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Commercial Deals

Class Actions Fuel Booming UK Litigation Funding Industry

As we have seen in recent months, a growing number of industry leaders are predicting significant growth in the UK litigation funding market in tandem with an increase in class action suits. The latest research from law firm RPC, suggests that the value of the litigation funding industry in the UK has doubled in the last three years, with an estimate of £2.2 billion in assets. Reporting from Bloomberg highlights that class-action lawsuits, and particularly those that are opt-out cases, are central drivers of this explosive growth. RPC’s Charlotte Henschen suggests that the high return-on-investment is a big factor in funders pursuing these types of claims, along with a growing number of actions and the volume of claimants out there. Susan Dunn, who heads the Harbour Litigation Funding team, points out that without this third-party funding, there would be almost no cases taken to the Competition Appeal Tribunal (CAT) as the claimants would simply never have the capital to fight these claims.  However, Bloomberg’s reporting notes that those seeking funding must realize that holding on to a funder is not always a guarantee, highlighting the case of Walter Merricks’ class action against Mastercard, where Burford Capital dropped its funding after Merrick failed to gain certification from CAT. This case also illustrated the breadth of the UK funding market, as Merrick has since won appeals to the Court of Appeal and Supreme Court, after entering into a new funding agreement with Innsworth.
Case Developments Commercial Special Features

Federal Court of Australia Orders Respondent in Shareholder Class Action to Hand Over Insurance Information

The following piece was contributed by Anne Freeman of Australian law firm, Piper Alderman.

Virgin Australia, which has been sued by investors who purchased unsecured notes in the airline based on statements in a 2019 prospectus for a capital raising, has been ordered to advise the lead applicant in the class action whether its has made a claim against its insurer for its costs and any liability in the class action, and whether its insurer has agreed to grant indemnity.  It has also been ordered to produce copies of any insurance policies which might respond to the claims made in the class action[i]. The orders made are in contrast to a 2020 decision of the Court[ii], which found that the case management powers of the Court did not empower it to order the disclosure of the respondent’s insurance policies in class actions.  In that case, very similar orders were sought, namely for production of policies and for communications regarding the insurer’s position on the grant of indemnity.  The applicant in that case relied upon a 2019 Federal Court authority, Simpson v Thorn Australia Pty Ltd trading as Radio Rentals[iii] , which had resulted in orders for the production of insurance information, to argue that the documents were relevant to inform the applicant whether further prosecution of the proceedings was commercially viable and whether mediation was appropriate and, if so, what the appropriate quantum of settlement might be.  The applicant also argued that the documents were relevant to the approval of the settlement and to determine whether action against the insurer may be needed to obtain a declaration of indemnity.  The judge disagreed, taking the conventional position that insurance information is not relevant to the proof of a cause of action in the proceedings and is therefore not discoverable, and noting that the case management powers of the Court were not designed to “confer an asymmetric commercial advantage in favour of one party at the expense of another” in mediations.  Beach J also rejected the suggestion that the documents were needed for any settlement approval, and distinguished the position in Simpson where leave had been granted to bring a claim against the insurer. The orders are also in contrast to a decision of another Federal Court judge, who declined an application by a shareholder to access insurance policies under a discretionary power which may allow shareholders access to the books and records of the company, if the application is made in good faith and for a proper purpose[iv].  That decision was based upon a finding by the judge that the claims made by the class members did not arise from their rights and entitlements as shareholders but rather as potential investors, and that therefore the application was not brought for a proper purpose. The orders in Virgin Australia were made in the context of a Deed of Company Arrangement and the need to consider which claims against the company were covered by insurance.  That made the insurance position relevant, and distinguishes it from the decision in Evans.  However, the decision does show that accessing insurance information is a matter to be considered carefully in the circumstances of the individual case.  There are mechanisms available to obtain insurance information, which is obviously valuable in considering the recoverability of any funded claim.  Early consideration should be given in each class action as to potential means to obtain this information. [i] Matheson Property Group Australia Pty Ltd as Trustee for The MPG Trust v Virgin Australia Holdings Limited NSD346/2022, order of Lee J, 28 June 2022 [ii] Evans v Davantage [2020] FCA 473 [iii] [2019] FCA 1229 [iv] Ingram as trustee for the Ingram Superannuation Fund v Ardent Leisure Limited [2020] FCA 1302  
Commercial Legal Innovation

AxiaFunder Sees Early Success with New Portfolio Offering

The UK litigation finance industry is seeing an expansion of market players, as many newer funding platforms are finding success offering a wide array of products for investors. This has been demonstrated most recently by AxiaFunder, which has announced that after launching its Housing Disrepair (HDR) product in July, it has already begun to execute on its mission of providing stable and regular returns for investors. In an article by Peer2Peer Finance News, the HDR portfolio has already seen three per cent of its cases settled, and an additional 18 per cent are in settlement negotiations. This new product represented a new approach for AxiaFunder, as the HDR portfolio is directly assigned to a partner law firm, rather than being individually contracted to each claimant. Although the funder is avoiding exaggerated speculation on the portfolio’s growth, AxiaFunder claims that it expects the portfolio to hit its target internal rate of return of 25 per cent. Investors can expect to see further portfolio products from AxiaFunder, should this upward momentum continue.
Commercial Regulatory Issues

