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Case Developments Commercial

Harbour Funds Dual Lawsuits Against Google in the UK and Netherlands

As tech companies have grown in size and market power over the last two decades, many critics have accused these multinational corporates of abusing their near-monopolistic status. A new lawsuit being pursued in both the UK and EU jurisdictions is leveraging litigation funding to hold one of these tech giants to account, and restore the balance in favour of smaller market competitors. Outlined in reporting by TechCrunch, this latest lawsuit is being brought against Google, whom the plaintiffs accuse of misusing its ad tech to side-line publishers and smaller media companies on its platforms. The case is being brought by Geradin Partners in the Netherlands and by Humphries Kerstetter in the UK, both of which are filing anticompetitive conduct claims against Google. Harbour Litigation Funding is financing both claims, with the combined total value of damages being sought potentially reaching €25 billion. An important distinction between the two cases is their classification in each jurisdiction, with the UK claim being categorized as an opt-out claim, whereas the Dutch matter will go forward as an opt-in claim. Furthermore, the former case is being brought to the UK’s Competition Appeal Tribunal and the case in the Netherlands will be seeking collective damages on behalf of European publishers.
Commercial Deals

New research shows companies with large claims recover more and preserve budgets by using legal finance as part of their class action opt out strategies

Burford Capital, the leading global finance and asset management firm focused on law, today releases new independent research demonstrating the value of legal finance for companies with valuable commercial class action claims. In recent years, Burford has seen an increasing number of major corporations choosing to opt out of class action lawsuits to pursue high value claims individually and has commissioned independent research to examine the trend in greater depth.

Although companies are currently still more likely to remain in the class than they are to opt out, the research reveals that their reasons for doing so are economic—and solvable with legal finance, which de-risks the choice to opt out and provides a clear benefit to corporations with high value claims. As most legal finance is non-recourse, companies can receive risk-free funding to pursue meritorious claims as individual plaintiffs, as well as to accelerate the often-significant value represented by pending claims.

Given the results of the research, Burford expects the trend toward opt outs will continue, with major companies choosing to rethink their opt out strategies with legal finance.

Christopher Bogart, CEO of Burford Capital, said: “Burford’s independent research on commercial class actions demonstrates the clear benefit that legal finance provides to companies with significant claims. If you’re a GC and you have a claim that’s big enough to merit opting out, you should, because you’ll recover more, and you can do so without budget implications by using legal finance capital. Further, your competitors who are already using legal finance are opting out three times more often. As a former GC, I recognize the importance of maintaining control and maximizing returns in litigation, and Burford works with many GCs to use legal finance to reduce risk, maintain greater control and enhance the likelihood of achieving greater recoveries.”

Key findings from the research include:

  • Use of legal finance correlates to opting out.
    • Use of legal finance is 3x likelier among companies that mostly/always opt out vs. companies that mostly/always remain in the class, and 2x likelier than all companies.
  • Companies’ top reasons for opting out are maintaining control and maximizing return.
    • The #1 reason large company GCs opt out is their fiduciary duty to maximize recoveries to their company.
  • Companies’ top reasons to stay in the class are economic.
    • Not being able to justify the cost of pursuing an opt out claim (64%) and not having the budget to do so (61%) are the top 2 reasons companies remain in the class.
    • Legal finance ameliorates both cost and budget constraints.
  • GCs say the availability of legal finance would impact their opt out strategy.
    • 1 of 2 (52%) say that while they have not used legal finance, its availability would positively impact the decision to opt out. 

The Report on Class Action Recoveries can be downloaded on Burford’s website, where full results are also available. The research report was conducted in June 2022 by GLG via an online survey, with responses from 150 US GCs, heads of litigation and other senior in-house lawyers responsible for their companies’ commercial litigation.

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 the New 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.

