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Commercial Deals

Third Point LLC on Shell PLC Restructuring 

Litigation Finance Journal recently reported on Shell PLC’s board of directors who are accused of allegedly manipulating ESG frameworks at the expense of shareholder interest. New York-based Third Point LLC recently announced a significant investment into Shell, underscoring intentions to profit from a corporate restructuring of the multinational energy conglomerate. Third Point says Shell’s relocation to the United Kingdom provides significant leverage for ROI, given the board of directors’ alleged ESG misgivings.    Third Point’s Q1-22 shareholder letter outlines the firm’s pragmatic approach to increasing its investment in Shell, despite the board’s ESG track record. Third Point suggests that conversations with Shell’s board echo shareholder dismay from poor ESG planning. However, Third Point plans to help guide Shell’s shareholders to a bright future under various restructuring scenarios.  Third Point suggests that European energy efficiencies are a valuable long-term investment in a wartime scenario. Third Point’s Q1-22 letter discusses lessons learned by Shell, and how ESG’s future will include copper and nickel stewardship to drive the future of EV innovation.
Consumer

New York Senate Bill A.1270A’s Consumer Litigation Funding Act 

Back in 2017, New York State Assembly members introduced a bill that would mandate certain consumer protections concerning the arrangement and engagement of litigation funding agreements. Each legislative session since has seen a new version of the Consumer Litigation Funding Act debated by New York legislators. On May 3, 2022, a new draft of the Act was amended and recommitted to the Consumer Affairs and Protection committee for debate.  According to New York State Assembly Bill A1270A’s summary, the Act would promote consumer litigation finance protections by regulating contractual mandates as part of New York State law. For example, the proposed Act would stipulate that claimants hold rights to ‘prepay’ the funded amount before their case is settled, without penalty.  The Consumer Litigation Funding Act would be a game changer for the New York State legal scene. Special interest groups are sure to be lobbying both sides of the Act’s debate.  Litigation Finance Journal will continue reporting on the Act’s progress through the New York State legislature.
Commercial Deals

Lexshares’ Q1-22 Litigation Finance Industry Outlook 

Lexshares has published the firm’s outlook for the first quarter of 2022. Notably, Lexshares suggests that the litigation finance industry is thriving. Furthermore, the funder says it disagrees with marketplace competitors who suggest a decline in average litigation investment deal size.  According to Lexshares’ insights, courtroom delays are hindering profits of the largest litigation funders in the United States. Yet Lexshares sees an increase in patent and trademark case funding on the horizon, as potential awards associated with IP violations are on the rise.  Meanwhile, Q1-22 was eventful for Lexshares, as the firm raised $103M for its Marketplace II Fund. Lexshares notes that courtroom delays are a ‘double-edged sword’ in terms of how funders organize their fund’s deal flow.  Click here to read more about Lexshares’ Q1-22 insights.
Commercial

Burford Capital’s Insights for Women in Law

Women in the legal profession face various challenges such as unconscious bias, according to the Women’s Career Progression Factsheet. Recently, a group of litigation finance leaders debated the findings from a Career Progression in the Legal Sector report.  Burford organized key takeaways associated with a woman’s career progression in law. According to the panel, data will continue to play a crucial role in monitoring the effects in supporting women’s careers in law.    Some in the industry suggest that legal franchises should better monitor origination credits across the industry, alluding to the fact that women’s efforts are sometimes overlooked in terms of client origination and retention. Furthermore, unconscious bias seems to be a significant matter for the legal profession when it comes to promoting women.  Click here to learn more about Burford’s findings. 
Commercial

Forecasting Litigation Investment Consolidation 

The global litigation finance landscape is ripe for consolidation according to predictions from the court reporting firm, Steno. According to Steno’s forecasts, with the advancement of litigation investment products and services, the most successful legacy franchises will have balanced macro factors to attract large cases, while pushing out competition by consolidating resources.   Steno’s brief on the future of litigation finance evolution signals that the industry is in some ways protected by the safety of the court system. In that, when marketplace dynamics change (such as in a recession), investors seek to deploy capital in safe places. Steno also predicts a growing trend of regulatory harmony across jurisdictional borders.  With regulation synergies, Steno suggests that the fruits of the legal system will become more ubiquitous – something that previously was only accessible by the wealthy.
Commercial Deals

