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Litigation Funding in Poland: A Closer Look

Poland has seen tremendous economic growth in recent decades, and now stands out as one of the business powerhouses within Europe. However, unlike other major economies within the region (UK, Germany and the Netherlands) we have not seen a commensurate rise in the adoption of litigation funding and investment that one might expect. In the first part of a series of analysis for Augusta Ventures, investment manager Greg Beres outlines some of the unique considerations that may cause hesitancy for those looking to invest in Polish litigation finance. The main concern for potential funders is the often slow and protracted nature of the country’s courts, with the majority of litigation taking several years to reach completion. This is further compounded by legislation that mandates the right to appeal, leading to cases having extended lifespans and delaying return on investment. Beres suggests that while funders shouldn’t write off investment in Poland completely, any engagements need to be low-risk cases and have realistic expectations about the time it will take to see those returns.

Brown Rudnick advises on £100m litigation funding partnership between North Wall Capital and PGMBM

International law firm Brown Rudnick has advised alternative investment firm North Wall Capital on a £100m litigation funding partnership with PGMBM, a law firm focused on environmental, social and corporate governance cases. The investment will be used by PGMBM to address the growing demand from consumers and other victims of injustice to seek recourse against corporates. Fabian Chrobog, Founder and Chief Investment Officer of North Wall Capital said: “We are thrilled to announce this partnership with PGMBM as part of our ESG-focused legal assets strategy. We are incredibly grateful to Elena and the litigation funding team at Brown Rudnick for advising on this significant deal.” Elena Rey, Partner at Brown Rudnick who led the deal team said: “This deal is thought to be the largest investment in a UK claimant law firm to date, strengthening Brown Rudnick’s leadership as the go-to advisor for litigation funding deals. This was a complex structure, which included a framework for the type of cases that this investment can be used to fund. We are delighted to have advised North Wall on this significant component of their ESG strategy.” As well as Elena Rey, the Brown Rudnick deal team included Counsel Tristan Dollie and Associates Natalie Grundy and Reena Patel. Brown Rudnick is the go-to law firm for litigation funding deals, thanks to their deep understanding of the industry and experience in structuring innovative and complex deals. In April 2021, Brown Rudnick advised on the multimillion-dollar funding agreement for a legal claim against social media giant TikTok and its parent company ByteDance. In November 2020, Brown Rudnick launched the Litigation Funding Working Group, which now has over 90 members to develop model documents. In May 2022, Brown Rudnick hosted London’s first ever Litigation Funding Conference, attended by over 300 funders, lawyers, brokers, investors and other entities from the litigation funding eco-system. London-based North Wall Capital provides private capital to Western European special situations and manages several funds on behalf of global institutional investors. This investment brings the total invested by North Wall in PGMBM to £150million. In March 2021, North Wall Capital and PGMBM announced a £45m funding partnership. PGMBM is a partnership between British, American, Brazilian, and Dutch lawyers passionate about championing justice for the victims of wrongdoing by large corporations. This month, the firm secured a landmark, unanimous judgment from the Court of Appeal that allows over 200,000 victims of the Mariana Dam disaster, Brazil’s worst ever environmental disaster, to seek redress against the world's largest mining company, BHP, in the Courts of England and Wales. The firm is at the cutting edge of international consumer claims, including historic settlements on behalf of over 15,000 claimants in the Volkswagen NOx Emissions Group Litigation in May 2022 and 16,000 victims of the British Airways Data Breach in 2021. About Brown Rudnick LLP Brown Rudnick is an international law firm that serves clients around the world from offices in key financial centers across the United States and Europe. We combine ingenuity with experience to achieve great outcomes for our clients. We deliver partner-driven service; we incentivize our lawyers to collaborate in the client’s best interest; and we put excellence before scale, focusing on industry-driven, client-facing practices where we are recognized leaders.

