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Case Developments Commercial

LLS-Funded Class Action Enlists Hayne Royal Commission Barrister

For litigation funders, it is imperative that any legal action they choose to finance not only has a strong theory of the case to win, but also is paired with the best legal representation possible. This is especially true in high value class actions that may proceed to trial, such as the ongoing shareholder class action in Australia being brought against a prominent wealth management company over alleged failures to disclose misconduct. Reporting by the Australian Financial Review reveals that the class action being brought against Insignia Financial has enlisted the services of barrister Michael Hodge KC, who comes highly regarded having assisted the Hayne Royal Commission in 2018 as counsel. The investor class action, which is being led by Shine Lawyers and financed by Litigation Lending (LLS), is set to proceed to trial in Federal Court from June 5, with an expected duration of around five weeks. The class action representing shareholders who bought Insignia shares between March 1, 2014 and July 7, 2015, is centered on allegations that Insignia failed to disclose misconduct. This included conflicts of interest and insider trading, which led in turn to shareholders suffering financial losses.  Craig Allsop, joint head of class actions at Shine Lawyers, claimed that “the company breached its continuous disclosure obligations and misled its shareholders.” Insignia’s own spokesperson provided a statement saying that “Insignia Financial will vigorously defend the claim and is looking forward to having the matter heard and determined.”
Commercial Regulatory Issues

Legalization of Litigation Funding in Ireland Remains on the Distant Horizon

Whilst it is routinely stated that litigation funding is on the rise both in adoption and volume of activity around the world, there are still numerous jurisdictions where it has struggled to take hold, and others where it is actively prohibited under the law. One such country that is viewed as lagging other jurisdictions in terms of legalization and adoption is Ireland, where future law reforms do not appear to be arriving any time soon. An insights article by Dentons provides an overview of the current state of legislative reform regarding litigation funding in Ireland, highlighting that any potential changes to the law will not occur before the Law Reform Commission Review of third-party funding is produced in 2024.  The authors note that although some observers expected the new EU Directive on Representative Actions would catalyze more immediate reform in Ireland, recent statements by government ministers suggest that this is not the case. Whilst the Irish government will have to implement the directive’s broad requirements into Irish law, the Department of Justice has made it clear that litigation funding for these actions will not be permitted until separate legislation allows the use of third-party funding for litigation. The article does highlight that there are small areas of progress being made with the Courts and Civil Law Bill 2022 currently making its way through the legislature, which would permit the use of third-party funding in arbitration matters located in Ireland. The authors also point out that supporters for legal reform have a strong argument that it is necessary to modernize the Irish legal system, and would further allow Ireland to take advantage of its position as the only English-speaking common law jurisdiction within the EU.
Commercial Deals

Advice for Patent Owners Considering Third-Party Funding

Patent infringement lawsuits have become some of the most sought-after targets for litigation funders, despite the increasing pressure from courts in the US to increase disclosure around the involvement of third-party funding. In this contentious environment, it is important for litigants and patent holders seeking third-party funding to keep several factors in mind. An insights article by Lauren Sabol and Lawrence Hoff of Fox Rothschild, provides an overview of key considerations for patent owners when pursuing litigation funding for their infringement cases.  Sabol and Hoff emphasize that in order to begin the process, patent owners should enlist the services of experienced patent and litigation funding counsel before approaching funders with their case. They suggest that this kind of specialist counsel makes it more likely that patent owners will obtain a funding agreement with favourable terms, and enter into an agreement with full knowledge of the potential issues that can arise during litigation. Sabol and Hoff also highlight the ongoing issues around disclosure that have been brought to the forefront by Judge Connolly in Delaware, and note that whilst disclosure requirements vary from state to state, patent owners should always be prepared to, at the very least, disclose the existence of third-party funding. In addition, they note that proper care must be taken to ensure that privileged or confidential information cannot be exposed, primarily by using NDAs that counsel can assist patent owners with.
Commercial Regulatory Issues