The Frothy UK IP Litigation Space 

International IP claims are becoming more important for pure play cross border competition. Many large technology firms in the United States have met trouble when violating global IP rights. Most litigation finance firms in the United Kingdom are seeking to boost patent and intellectual property business according to new market insights. Notably, UK litigation investors are leading worldwide IP litigation funding ahead of the opening of Europe’s Unified Patent Court.  London’s Mathys & Squire LLP outlines that litigation funders are sometimes engaged by startup firms who lack funds to pursue dynamic IP claims against technology giants. Oftentimes, IP registrations in the United States are seen as the preeminent safeguard for global IP concerns. Litigation investors in the UK often partner with firms of various sizes to police global IP infringement scenarios.  Furthermore, litigation investors are becoming more useful for those pursuing injunctive relief to secure market dynamics, according to Mathys & Squire.
Commercial Special Features

High Court confirms use of public examination powers to investigate potential class actions

The High Court has ruled in favour of shareholders in Walton & Anor v ACN 004 410 833 Ltd (formerly Arrium Limited) (in liq) & Ors. In a 3:2 decision, the majority permitted former shareholders of Arrium Ltd to examine the insolvent company’s officers under s 596A of the Corporations Act 2001 (‘CA’) for the purpose of potentially bringing a class action against the company’s managers. The Road Ahead The High Court (3:2) decision is positive news for shareholder class actions as it confirms that “eligible applicants” can publicly examine corporate officers about a corporation’s affairs, to test the merits of a potential class action against the company. This is even if a liquidator does not intend to investigate or pursue claims against the officers of the company. The approach adopted by the majority is a welcome step forward for corporate accountability in the midst of many attempts by the legislature to constrict the Australian class action landscape. Procedural history The applicants were shareholders in a former mining company, Arrium Ltd (‘Arrium’). The applicants bought shares in Arrium during a capital raising in 2014. Shortly thereafter, Arrium announced an impairment to the value of its business of over $1billion. Arrium was then placed into administration, and then finally liquidation. Under s 596A CA, the Court is to summon a person for examination about a corporation’s ‘examinable affairs’ if an eligible applicant seeks the order, and the court is satisfied that the person subject to the order was an officer or liquidator of the corporation during the prescribed period. With authorisation from ASIC, the applicants sought an order from the Supreme Court of New South Wales summoning a former director of Arrium for public examination. The applicants sought the order,  as they believed that they may have claims against the former directors and auditors of Arrium arising out of the capital raising and the company’s published financial results for the same period. The goal of the examination was to investigate whether pursuing these claims as a class action with other shareholders was viable. The Supreme Court of New South Wales initially granted the order.  However, the Court of Appeal overturned the decision to allow the examination on the basis that it was an abuse of process, as the examination did not benefit Arrium, its creditors, or its contributories. The issue to be determined by the High Court was whether the applicant’s purpose for seeking the order was an abuse of process. This involved considering whether the purpose of the application was consistent with the purpose of s 596A CA. Was the Proposed Examination an abuse of process? The majority (Justices Edelman, Steward and Gageler) allowed the appeal, finding that the application was not an abuse of process. The purpose for the application was held to be within the scope of s 596A CA. In coming to this conclusion, the court considered section 596A CA to ascertain its purpose, which involved lengthy consideration of the preceding iterations of the statutory scheme for public examinations. The High Court acknowledged that earlier laws insisted on public examinations being for the benefit of the company or its creditors, or for bringing criminal or regulatory proceedings in connection with the company. However, the High Court concluded that these requirements did not apply to bringing an application under s 596A CA because s 596A CA has no direct analogy with any former provision in the earlier companies’ legislation. Instead, the court held that s 596A has much broader requirements than the former laws on this issue. This is because: 1.     section 596A CA is drafted differently, and applications under it require less supporting evidence than earlier companies’ legislation and other sections within the same part of the Corporations Act 2001; 2.      section 596A CA was intentionally drafted to have a broad application; 3.     section 596A was enacted in the public interest to facilitate the administration or enforcement of the law concerning a corporation and its officers in public dealings. Therefore, an application under this section will not be an abuse of process if it promotes compliance with the law. On this basis, the High Court concluded that using a compulsory examination to test the merits of a potential class action for corporate misconduct coincides with the purpose of s 596A CA. The fact that the proposed class action would not benefit all of Arrium’s shareholders did not jeopardise the validity of the application, because s 596A CA is directed to enforcing the law, rather than benefitting the company in administration. The judgment is available here: Walton v ACN 004 410 833 (formerly Arrium Ltd) (in liq) [2022] HCA 3, 16 February 2022. About the Authors Lillian Rizio specialises in managing large scale complex litigation, particularly with claims involving multiple parties. Lillian’s emphasis is on corporate disputes, class actions, professional negligence and insurance, across most Australian jurisdictions. Lillian also has extensive experience advising clients in relation to right to information matters, in both federal and state jurisdictions Julia Hegarty is a law clerk in the Dispute Resolution and Litigation team at Piper Alderman in Brisbane. She is currently studying a Bachelor of Commerce/Laws (Hons) at the University of Queensland. Julia has an interest in externally funded litigation and shareholder class actions. For queries or comments in relation to this article please contact Kat Gieras, Litigation Group Project Coordinator | T: +61 7 3220 7765 | E:  kgieras@piperalderman.com.au
Case Developments Commercial

