm Connolly’s April standing order, which mandated additional disclosure around the plaintiff’s litigation funding arrangements. Whilst VLSI had provided further disclosures, Judge Connolly and Intel both argued they were still failing to comply, and then in October, Connoly requested briefs from all parties as to whether the suit should be dismissed for VLSI’s failure to meet the court’s disclosure requirements. Whilst additional briefs were expected in January, these are unlikely to go ahead, after both Intel and VLSI have requested the case be dismissed. However, observers will now likely be closely watching the Nimitz patent case, which has faced increasing scrutiny from Judge Connolly regarding disclosure of its litigation funding arrangements.
Commercial Legal Innovation

Tokenization of Litigation Funding Could Widen Access to Justice

Litigation finance represents a potent solution to the access-to-justice issues facing America’s legal system. However, third-party funding still faces barriers to entry, both in terms of a lack of general awareness of its availability, and how it can be best accessed and utilized. Writing in Law.com, Ron Lasorsa, managing general partner at Victory Litigation Fund, argues that digital transformation, and in particular, tokenization, is the key to unlocking access to litigation funding by opening pathways for more capital and further democratizing the judicial system. Lasorsa points out that it has been three years since the first lawsuit was tokenized, and has since become a more commonplace practice by funders. By embracing tokenization and thereby allowing for the effective crowdfunding of lawsuits, the litigation funding market can expand beyond the borders of the small group of established litigation funders. By widening the number of sources of capital, the individual risk can be reduced, and in the process, increase the liquidity of the market. Furthermore, Lasorsa highlights that ‘smart contracts’ on the blockchain would avoid the difficulties of ensuring payouts from funded wins are delivered on-time and without difficulty. Finally, he argues that tokenization would increase opportunities for activist investors, rather than commercial funders to finance litigation, especially within the ESG arena.
Consumer

RNC Funding of Trump’s Legal Campaign Undermines GOP State AGs’ Attack on Litigation Funding

Litigation Finance Journal recently reported on a group of 14 state attorneys general that have called for action from the Department of Justice to review potential threats to U.S. national security from foreign adversaries' engagement of litigation investment. Litigation funders and industry advocates have new ammo in response to the AGs’ claims, given recent news of the RNC funding former President Donald Trump’s various legal entanglements.  According to ABC News, RNC leaders earmarked $1.6M in legal funding to support President Donald Trump's defense over lawsuits brought by New York Attorney General Letitia James. Meanwhile, the United States Chamber of Commerce Institute for Legal Reform's research has prompted 14 state attorneys general to ask for the Justice Department to assess national security risks of adversaries 'undermining' the United States by engaging litigation funding and third party investment vehicles.  The group of 14 state attorneys general are concerned about foreign adversaries 'weaponizing' United States legal frameworks via litigation investment, to attack critical national industry and infrastructure, such as energy sectors. The group of 14 seeks the Department of Justice to detail how a network of federal agencies could engage a blueprint for defending United States independence from international litigation investors, hostile groups, agencies or governments such as Russia and China. This latest attack on the industry, prompted by the U.S. Chamber of Commerce, is simply another attempt to undermine the nascent and growing litigation funding sector. It is ironic, given that in the case of Consumer Legal Funding–which the Chamber specifically targets–the funding in question does not go to support legal fees, but rather to finance claimants’ livelihoods while they remain injured and unable to work.  While the RNC’s funding of Trump’s legal battles does not constitute foreign investment, it illustrates the acceptance of third party legal funding across political lines, and should be noted by industry advocates looking to respond to the negative publicity put forth by the U.S. Chamber. 
Consumer

Bloomberg Law Reports Litigation Finance is an Investment in National Integrity

The United States Chamber of Commerce Institute for Legal Reform recently warned that litigation finance is a potential risk to national security. Bloomberg Law has published a rebuttal to such claims, hailing Consumer Legal Funding as a cornerstone of many United States households seeking much needed cash flow during the litigation process.  Bloomberg Law claims that Consumer Legal Funding poses no risk to United States national security. Bloomberg Law's opinion piece does draw a distinction between consumer and commercial litigation investment. With a focus on consumer funding, Bloomberg Law concludes that many Americans can only pursue justice through the facilitation of litigation investment as a cash flow facility.  With the average Consumer Legal Funding contact around $2,000-$3,000, Bloomberg Law concludes that national security is certainly not at stake.  Bloomberg goes so far as to call the Chamber of Commerce's position on consumer litigation investment a 'fallacy' of composition logic.
Commercial People Moves

Former LCM Investment Manager Launches Versaras

As we head into 2023, another new funder has entered the growing litigation funding market. Revealed in a LinkedIn post, Matthew Denney announced the launch of Versaras, a new legal finance and consultancy firm which is seeking to provide “outsourced dispute finance and funding solutions, and non-recourse investments in Real Estate.”  Prior to founding Versaras, Denney has accumulated a wealth of experience across the legal and finance sectors, having most recently served as an investment manager and head of origination in EMEA for Litigation Capital Management.
Commercial Fundraising

Boutique Investment Firm Launches with a Focus on Cross-Border Disputes

As the litigation finance industry continues to grow in both established and nascent jurisdictions around the globe, new funders are launching investment firms dedicating a significant portion of their capital to this industry. As we close out the year, this trend does not appear to be slowing, with the launch of a new boutique investment firm: Inweasta. Interviewed by EU Reporter, Inweasta’s Hong Kong CEO, Annie Chan Wai Kwan, discussed the new company’s focus on special situation investing, with an eye towards international disputes resolution and litigation funding. The company is looking to bridge the gap between East and West, bringing expertise to complex cross-border disputes and litigation finance cases that require tailored solutions. Inweasta was founded and is owned by Andrei Elinson, who brings 20 years of experience in commercial disputes, distress assets management and private equity M&A.
Consumer

State AGs Join Chamber of Commerce’s Call for Action Against Foreign Litigation Funding

Recent discussion around the risks of litigation funding have highlighted the potential threat of foreign actors using third-party funding of lawsuits to harm U.S. national security. This claim, which was put forward in a report by the U.S. Chamber of Commerce’s Institute for Legal Reform, a prominent industry antagonist, has now found support among state officials, as a group of 14 state attorneys general have called for action from the federal government to review this alleged threat. Outlined in an article by Reuters, the letter sent to U.S. Attorney General Merrick Garland was signed by these Republican state AGs led by Georgia’s Chris Carr and Virginia’s Jason Miyares. The letter requested that the Justice Department outline what measures it has taken to address the use of third-party funding by foreign entities, stating that the potential of adversarial nations using the process to undermine American economic or security interests was a serious threat. Whilst the Justice Department did not provide Reuters with a comment in response to the letter, the International Legal Finance Association (ILFA) released a statement arguing that the letter was merely a repetition of the Chamber’s claims and was not supported on any factual basis. Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC), stated the following: “The funds that ARC companies provide consumers are not used to pay for the cost of litigation and bringing cases forward. The funds are used to cover household needs, such as keeping a roof over consumers’ heads.”  Schuller went on to note that “If there is a concern as to who is funding the lawsuit itself, then any proposed regulation or legislation needs to concentrate on that aspect, and not on consumers who need funds to make ends meet while their cases make their way through the legal system.”