Communication and Speed at the Core of Productive Funder-Lawyer Partnerships

There can often be tensions between law firms and litigation funders, especially in the early days of partnership. As a result, there are those in the legal industry who are wary of working with funders. However, Sarah Breckenridge, who has served as both the head of a disputes team at a global law firm and now as an investment manager at a litigation funder, offers a balanced perspective which emphasises the need for efficient and open communication between the two sides.  Writing for the Dispute Resolution Blog, Breckenridge offers advice to both factions that can hopefully lead to more efficient and effective communications. Looking at funders, she emphasises the need for a speedy response when considering whether to enter into a funding agreement with a client, even if the answer is the funder declining. This approach should also be reflected when sharing timings and terms of any agreement, as both the lawyer and claimant will be juggling many responsibilities. On the other side, Breckenridge also acknowledges a range of factors for law firms to consider. These include having detailed and realistic budgets prepared, similarly thorough projections of potential quantum if the case is successful, and stress-tested legal opinions on the case’s merits to demonstrate the value to the funder. While issues will inevitably arise in negotiations and communication, thinking primarily about the other side’s needs and requirements builds a strong foundation for relationships between funders and law firms.
Announcements Commercial People Moves

BURFORD CAPITAL APPOINTS DR. RUKIA BARUTI AS AN INDEPENDENT NON-EXECUTIVE DIRECTOR

Burford Capital Limited, the leading global finance and asset management firm focused on law, is pleased to announce the appointment of Dr. Rukia Baruti as an independent non-executive director. Dr. Baruti is the Secretary General of the African Arbitration Association and an experienced independent arbitrator. She is admitted as a solicitor in England and Wales and previously practiced commercial and arbitration law in London. She is also the founder of Africa International Legal Awareness, a non-profit organization dedicated to advancing African involvement in the international legal community, and a co-founder of the African Arbitration Association, a non-profit organization dedicated to promoting African arbitration practitioners. Dr. Baruti holds a bachelor’s degree in law (first class) from Birkbeck College, University of London, a Master’s degree from the University of Westminster, and a doctorate (cum laude) from the University of Geneva. Dr. Baruti, 53, brings a valuable perspective to Burford’s business as an arbitration expert with deep international experience. She will also serve as a member of its nominating and governance committee. She is Burford’s fifth new non-executive director since 2020, and her appointment completes the refresh of Burford’s board of directors ahead of schedule. Burford previously announced a plan to achieve by its 2023 annual general meeting a board of directors with a majority of independent directors as defined by the UK Corporate Governance Code (to which Burford is not subject). Burford delivered an independent board of directors in line with the Code one full year ahead of schedule in May 2022 with the appointment of Christopher Halmy as an independent non-executive director. Dr. Baruti’s appointment adds still more independent oversight to the Board. Dr. Baruti’s appointment also furthers Burford’s plan to improve the diversity of its board of directors. Burford has stated that at least 30% of the board of directors should comprise female members as soon as reasonably possible; following the retirements of Mr. Parkinson at the 2023 annual general meeting and Mr. Wilson at the 2024 annual general meeting, Burford will exceed that goal. Other required disclosures Dr. Baruti’s full name is Dr. Rukia Baruti Dames. Save as disclosed below in relation to current and past directorships, Burford confirms that there are no further disclosures to be made in relation to Rule 17 of paragraph (g) of Schedule Two of the AIM Rules for Companies in respect of Dr. Baruti’s appointment.
Current directorships/partnerships:African Arbitration Association
Directorships/partnerships in the past five years:Africa International Legal Awareness Ltd
About Burford Capital Burford Capital is the leading global finance and asset management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on theNew York Stock Exchange(NYSE: BUR)and the London Stock Exchange (LSE: BUR), and it works with companies and law firms around the world from its principal offices in New York, London, Chicago, Washington, DC, Singapore, Sydney and Hong Kong. For more information, please visit www.burfordcapital.com.
Commercial Regulatory Issues

Funder Highlights the Importance of Privileged Communications

Claimants are understandably cautious when engaging with third-parties during litigation due to the sensitive nature of the information they discuss, and a need to maintain a careful eye on any privileged communications they undertake. However, it is equally important for funders to have a detailed and complete understanding of the case they’re financing and any particularly sensitive elements of the proceedings that could affect the outcome. In a piece of analysis for Sentry Funding, litigation finance adviser and broker, Miko Burzec, provides a helpful guide for clients and funders as to best practices for maintaining the security of privileged information during cases in England. In particular, he states that while legal advice privilege will protect litigants when discussing matters of legal advice in terms of the client’s rights and liabilities, this will not extend to broader strategic advice or commercial matters. Therefore, Mr Burzec highlights the need for confidentiality and non-disclosure agreements between potential clients and funders, even before any funding agreement is signed and finalised. This will allow funders and claimants to maintain an open and informed dialogue about key background or ongoing details in the case, such as trade secrets, without risking disclosure at a later date. This combination of caution and communication is the key to a productive relationship between the client and funder, whilst avoiding any increase in potential risk for clients.
Commercial Legal Innovation