Case Developments Commercial

Dispute Between Funder and Law Firm over Fees Reaches Federal Court

The biggest challenge for a funder taking on an investment in a case is the need to balance potential financial returns against the risk of losing one's investment. However, an ongoing matter making its way through the federal court system in the US shows that even when a case is successful, funders may still face challenges in recovering those returns. Reporting in Bloomberg Law highlights this issue, as Woodsford is seeking to force Hosie Rice, a law firm based in San Francisco, to pay almost $2 million in fees for its financing of a case that successfully settled in 2020. After an arbitrator ruled that Hosie’s client, Space Data, owed the law firm up to $4 million in costs but no contingency fee, Hosie argued that it was not required to award Woodsford any additional fee beyond the original loan repayments. Woodsford’s CEO, Stephen Friel, has argued that this dispute is a simple matter of Hosie failing to repay its debts, and last year an arbitration panel agreed that Woodsford was owed additional remuneration as the $4 million client payment constituted a ‘revenue event’ for the law firm. A federal judge in Delaware is now considering Hosie’s appeal that the arbitration award was improper. Whichever way the judge rules, it is sure to be carefully watched by funders and law firms alike, who no doubt will be considering future situations where the two parties may have differing definitions of what constitutes a contingency fee.
Commercial Deals

Investment in Litigation Finance can offer Stability Against Market Volatility

This year has seen the global economic market continue to struggle on shaky grounds; weighed down by the pressure of inflation, conflict in Europe and associated weaknesses in supply chains. As a result, investors have been looking for alternative avenues to seek more reliable and secure returns for their capital, with litigation financing representing a tempting proposition for a growing number of funds. Insights by Katch Investment Group highlight that with the spectre of a recession on the horizon, investing in litigation finance can provide stability that simply cannot be found in the equities market at present. Katch argues that while investors often overlook this asset class due to its complex nature and smaller market size, in comparison to traditional investments, the litigation finance space is not only growing, but also seeing increasingly diversified opportunities with the rise of specialist outfits. Katch does caution potential investors that engagement in this market needs to be carefully evaluated, with the jurisdiction and type of cases being primary concerns. Furthermore, investors should also assess not only the likelihood of any given case resolving successfully, but also the challenges that may arise when attempting to collect on any financial rewards.
Commercial

Omni Managing Director Highlights Enforcement and Collection as Key Issues

The litigation funding industry is continuing its upward growth trajectory, so much so that even the largest and most established funders must evolve to keep pace with changing market and jurisdictional conditions. In an interview with Lawdragon, Matthew Harrison, managing director and co-chief investment officer at Omni Bridgeway, sees the litigation funding space continuing its upward momentum. This is true not only in terms of case volume, but in the speed of case resolution as the court system begins to shake-off the sluggish pace of the pandemic. Observing another trend that has become a more frequent concern within the industry, Omni Bridgeway has launched a U.S. Judgement Enforcement Team, bringing its expertise to bear in the field of enforcing and collecting awards from successful cases. Mr Harrison highlights that while the primary challenge for any funder will always be winning the judgement in the first place, the need for both clients and firms to consider how to collect on financial returns is of paramount importance. Harrison notes that the biggest trend among Omni’s client base is the increased willingness of the more established law firms and similarly enterprise-level companies to explore litigation funding. Whilst most funders may have started out representing small clients against large entities, Omni’s co-CIO sees this balance shifting, with large-scale commercial litigation being at the forefront of investment opportunities.
Announcements Case Developments Commercial