Nigeria’s New Arbitration Legislation Opens The Door For Third-Party Funding

While the litigation funding industry continues its rapid growth in many territories around the globe, we are starting to see similar patterns emerging in Africa. With the passage of Nigeria’s Arbitration and Mediation Bill, the country has opened the doors for wider adoption of third-party funding with these latest changes to the regulatory framework. Analysis by White & Case examines the ways in which this new legislation will not only make it easier for parties to engage in funding agreements, but also offer sensible oversight and scrutiny for this process. The new law allows for third-party funding in arbitration cases in the Nigerian court system, which White & Case notes is only the third case of a bill with such direct language, after similar legislation in Hong Kong and Singapore. As mentioned, the new law ensures that any funding agreements must be disclosed and covers situations where costs orders may be brought by respondents, providing much-needed guarantees in cases where the claimant would not have the capital to cover such costs.

US Investors Face Wide Array Of Funding Opportunities Abroad

The US remains the market with the highest volume of class action litigation, and has been the go-to market for investors looking to capitalize, but this does not mean they should restrict themselves to American cases. Whilst litigation financing in Europe and Asia may be less familiar territory to US investors, there are a plethora of opportunities within the UK, Australian, Dutch and German markets all offering tangible rewards for smart investing. In a recent feature for Funds Europe, director of business development at Broadridge, Trip Chong, outlines the potential opportunities and risks that need to be analyzed by US investors before diving in. She highlights that not only should stand-alone cases in other jurisdictions be considered, but also multi-jurisdictional cases that originate in the US could see investors reap significant gains. Key to engaging in these foreign markets, she emphasizes, is the ability to monitor a breadth of cases and to dive into the detail on each matter. Within this analysis, there are multiple factors that investors are urged to consider, from the individual jurisdiction’s nuances, the resources required to adequately fund a claim, and importantly, any reputational risk that may be at stake for aligning with a litigant. However, she also raises the important point that these markets may be seeing higher rates of successful and high-value settlements than in the US, and that ESG-specific cases are gaining particular traction in Europe. Investors should closely evaluate each funder’s proposition and ensure adequate risk-management through insurance provisions. Yet despite these necessary risk mitigants, it would be foolish for US investors to eschew exploring the many opportunities in other regions that may yield high returns on investment.

ESG Litigation Gains Traction With Investors

The ever-growing focus on ESG for companies around the world looks to be a double-edged sword, as investors may soon switch from rewarding companies pursuing ESG strategies with capital to instead funding litigation against those that fail to deliver on their promises. The increasing adoption of third party funding for legal recourse makes this strategy a much more compelling avenue for those seeking to pursue claims against industry giants, who otherwise might have been beyond the reach of smaller entities. Sarah Mills of FNArena outlines the growing potential of this industry, highlighting major players such as Burford Capital, Omni Bridgeway and Harbour Litigation Funding as some of those already taking advantage of these ESG-specific opportunities. Existing activity has the potential to be boosted by the fact that the SEC plans to enforce mandatory reporting of emissions for companies by the end of 2022. Those embedded in the industry already see a path to further expansion, with Ed Truant, CEO of Slingshot Capital, predicting that ESG-specific litigation could solidify as an individual asset class for investors. This is further reinforced as the industry is starting to see funders dedicate specialist funds towards ESG litigations, such as North Wall Capital’s £100 million investment in PGMBM to bring ESG claims, and Aristata Capital bringing in £40 million to drive its impact litigation fund. There are concerns that this type of litigation may not have staying power beyond the short-term. However, insiders like Mr Truant believe that as the wider litigation finance industry continues to grow, this will naturally be replicated in the ESG arena, as multinationals are held to account over their environmental promises.

LegalPay Continues To Dominate Indian Market With Latest Case

The market-leader for litigation finance in India, LegalPay, is continuing to trail blaze with its latest funding for Just Deliveries to pursue claims against Coffee by Di Bella India. The cafe chain is being sued for unpaid invoices due to Just Deliveries, a logistics solutions company based in Mumbai, which provided the cafes with delivery logistic services for a monthly rate. CXOtoday reports that despite multiple demands for payment, Coffee by Di Bella India has still failed to fulfill these invoice requests. As a result, Just Deliveries enlisted the services of LegalPay in order to engage in arbitration actions in an effort to seek recovery of the payments.  The case represents another major action for LegalPay, which remains the only homegrown third party legal funding provider in India.