Litigation Funding Levels the Playing Field in Patent Infringement

When it comes to patent infringement, the balance of power has been so heavily in the favour of companies doing the infringing, that many do not fear any sort of reprisal and will often choose to eschew paying for the license. Having courts invalidate patents, and the lack of damages that can actually be gained by an inventor through an infringement lawsuit, have put individual creators at a serious disadvantage. However, litigation funding is a unique asset for these patent holders to reassert control. Writing in Bloomberg Law, Jonathan Barbee, an attorney at MoloLamken, examines the utility of third-party funding for inventors to redress this imbalance by not only giving patent holders the financial resources to execute a lawsuit, but also by reducing the risk that a poorly-handled lawsuit might hasten the invalidation of the patent. With the capital to see proceedings through to the final conclusion, and to hire the kind of legal counsel that can go toe-to-toe with those instructed by global corporations, inventors will stand a fighting chance. Mr Barbee also points out that this should not just be a consideration for individual innovators, but also for universities and startups, which may see their intellectual property appropriated by industry leaders. He points to the recent Columbia University and CalTech cases as examples of institutions protecting their patents, where they have utilised litigation funding as a method for strengthening their position.
Commercial People Moves

Global Law Firm announce expansion and name change

Global law firm PGMBM will now be known as Pogust Goodhead after a succession of litigation victories.

Following a landmark ruling ensuring mining giant BHP will face their day of reckoning in the English courts over the Mariana dam disaster, the law firm will also be expanding their services in Brazil.

With the addition of a new office in Rio de Janeiro, Pogust Goodhead plans to continue spearheading environmental litigation in Brazil, as well as around the world through offices in the Netherlands and United States.

The expansion also includes plans for a new legal process outsourcing centre based in Governador Valadares, Minas Gerais, Brazil to help process and service clients worldwide – which will bring over 300 jobs to the area.

Alongside the expansion into Brazil, the firm is growing its global securities department, with a new office in San Diego – headed up by experienced securities litigator Takeo Kellar. Enhancing this practise area aligns with Pogust Goodhead’s commitment to bringing shareholder engagement and litigation solutions to investors around the world.

The news comes after a series of historic settlements including on behalf of 15,000 claimants in the Volkswagen Group Litigation in May 2022 and 16,000 victims of the British Airways Data Breach in 2021.

A partnership and £100m funding deal with North Wall Capital was also recently announced as the largest investment in a UK claimant law firm to date.

The ongoing investment in Brazil will also see the addition of 20 new Brazilian lawyers in the coming weeks, after a series of UK hires.

Pogust Goodhead has recently seen the recruitment of C-Suite leaders Chief Operating Officer Alicia Alinia and Chief Financial Officer Jash Radia, bringing decades of experience in strategic leadership across the business.

Global Managing Partner and CEO Tom Goodhead said:

“In the past twelve months, we have successfully concluded group litigations against British Airways, Volkswagen and just last month we secured an extraordinary victory against the largest mining company in the world, BHP.

“Today we are moving to the next chapter. As the business continues to grow, it is vital that we make changes to ensure that we have a strong, reliable, and sustainable infrastructure to facilitate our ambitions to transform group litigation globally.

“Our Brazilian cases have always been the driving force of the firm and with a new office in Rio we hope to build on the great progress we have made with cases against defendants such as BHP and Tuv Sud.

“Most importantly we want to ensure our clients are given an even better experience and to ultimately ensure we represent their desire for justice, continuing to fight the good fight across all our litigations.”

Chairman Harris Pogust added:

“We are delighted to be building on the successes of recent years in what we feel is the next crucial step for our firm.  I am beyond proud to have my name standing big and bold next to my amazing partner, Tom Goodhead.  As we continue to grow the firm, brand recognition becomes an even more important item in our growth.  With this name change we believe the brand Pogust Goodhead will be one of the most recognizable in the legal landscape.

“There is no law firm out there doing the cutting edge, ground-breaking work on behalf of those who are in most need of legal representation than Pogust Goodhead, and these changes will ensure we take things to the next level.

“We are beyond proud of the talented people we have on board at the firm and the incredible work they do every day, championing justice for our clients.

“We are only just getting started.”

Consumer Fundraising

Experity Ventures Closes £32 Million in Financing from Institutional Investors

Investors continue to see litigation financing as a lucrative investment, not only seeking returns from individually funding cases, but also through investments in leading funders. Experity Ventures is the latest beneficiary, as the funder announced it has secured a $32 million corporate note, in a transaction that involved a number of high-level institutional investors. In the company’s press release, founder and chairman of Experity Ventures, Joseph Greco, stated that this demand from institutional investors will allow Experity to see continued growth and pursue a portfolio of litigation funding claims that focuses on pre-settlement and medical funding cases. In the six years since it was founded, Experity has provided more than $380 million in funding to over 65,000 claimants, and CEO Ryan Silverman highlights the value of this capital for the firm continue expanding and execute its operations. For this transaction, Brean Capital acted as the sole placement agent and financial adviser to Experity.