Manolete Partners writes down GBP2.3 million on High Court decision

Manolete Partners PLC on Friday said it has received a "rare adverse decision" on one of its larger cases from the UK High Court, forcing it to write down GBP2.3 million. Shares in the London-based insolvency litigation financing company were down 15% to 214.00 pence each in London on Friday morning. Manolete said that it has applied for permission to appeal the High Court's decision, but it has decided to write down the full value of the case in its forthcoming results for the six months ended September 30. The impact of the write-down will be a GBP2.3 million reduction to pretax profit, of which the cash paid out on this case to date is GBP636,756. Separately, the company said it will take a more prudent view of the company, due to the challenging macroeconomic climate in the UK. Manolete expects to report a pretax loss of around GBP5 million in its financial year 2023 interim results, as a result of these two factors. However, the company said that it continues to "operate well", with gross cash generation from completed cases in the first five months of the financial year at a "record" GBP15 million. This compares to GBP15.6 million for the entire year ended March 31. Further, it said that revenue, from completed cases, for the first five months of financial year 2023 more than doubled to GBP10.6 million, compared to GBP3.9 million in the same period last year. Chief Executive Steven Cooklin said: "The board and our legal advisers were surprised and disappointed by the very rare adverse initial judgment that we received on one of our larger cases, a case that we originally signed up in 2019. For the first time in our 13-year history, we have applied for permission to appeal that decision to the Court of Appeal. "We have taken a cautious stance by reducing the carrying value of that case to zero until we know the final outcome of the appeal process."
Case Developments Commercial

Litigation Lending Class Action Secures Compensation for NT Stolen Generations Survivors and Family Members

Class actions are often thought of as a method to address ongoing or recent grievances against a corporate or public entity, but they also have the potential to provide legal redress against historical wrongdoing. This has been most recently illustrated by the NT Stolen Generations class action in Australia, which secured a $50 million settlement for family members and deceased estates of those Aboriginal children who were forcibly removed from their families by the government. The case which was funded by Litigation Lending in partnership with Shine Lawyers, which sought to compel the Commonwealth Government to not only compensate Stolen Generation survivors but also to their Kinship Group Members and the deceased estates of both groups. The settlement, which is awaiting approval by the NSW Supreme Court, began in April 2021 and will see compensation provided to all class action members. Warren Mundine, an Aboriginal leader and LLS board director, highlighted that while this settlement could not compensate survivors and their families for the damage caused, it is a valuable step in moving forward with the healing and reconciliation process.
Commercial Deals

Late-Stage Funding Offers Solution to Law Firms’ Fee Struggles

The issue of financial risk and cost overruns during litigation is not just one that affects entities pursuing legal action, it also has serious implications for law firms whose business model relies on client fees. This situation frequently requires law firms’ pricing teams to balance fixed fee arrangements with contingency fee structures, providing an imperfect solution to the problem. In a recent piece of analysis, Brendan Dyer, vice president of business development at Woodsford, argues that litigation funding can represent a more beneficial solution and reduce capital and cash flow risk for law firms. Moreover, Dyer points out that funding need not always be in place from the beginning of a case, and that late-stage financing can be utilized by pricing teams to offset the issues with accidental contingency fees. Dyer also raises another key benefit, that later engagement with a funder can reduce the size of the financing required when it is solely being used to mitigate cost overruns and ensure ample capital to reach the end of proceedings. This type of funding not only solves a core issue for law firms, but also reduces the likelihood of what Dyer describes as ‘fee fatigue’ from clients, who may otherwise consider ending the litigation prematurely to avoid sinking deeper into additional costs.
Commercial People Moves

Trends to Watch in Litigation Funding Recruitment

As the demand for litigation funding continues to rise, industry insiders are seeing a parallel rise in the demand for skilled and experienced litigation professionals who these funders are eager to recruit. As the sector continues to mature, more and more experienced litigators are considering a move from private practice to the commercial litigation finance business In a blog post by the specialist legal recruitment firm, Marsden, senior consultant Megan Williams takes a look at the key factors for both hiring managers and prospective hires to consider. Williams places a particular focus on the need for a mind-set shift from those coming from law firms into the world of litigation funding, with an emphasis on bringing a commercial and analytical perspective with which to assess cases. Williams also highlights that the uptick in ESG and group action cases is causing funders to look for individuals with experience in these areas, as these areas come to dominate much of the third-party funded case volume. However, Williams argues that the switch is not just restricted to those with decades of experience, and funders are keen to bring on junior lawyers who are able to embrace an approach centered around growth and fast-paced decision making.