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Commercial Deals

How the Time Value of Litigation Should Influence Investment Decisions

When considering the pros and cons of engaging in litigation, the issue of costs cannot be considered without also factoring in how long the process could take. As a result of systemic backlogs and inefficiencies, the ability to accurately assess the ‘time value of litigation’ is paramount when determining the appropriate quantum–an in turn, whether an investment in the claim is warranted.  In a new piece of analysis for Thomson Reuters’ Dispute Resolution Blog, LionFish’s managing director, Tets Ishikawa, provides an in-depth look at the mathematical breakdown of this concept. At the centre of the argument is the idea that the further prolonged the litigation process, the more the present day cost value is diminished.  Ishikawa argues that through this model, it is plain to see why defendants can and do seek to extend the duration of litigation processes, as they are in fact arbitraging the time value of litigation. In his view, it is symptomatic of a wider issue in the legal system, one which encourages parties to commit wrongdoings and pay for their misdeeds later at a lower value than if they were brought to justice more swiftly.
Consumer

Litigation Funding has Upended the Balance of Power in Medical Malpractice Cases

One area of litigation funding that receives less time in the spotlight but carries great importance is in the realm of medical malpractice and personal injury cases. According to industry insiders, the emergence of third-party funding for these types of claims has dramatically reoriented the balance of power away from medical insurers and into the hands of individual plaintiffs. Speaking with South Florida Hospital News and Healthcare Report, Matt Gracey, managing director of Danna-Gracey, points out that litigation finance allows claimants to fight cases they wouldn’t otherwise have the capital to sustain, and then avoid settling early where cases may have prolonged timeframes. He goes on to argue that this development should not only be a concern for doctors, but any other commercial entities that could be targeted with litigation funded by third-parties. Gracey highlights the important statistic that insurance companies were previously winning 85-90% of cases brought to trial, yet in instances where a plaintiff has the support of a litigation funder, plaintiffs are now winning by the same landslide ratio. He states that insurers must continue to analyse the types of cases that funders are having successful returns on in order to be better prepared, and must also realise that doctors must evaluate the financial capabilities of their insurers to make sure they can measure up against this new force of capital for plaintiffs.
Commercial Deals

Scotland Represents Potential Growth Jurisdiction for Class Actions

The rise in the volume of class actions in Europe has shown no sign of slowing down in recent years, with more and more cases demonstrating the possibility of success, especially for consumers bringing legal actions against multinational corporations. With this growth, litigators and funders alike are keen to pinpoint jurisdictions where this success can be built upon. Writing for Lawyer Monthly, Richard McMeeken, a partner at Morton Fraser Lawyers, argues that Scotland may be the next country to see an explosive rise in class action activity. He identifies the three key factors that could fuel this growth: the relatively low cost of bringing class action claims, the low adverse costs risk and the presence of a mature litigation funding industry. When it comes to the final factor, McMeeken states that Scotland benefits from the lack of legislative and regulatory restraints on the use of third-party funding in this type of litigation. This is further supplemented by the use of After The Event (ATE) insurance, which can provide additional security for claimants where there is the risk of adverse costs order. However, McMeeken explains that Scotland has not yet seen the kind of activity present in other jurisdictions, due to the fact that the Scottish legal system has only recently adopted procedures for these types of proceedings, and as of today, has been restricted to opt-in class actions. McMeeken expects that if courts are able to replicate this openness in regards to opt-out cases, and as the system becomes more familiar with a broader swathe of class actions, Scotland could see significant activity in the near future.
Announcements Commercial Legal Innovation

New research reveals growing business impact of in-house lawyers and legal departments as they increasingly generate cash recoveries

Burford Capital, the leading global finance and asset management firm focused on law, today releases new independent research based on a survey of 300 GCs and heads of litigation in the US and UK that demonstrates the transformative way that GCs view legal department impact. GCs seek to add value to the business, and affirmative litigation recoveries play an increasingly important role. GCs also see a role for their law firm partners and for legal finance, especially in relation to fostering innovation and providing support for affirmative recovery programs.

Christopher Bogart, CEO of Burford Capital, said: “Burford’s latest independent research shows that GCs are determined for the legal department to increase their business impact. Legal finance can help them, and the research shows that GCs are increasingly open to cost- and risk-sharing with third parties and that law firms need to be ready to talk to clients about this solution.”

Among the core findings of the research:

  • GCs are ambitious for the legal department’s impact in generating liquidity and transcending its traditional understanding as a cost center.
    • Over half (54%) say the legal department is understood to add value to the business by pursuing recoveries through litigation or arbitration.
    • An even larger majority (69%) say identifying new ways to add value to the business is the most important means by which in-house lawyers can contribute to the success of the company.
  • Still, many see opportunities to do more, specifically in adding value through meritorious affirmative recoveries.
    • Over half of those surveyed (51%) say they need to build infrastructure and process to add value through meritorious affirmative recoveries.
  • GCs expect law firms to be ready to provide guidance on value generation.
    • A solid majority (65%) say that receiving guidance from law firm partners about opportunities to innovate or add value to the business is one of the most important factors in individual GC success.
    • Six in ten say either that their panel litigation firms have spoken to them about legal finance in the last five years or that the firm’s doing so would have contributed to the company success.
  • Legal finance is poised to play an increasingly important role in GC success.
  • GCs see a role for legal finance, especially in relation to their affirmative recoveries.
  • Just under a third of GCs (27%) say their companies have used legal finance.
  • Similarly, almost six in ten say either that they reviewed legal finance partners in the last five years or that doing so would have contributed to the company’s success.

