It is impossible to separate the future direction and trends of litigation funding from the broader movement of the litigation sector itself, as investors are naturally drawn towards those areas that are increasing in both activity and financial value. A new blog post from one of the industry’s leading insurers offers predictions for the litigation trends in the UK we should expect to see for the rest of 2023. The blog post released by Harbour Underwriting examines the current state of UK litigation and suggests what areas funders may be pursuing most actively. Unsurprisingly, competition claims are highlighted, citing the 10 Collective Proceedings Orders (CPOs) that have been already approved by the Competition Appeal Tribunal (CAT), along with the 24 opt-out CPO applications which began in 2022. A spectre remains over UK competition claims, with the upcoming Supreme Court decision likely impacting how these claims can be funded by third parties. The article goes on to spotlight securities class actions as another major area of focus, with high profile cases likely setting the stage for even more activity if they reach successful outcomes. Similarly, fraud-based litigation is seen as a potential growth area, fueled by the aftermath of the pandemic, and which has already seen claims being brought against companies who allegedly misused government loans. As has been discussed by other industry commentators, insolvency litigation is also expected to be a significant trend in 2023, given the current economic instability that has put additional pressure on companies already struggling to recover from the effects of Covid-19. Whilst ESG litigation is always of interest to funders, Harbour Underwriting highlights the variety of cases that exist under this broad umbrella, and suggests the sector will remain a prominent target market for litigation funding. Finally, mergers and acquisition litigation is offered as another trend, with the author speculating that a rise in the number of deals, as well as the speed of those transactions, could pave the way for litigation focusing on ‘valuation and warranty disputes and claims for misrepresentation.’

In the GAO report on the litigation funding industry published last December, one of the key takeaways from its research was the lack of publicly available data around the market and its participants. However, some industry firms and publications are leading the way on gathering such data, as Above the Law and Lake Whillans are partnering once again on their annual litigation finance survey. Announced in an article by Above the Law, the latest addition of the publication’s annual survey of attorneys and in-house counsel is being launched in partnership with funder Lake Whillans. The research aims to study these individuals’ perspective on litigation funding, with the overarching theme of ‘Is Litigation Finance An Effective Option In A Down Economy?’ The survey includes questions such as ‘What are the most important considerations in choosing a litigation financier?’ and ‘Has litigation finance become more relevant to your practice in the last year?’. The survey is brief and all responses are anonymous, with participants given the chance to win a $250 gift card. Law firm attorneys and in-house counsel are invited to complete the survey here.

The end of 2022 saw many industry headlines dominated by the ongoing stories of fights in patent infringement lawsuits between plaintiffs and a District Court judge in Delaware, primarily focused on orders requiring increased disclosure of third-party litigation funding. However, a new opinion piece by a former federal court judge argues that this campaign to increase funding disclosure in patent disputes is part of a wider effort to tip the scales in Big Tech defendants’ favor, and to disadvantage tech startups. Writing for RealClear Policy, Paul Michel, the former Chief Judge for the United States Court of Appeals for the Federal Circuit, argues that if Judge Connolly’s disclosure requirements are upheld, then large technology corporations will gain ‘a huge tactical advantage’ in these cases. Michel points out that these orders seem to have gone in the opposite direction to the conventional position that ‘the funders of a lawsuit are irrelevant to the merits of the lawsuit itself’. Responding to critics of third-party funding who say the practice encourages frivolous lawsuits, Michel states that this is ‘absurd’ and that it is in these funders’ interests not to back cases that will fail and therefore deny any return on investment. He closes by suggesting that if these requirements become the standard for patent infringement cases, then defendants will be able to ‘tie up small patent holders in expensive legal knots over issues irrelevant to the merits and only rarely relevant to case management.’