Johnson and Johnson’s ‘Texas Two Step’ Talc Restructuring 

Johnson and Johnson (J&J) has engaged a restructuring vehicle to leverage bankruptcy protection for its talcum claim awards. The 'Texas Two Step' is a legal investment strategy that limits overall financial loss due to class action and other corporate litigation. J&J has allocated $2B to a new company that will hold litigation liability.  Litigation Finance Journal has collated 12 highlights to a Brief for Amici Law Professors on Support of Appellants of the J&J talcum business reorganization. Legal scholars are labeling J&J's approach as an extraordinary effort by wealthy and sophisticated individuals who aim to bypass bankruptcy court supervision.  Authors of the brief summarize that J&J has leveraged Texas state law to organize a unique limited liability approach to talc claim exposure and corresponding expenses.  Some say the total addressable market for talcum claims exceeds $10B, so it will be interesting to see how this plays out. 

Guernsey Stands Out As Innovative Hub For UK Funders

The growth of the litigation funding industry in the UK over recent years has not just taken place in the capital, as the Channel Islands of Guernsey and Jersey have become a go-to destination for funders. Major industry players including Burford Capital, Therium and Bench Walk Advisors have all established a number of funds in these territories. This reputation as an attractive location for litigation funders has also resulted in a growing array of companies specializing in support services for both funders and lawyers anchoring themselves in Guernsey. Writing in Bdaily News, Simon Graham of Lancaster Guernsey highlights that the islands’ appeal to the industry stems from its welcoming regulatory environment, its proximity to London, and a legal framework that is easily approachable for UK law firms. He also points out that this coincides with an emphasis on innovation, including the Guernsey Registry which has implemented a streamlined and effective online interface for entities to more easily manage administration. With this solid foundation, Mr Graham expects to see continued growth and evolution for the litigation finance sector in Guernsey and Jersey.