The 2022 GC Survey 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 300 US and UK 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.

The LFJ Podcast
Hosted By Joe Siprut |
In this episode, we sit down with Joe Siprut, Founder, CEO and CIO of Kerberos Capital Management. Joe discusses his firm's approach to law firm funding, his underwriting and structuring criteria, what it's like to be a capital provider in the current economic climate, and some developments he foresees for the industry in the coming years. [podcast_episode episode="10573" content="title,player,details"]
Commercial Deals

Patent Infringement Litigation Represents Major Growth Sector for LitFin

One of the largest areas of growth for litigation funding commitments is in the world of patent litigation, with patent infringement cases representing a lucrative world of disputes between patent holders, inventors and corporations. These funded lawsuits have become increasingly prevalent, yet with this activity has come an added layer of scrutiny as to the nature and origin of third-party funding. Reporting in Bloomberg Law details this trend, highlighting the recent case of VLSI Technology and Intel Corp., where Fortress Investment Group funded VLSI’s case and successfully secured a $2.18 billion verdict in its favour. Both parties are now set to appear before a federal district court, to examine whether VLSI sufficiently disclosed the financial backing it received. Regardless of the outcome of that case, it is expected that funders will continue to target similar cases, as Westfleet Advisors' managing partner, Charles Agee, points out that the costly and protracted timelines of these cases often could not go forward without third-party funding. Despite the expensive nature of patent infringement disputes, the possibilities of large payouts like the VLSI case make them an attractive proposition for funders. This viewpoint is reflected by other funders, with Burford Capital’s managing director, Katharine Wolanyk, stating that their firm receives more intellectual property-related requests for funding than any other area. Wolanyk also notes that this activity is now seeing patent owners exploring third-party financing much earlier in the process.
Commercial Regulatory Issues

Industry Leaders Discuss the Value of Disclosure

One of the hot topics of discussion for litigation finance leaders, regulators and commentators, is the extent to which disclosure of third-party funding needs to be mandated and enforced.  With numerous examples of judges highlighting this issue in ongoing cases, and legislators proposing reforms to disclosure rules, the debate appears to be growing in importance. Reporting by Law360 outlines recent comments from industry figures at a conference hosted by UC Hastings Law School in San Francisco. Speaking in favour of enhanced disclosure, Hausfeld’s global managing partner, Brent Landau, argued that requiring disclosure will actually benefit funders, as it will grant added legitimacy to the practice through transparency. Speaking from a funder’s perspective, Jiamie Chen, director of investor initiatives at Parabellum Capital, claimed that while funders are not opposed to certain disclosure, she believes that the idea of disclosure being used to unearth conflicts of interest is misguided, due to the fact that funders do not influence decisions during the litigation process or offer legal counsel. Bringing a different point of view, Judge Vaughn R. Walker, a retired US District Court Judge, pointed out that the existence of funding should not influence a court’s perspective, as any verdict or decision on awards should be made based on a case’s merit alone. This viewpoint was reinforced by Steve Weisbrot, the CEO of UK claims administrator Angeion Group, who argued that litigation funding has been a positive for the legal industry, as it has enabled lawyers without access to funds to fight cases that are ignored by larger firms.
Commercial Fundraising

North Wall Builds on Previous Successes with New €500 Opportunities Fund

With the ongoing economic instability and inflation pressures felt around the globe, investment firms are looking for alternative avenues to maintain returns and scale future growth. As a result, those firms willing to explore more niche opportunities including litigation finance are continuing to raise capital to take advantage. Reported by Bloomberg UK, North Wall Capital is a recent example of this trend, as it looks to raise €500 million to complete a second opportunities fund focused on the European market. North Wall’s chief investment officer, Fabian Chrobog, said that as opportunities in traditional markets remain restricted, the firm is looking for additional funding partnerships to exploit these alternative asset classes. The firm has already raised €250 million, with a significant portion committed by MLC, an Australian superannuation fund. On top of this second Europe opportunities fund, North Wall may soon look to build its third fund focused on litigation, having seen great success with its previous endeavours which included a £100 million commitment to the law firm PGMBM to fight high-profile ESG cases.
Commercial Deals

Pravati Capital’s CEO Discusses the Growth of Litigation Funding and ABS for Law Firms

As the litigation finance industry continues to mature, established leaders within the industry are now able to trace recent developments to the history of this niche area of financing. One such long-established figure, Alexander Chucri, founder and CEO of Pravati Capital, recently shared his thoughts on the most significant changes in litigation funding and what the future of third-party funding holds. Speaking with Dealmakers’ LINE magazine, Mr Chucri spoke about the transformation of litigation finance from a boutique world of small investments, to law firms being open to and eager for financing from firms like Pravati.  In particular, Chucri honed in on recent developments in certain states in the US around Alternative Business Structures (ABS) for law firms, which allows non-lawyers to participate in law firm ownership. While he sees the benefits for law firms seeking capital, Mr Chucri maintains that for a funder like Pravati, it is far more advantageous to invest in a firm through existing methods rather than risk the complications and potential conflicts of interest that come by taking an equity position. As for the future of the litigation finance industry, Mr Chucri sees no slowdown on the horizon and expects growth to continue as law firms and corporates will utilise this tool in their litigation arsenal with increasing frequency. He also highlighted the benefits of working with a dedicated litigation funder over a hedge fund, as the former can handle all case underwriting needs and therefore reduce the complications of sharing confidential data with third-parties.