It would be impossible to recognize every single participant who is providing important contributions to the litigation finance sector, however, Lawdragon has honored many of the industry’s key individuals in its 100 Global Leaders in Litigation Finance for 2023. The latest edition of Lawdragon’s annual listing recognizes funders from across the world, with individuals on this year’s list hailing from countries including Australia, Germany, Singapore, the United Kingdom and United States. Lawdragon stated in its announcement that as an ‘advocate of inclusion in the legal profession’, the 2023 guide is 32% female, and 17% inclusive.  Whilst there are many familiar funder names from the 2022 list, there are plenty of new entrants this year including: Rob Ryan, CEO of Aristata; Ian Garrard, Managing Director at Innsworth Advisors; and Brandon Baer, Founding Partner of Contingency Capital. Three members of the 2023 list are also featured in Lawdragon’s Hall of Fame: Louis Young, Co-Founder of Augusta; Stuart Grant, Managing Director at Bench Walk Advisors; and Andy Lundberg, Managing Director at Burford Capital

The prolonged timescale of litigation is regularly cited as a barrier to entry for some investors, with the uncertain duration of any case making it difficult to predict when those returns will be realized. However, as a recent decision demonstrates, there will always be opportunities available for funders and investors willing to take a pragmatic approach. An article by Bloomberg Law provides an update on Burford Capital’s financing of a long-running lawsuit brought by shareholders of YPF SA, a re-nationalized oil company, against Argentina. The case of Petersen Energia Inversora, S.A.U. v. Argentine Republic dates back to 2015 and has stretched on for long enough that Burford ‘began posting financial results and projections that excluded any returns’ from the case. However, the U.S. District Court for the Southern District of New York (SDNY) released an important ruling last Friday, with District Judge Loretta A. Preska finding that the Argentine Republic is liable for the YPF shareholders’ losses following the company’s re-nationalization in 2012. The ruling from SDNY granted summary judgement to the investors without specifying damages, as Judge Preska stated that further details on the exact ‘timing of the nationalization’ needed to be clarified before damages could be calculated.  According to Bloomberg’s reporting, Burford ‘has already made more than three times its initial investment in the case, after previously selling claims worth more than $230 million.’ Burford had suggested that the shareholders’ claims could be worth more than $7.5 billion.

Class actions continue to be a top choice for funders looking to pursue meritorious claims with the potential for strong financial returns, buoyed by favourable regulatory regimes in many jurisdictions. In another example of this trend, Omni Bridgeway announced that it is funding a class action against Downer EDI, an integrated services provider operating in Australia and New Zealand.  Omni Bridgeway’s shareholder class action alleges that Downer EDI failed to disclose accounting irregularities to the market, misrepresented the truth about its financial position, and that its shares were trading at an artificially inflated price until December 8th, 2022. Omni Bridgeway has stated that the class action will be run by Piper Alderman. The claim has its origins in two events: a December 8th announcement by Downer EDI that disclosed these ‘accounting irregularities’, and the publishing of restated half-year accounts and the provision of updated FY23 guidance on February 27th, 2023. Downer EDI’s share price fell by 20% following the December announcement and then fell by 24% following the February release. Omni Bridgeway is encouraging any shareholders who acquired Downer EDI shares or an interest in Downer EDI shares between April 1st, 2020 and February 27th, 2023, to register their interest.

The ongoing dispute between Burford Capital and Sysco Corporation continues to develop, with lawsuits on each side accusing the other party of wrongdoing. Last week saw Burford’s leadership make an emphatic defense of its position and track record in a letter to the Wall Street Journal, in which it categorically stated that ‘the facts of this litigation are on Burford’s side’. The letter from Burford’s CEO and CIO, which was originally published in the WSJ last Thursday, saw Christopher Bogart and Jonathan Molot make the case that this dispute was not ‘exemplary of litigation finance […] but rather of an admitted breach of contract.’ In this letter, Bogart and Molot re-emphasise that the origin of this dispute came from Sysco breaching the original terms of its contract with Burford, which resulted in a negotiated settlement that included a ‘limited consent right’ for Burford. Burford’s letter also reframes Sysco as the party which has ‘already lost twice’ in court, with Burford having been granted both ‘a temporary restraining order and preliminary injunction’. The letter ends by reinforcing Burford’s principle that their ‘standard contract makes client control of their litigation clear’, and that this would have also been the case with Sysco had the client not breached the original terms of the contract.