Delhi High Court Provides Favorable Ruling to Funder in Costs Liability Appeal

As litigation funding continues to expand into newer markets, a key issue that funders will be keeping an eye on is the creation of precedents from court judgements and rulings that relate to the use of third-party funding, as well as any norms that are established in these cases. In a market that has enormous potential for growth, as India does, funders who are considering entering the market will be pleased by a recent ruling which suggests a limited scope for funder liability in unsuccessful claims. An article by Bar and Bench provides an overview of a recent judgement from arbitration proceedings in the Delhi High Court, which found Tomorrow Sales Agency (TSA), a litigation funder, is shielded from liability in the case, “which they have neither undertaken nor are aware of.” This ruling related to the case of Tomorrow Sales Agency Private Limited v. SBS Holding, Inc and Ors, in which SBS Holding had asked the court to order TSA to pay its legal costs, after TSA’s client had failed in its claims against SBS Holding. SBS Transpole, the claimant which TSA had funded, was unsuccessful in its arbitration against SBS Holding. However, SBS Transpole did not have the capital or assets to pay the tribunal’s award against it. SBS Holding’s request to force TSA to cover this award was appealed and finally rejected by the Delhi High Court, which found that “there are no rules applicable to proceedings in this court for awarding costs against third parties.” The High Court’s ruling will be of further interest to funders, as it emphasized the importance of third-party funding to the judicial system and stated “A person without the necessary means would have no recourse, in the absence of third-party funders. Third party funders play a vital role in ensuring access to justice.”
Commercial Deals

Legal Experts Share Guide to Choosing the Right Litigation Funder

The expansion of litigation funding around the globe and the concurrent increase in the number of funders has meant that there are now more options than ever for litigants or law firms seeking third-party funding. However, that increased choice also means that it will become harder for first-time users of litigation funding to know which funder would be the best partner for them. An article for the Concurrences journal by Marc Barennes of Bureau Brandeis and Miguel Sousa Ferro of Milberg Sousa Ferro, provides a guide to those seeking litigation funding on what factors they should consider when evaluating different funders. The article offers prospective users of third-party funding the necessary framework for choosing the right funder, outlining some of the key questions to ask during the process, and what considerations to keep in mind before making a final decision. The detailed and comprehensive article includes useful information on the following topics:
  • Approaching the right number of funders
  • Understanding who the funder is
  • Asking about the investment decision-making process
  • Agreeing on the timeline
  • Inquiring about the experience, expertise and appetite of the funder for a case
  • Understanding the financial criteria and expectations of the funder
  • Special considerations for the funding of class actions
Barennes and Sousa Ferro suggest that with the increasing maturation of the litigation funding market, the increased competition between funders will allow prospective clients to take a more comparative approach to find the best option for their case. Above all the factors to consider, the authors encourage potential users of litigation funding to be proactive in asking questions and gathering information before making a final decision. The full journal article can be found here.
Commercial

An Overview of Third-Party Funding in Mainland China

The global growth of litigation funding has funders, law firms and other interested parties all looking to see where the next major market could be for the widespread adoption of third-party funding. Whilst individual jurisdictions such as India or broader regional markets like Latin America are often discussed, one market that remains enticing, yet illusive, is mainland China. A new article for Global Arbitration Review by Heng Wang, partner at Global Law Office, provides a detailed overview of the current state of third-party funding (TPF) in mainland China and offers key takeaways for those interested in exploring this market. Wang’s analysis suggests that ‘Chinese courts take a similar approach to TPF for arbitration as international practice’, with it being permitted but with an expectation that parties involved in such arbitration will disclose TPF arrangements to avoid conflicts of interest. However, Wang emphasizes that whilst the permissibility of TPF in arbitration has repeatedly been confirmed in courts, there is less certainty over the legality of litigation funding.  Highlighting a case in Shanghai in 2017, Wang notes that whilst the courts confirmed there was no prohibition against litigation funding in Chinese law, the funding agreement itself was ruled to be ‘contrary to public policy and good morals, and invalid’. Yet in other cases the courts have come to contradictory conclusions, having ruled in favor of allowing third-party funding agreements and even sided with funders in disputes over unpaid returns. Wang concludes that there are clearly contradictory and divergent outcomes for the third-party funding of litigation specifically, with little sign of a consistent policy from the courts towards the practice. Importantly, Wang emphasizes that no cases involving the legality of TPF have come before the Supreme People’s Court, which does leave the door open to its use being more widely affirmed or prohibited in the future.
Commercial Deals