New York Court of Appeals Rejects Litigation Agreement Discovery 

In what might be the first time in the history of New York State published law, a New York Appeals Court has rejected relevance associated with discoverability of litigation funding agreements in Worldview Entertainment Holdings v. Woodrow. The five justice panel refused the necessity of probing the plaintiffs financial background on grounds that the assessment has no material association with the nature of pure discovery.  Validity Finance profiles insights into the decision. According to Validity, the court described the defendant's litigation agreement discovery motion as “palpably improper.”  New York’s Court of Appeals requires certain standards to be met to entertain and approve such discovery requests. In this instance, the court's decision of non-approval was brief, according to Validity’s assessment of the concern.  Click here to read more about the historic precedent.
Announcements Commercial Fundraising

Northleaf leads A$250 million senior secured credit facility for Omni Bridgeway

Northleaf Capital Partners (Northleaf) today announced that it acted as the lead arranger of a A$250 million senior secured credit facility for Omni Bridgeway (ASX: OBL), a global leader in financing and managing legal risks, with expertise in civil and common law legal and recovery systems. 

“Omni Bridgeway represents the fourth litigation finance platform with which we have partnered over the past 24 months,” said David Ross, Managing Director and Head of Private Credit at Northleaf. “These types of specialty finance assets provide our investors with portfolio diversification while generating consistent, stable cash flows and enhanced returns that are uncorrelated to the broader economy.” 

“We are delighted to partner with Omni Bridgeway, leveraging our specialty finance expertise to support the firm’s continued global growth,” added CJ Wei, Vice President at Northleaf. “Northleaf’s flexible investment approach allows us to provide senior debt as well as hybrid and equity capital to support leading specialty finance and financial technology businesses across consumer, commercial and other verticals.” 

“The Northleaf team brought the necessary capabilities to meet the evolving capital demands of our business as we transition into the next phase of our growth, making them the right partner for us in this transaction,” said Andrew Saker, Managing Director & CEO and Chief Strategy Officer – US at Omni Bridgeway. “This transaction creates significant benefits for our company and our customers.”

 Northleaf’s private credit program seeks to provide investors with diversified exposure to private credit investments globally, with a focus on floating rate loans to middle market companies and specialty finance platforms in North America, Europe and Australia. Northleaf invests across the capital structure, including first lien, unitranche, second lien, mezzanine and subordinated debt and equity structures. 

About Omni Bridgeway

Omni Bridgeway is the global leader in litigation financing and managing legal risk, with expertise in civil and common law legal and recovery systems. With international operations based in 20 locations, Omni Bridgeway offers dispute finance from case inception through to post-judgment enforcement and recovery.

Omni Bridgeway is listed on the Australian Securities Exchange (ASX: OBL) and includes dispute funders formerly known as IMF Bentham Limited, Bentham IMF and ROLAND ProzessFinanz, and a joint venture with IFC (Part of the World Bank). For more information visit www.omnibridgeway.com. 

About Northleaf Capital Partners

Northleaf Capital Partners is a global private markets investment firm with more than US$19 billion in private equity, private credit and infrastructure commitments under management on behalf of public, corporate and multi-employer pension plans, endowments, foundations, financial institutions and family offices. Northleaf’s team of more than 175 professionals, located in Toronto, Chicago, London, Los Angeles, Melbourne, Menlo Park, Montreal and New York, is focused exclusively on sourcing, evaluating and managing private markets investments globally. Its portfolio includes over 500 active investments in more than 40 countries, with a focus on mid-market companies and assets. For more information on Northleaf, please visit www.northleafcapital.com.