What Lloyd v. Google Means for UK Class Actions and Litigation Funders

The Lloyd v. Google claim has given rise to some thought-provoking questions:
  • Has Google breached its duties as a data controller? If so, have class members of the ensuing collective action suffered quantifiable damages?
  • How exactly should “same interest” be determined in a case regarding the misuse of data?
  • Do individual members of a class have to demonstrate material harm in order to receive recompense?
In the following article, we will explore the answers to these and other questions that have arisen from Case UKSC 2019/0213, otherwise known as Lloyd v. Google. What Exactly Happened? Richard Lloyd, sought to file a claim against tech giant Google, asking for compensation pursuant to section 13 of the Data Protection Act of 1998. The accusation involves the use of cookies in a ‘Safari workaround’ that ultimately collected, then disseminated, user data into metrics that were then used to employ targeted advertising to users. This alleged misuse ostensibly impacted over four million iPhone users in England and Wales, whose data was unlawfully accessed by Google. Google’s use of the data was found to be a breach of DPA1998. Lloyd sued not only on his own behalf, but on behalf of others whose data was treated similarly. Google fought the suit, saying that class members could not demonstrate material harm from the misuse of data. In a case like this one, ‘material harm’ could include monetary losses or mental anguish stemming from the illegal harvesting or dissemination of data. Lloyd’s claim was backed by Therium, a prominent litigation funder specializing in tech-related cases. Lloyd’s legal team argued that the ‘same interest’ mandate had been satisfied, and that awarding all class members the same sum in damages is reasonable—without a need to delve into the personal circumstances of every individual claimant. The Decision  Initially, the High Court ruled in favor of Google. When the court of appeal reversed the ruling, Google appealed again to the Supreme Court. In the majority decision, Lord Leggatt determined the following:
  • The determination of “damage” must include verifiable, material damages such as financial or mental anguish. Mere illegality of an action is not enough to necessitate financial recompence.
  • Damages must be demonstrated.
Why are the Facts Here so Important? Obviously, there is reason to be concerned when a tech company in control of an extremely large amount of user data is accused of illegally managing that data. In this instance, Google allegedly sold or used user data for commercial/money-making purposes. This was done without the knowledge or consent of its users. One could argue that any user who utilized Google on an Apple iPhone has reason to be dismayed (indeed, a similar case settled before going to trial). The case also illustrates the importance of opt-in versus opt-out models, as well as what can happen when the majority of class members choose to abstain from involvement in the case proceedings. Under Lord Leggatt’s ruling, an opt-out model is not feasible in any instance requiring that class members be able to show tangible losses. Ultimately, tech giants like Google are required to abide by their own user agreements. However, users must prove suffering beyond the violation of their right to privacy. Ironically, one area of doubt in such a case arises over how shares of a payout (to litigation funders, for example) can properly be calculated without consent of all class members. Just as many class members in an opt-out proceeding may not know the details of the case, they also may be totally unaware of the claim, or of how any proceeds are to be divided. What Do These Developments Mean for Litigation Funders and Potential Claimants? The idea that a claimant must demonstrate damages in order to receive compensation is neither new nor controversial. But it does put a damper on collective actions with high class member counts. Especially when looking at cases against huge companies like Visa/Mastercard, Apple, or Google. Many would argue that it’s simply not feasible to collect information about losses from millions of potential claimants. So, while this line of thinking is reasonable under English law, it may well discourage litigation funders from taking on cases requiring that all class members demonstrate individual losses. This, in turn, will make the pursuit of justice more difficult for potential members of a wronged class. For litigation funders, the difference between one potential claimant in a case and the millions who could have been class members in Lloyd v Google is significant. While we know that funders ultimately back cases to increase access to justice and give claimants a day in court—we also know that this relies on investors, whose motivation to invest is profit-driven. In short, litigation finance only works in the long term, when it’s financially advantageous to investors. The question of privacy rights is a tricky one. Having one’s privacy violated is, as the phrase suggests, a violation. But as it typically has no financial component beyond the negative feelings associated, it is unlikely to serve as a demonstrable loss in a case involving user data (unless, of course, a further demonstrable loss can be proven). At the same time, it is clear that Google misused user data, intentionally and without consent—with an eye toward financial gain. Surely it makes sense that Google should share some of that income with the users whose data was breached? Not according to the UK Supreme Court, apparently. A Missed Opportunity  Had Lloyd vs. Google succeeded in the way Lloyd intended, it could have changed the way class actions in data cases were handled by the courts. Essentially, opt-out class actions could have flourished as individual class members wouldn’t be required to demonstrate financial damages. This has particular relevance to data cases, because when data companies use information in ways that are not in keeping with their own TOS, users may not be damaged financially. But this lack of demonstrable damages doesn’t necessarily mean a) data companies don’t have a moral obligation to offer users recompense, or b) that users aren’t deserving of a payout when they are wronged. Had Lloyd’s legal team instead used a bifurcated approach to the proceedings, a smaller opt-in class could perhaps have enabled a stronger case through the gathering of evidence—specifically evidence of damages. Similarly, a Group Litigation Order (GLO), which, despite what some see as high administrative costs, would have better determined eligibility for class members. This, in turn, would have allowed for a better test of the case’s merits. In Conclusion Lloyd vs. Google demonstrates the importance of several aspects of class action litigation, including how opt-in versus opt-out impacts the collection, as well as ability to bring evidence of damages. This promises to be a factor in future tech cases—not just in the UK, but globally. Will the failure to secure damages for those whose data was misused embolden Big Tech? Will it serve as a warning? Could it discourage litigation funders from backing such cases? We’ll have to wait and see. For now, it’s clear that Lloyd vs. Google has left its mark on the UK legal and litigation funding worlds—and on Big Tech as a whole.