Omni Bridgeway’s Giacomo Serra Zanetti Discusses Italian Expansion

Despite the looming spectre of potential regulation affecting the litigation funding industry in Europe, it seems that third-party funding is continuing to grow in activity across a wide variety of European jurisdictions. One country that has experienced a surge in new activity is Italy, with domestic startup funders emerging to take advantage of local opportunities, and international established firms, such as Omni Bridgeway, looking to expand their operations into the country. An article by Legalcommunity.it explores the entry of Omni Bridgeway to the Italian market, providing insight into the company’s strategy through an interview with Giacomo Serra Zanetti, who will be leading the funder’s operations in Italy. Serra Zanetti shared that he will be responsible for sourcing investment opportunities in Italy, with Omni Bridgeway looking to explore both domestic disputes and international arbitration cases involving Italian parties or recoveries within the country. Discussing Omni Bridgeway’s targets for clients, Serra Zanetti explained that the funder will primarily focus on establishing relationships with law firms in Italy, but will also look at direct engagements with companies involved in litigation, especially in the bankruptcy and insolvency arena. Emphasising the nuances of the Italian market, Serra Zanetti points out that Italian law firms often have to take a creative approach to align with the financial interests or constraints of their clients. This creates opportunities for a funder like Omni Bridgeway to take that burden off of the law firm and allow it to focus on the litigation itself.
Commercial Deals

Deminor and Grimaldi Alliance Discuss New Partnership

The relationships between law firms and funders are key to the success of the litigation finance industry, whether around the funding of individual cases or wider-ranging partnerships. Last month saw the announcement of a new approach to this relationship, as litigation funder Deminor and Italian law firm Grimaldi Alliance entered into a global partnership. An article in Legalcommunity.it provides more detail on the partnership between the two companies, featuring comments from Giulia Lovaste, counsel at Grimaldi Alliance, and Giacomo Lorenzo, senior legal counsel at Deminor. Clarifying the exact nature of the partnership, Lorenzo stated that whilst this would not be an exclusive relationship between Deminor and Grimaldi, it is the only partnership of its kind that Deminor has entered into so far.  Lovaste and Lorenzo confirmed that the partnership will allow Grimaldi to present its clients with a range of financing options for their cases, whether that be single case funding or the opportunity for Deminor to purchase the claim outright and thereby allow the client to monetize that claim. Lovaste emphasized that the main advantage of this partnership will be to support its customers in managing the costs of litigation, allowing the client and law firm to focus on managing cases. With the potential for new regulation looming over the industry in Europe, both Lorenzo and Lovaste agreed that whilst regulation could be beneficial by adding credibility and legitimacy to the industry, it will need to be approached in the right way and in collaboration with the existing funding industry.
Commercial Regulatory Issues

Louisiana Advances Legislation to Regulate Litigation Funding

The push for increased regulation of litigation financing across several US states has been gaining momentum this year, with new bills announced, and in some states like Montana, those bills being signed into law. This campaign does not appear to be losing steam, as the Louisiana legislature has advanced its own regulatory bill.  An article in Bloomberg Law details the advancement of a bill in the Louisiana legislature that seeks to increase the level of regulation over litigation funding in the state. Compared to similar bills announced or passed in other states, the Louisiana bill goes further in requiring the production and disclosure of litigation finance agreements to the courts within 60 days of being signed. If plaintiffs and their funders do not provide the agreement within the timeframe, the contractual agreement will be deemed unenforceable.  The bill’s sponsor, State Senator Barrow Peacock, has argued that litigation funding has “flourished in the shadows with very minimal oversight”, and repeated the common refrain from the US Chamber of Commerce that litigation funding represents a threat to national security. The Chamber’s senior vice president of legal advocacy argued that the bill does protect the plaintiff and funder’s sensitive information, as the bill gives the court the power to modify any disclosure of the funding agreement to redact proprietary information. Dai Wai Chin Feman, director of commercial litigation strategies at Parabellum Capital, had testified in opposition to the bill during its passage, stating that the concern around national security was “entirely speculative” and described these claims as “careless and baseless accusations without any evidence or facts”. The bill will go to the House as early as next week for further amendments, before being sent back to the Senate, with the bill’s supporters hoping that a mutually agreed draft can be sent on to the governor to be signed into law.