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Validity Finance Expands to Washington, D.C., Bringing Aboard International Disputes Litigator Nicole Silver from Greenberg Traurig

Leading litigation funder Validity Finance announced it has expanded to Washington, DC, adding prominent international disputes lawyer Nicole Silver as investment manager. She was previously a shareholder with Greenberg Traurig in Washington, representing governments and corporate clients in international arbitration proceedings, as well as in complex civil litigation, white-collar defense and internal investigations.

Further burnishing its DC bona fides, Validity added renowned Washington litigator and law firm leader Bert Rein as a senior advisor. One of the country’s top antitrust and commercial litigators, Mr. Rein is founding partner of national law firm Wiley Rein and an expert on international law. He’s been recognized as Washington’s “leading food and drug lawyer” and a “visionary” by American Lawyer. In his new advisory role, he’ll assist Validity in furthering connections with major law firms and potential clients.

Validity’s Washington presence adds to the firm’s existing U.S. offices in New York, Houston and Chicago, along with operations in Tel Aviv.

“Washington adds an important piece to our growth strategy, both as a business and technology hub that includes Northern Virginia and Maryland and for its proximity to federal courts, government enforcement agencies and especially key venues for international disputes,” said Validity CEO Ralph Sutton. That includes ICSID, the World Bank unit that oversees cross-border investor disputes. Mr. Sutton brings his own acumen in cross-border disputes, having helped draft the ICCA-Queen Mary guidelines for funding international arbitration in 2018.

“We’re excited to enter the DC market with Nicole Silver, who has counseled sovereign governments and private parties in high-stakes international arbitration proceedings, including many matters before ICSID and the Permanent Court of Arbitration,” Mr. Sutton added; he noted that Ms. Silver, who has particular experience in Latin America, has handled disputes in such sectors as energy, telecom, infrastructure and natural resources. “Nicole’s success directing complex, often yearslong disputes involving hundreds of millions of dollars in claims will be instrumental in helping lead due diligence and case assessment on our growing book of arbitration financings.”

Ms. Silver has consistently been ranked among Latinnvex’s “Top 100 Female Lawyers” and names one of Latin Lawyer’s top choices for arbitration. Admitted to practice in New York and the District of Columbia, she served as director of the Programming, Investment and Finance Committee of the D.C. Bar (2017-18). She received her J.D. from Vanderbilt and holds an A.B. from Princeton.

Speaking of Validity’s newest senior advisor, Mr. Sutton said, “Bert Rein is a legend in Washington legal circles, having turned Wiley Rein into a national litigation powerhouse across many areas of practice including bankruptcy, employment, insurance defense, intellectual property and others. Bert’s own success is exemplary, including his extensive work in international disputes. Having him join our advisory team will help us advance Validity’s visibility in Washington through his peerless connections and experience in high-stakes litigation.”

Mr. Rein’s career began as a law clerk to former Supreme Court Justice John M. Harlan, after which he held various roles in the Department of State and served as director of the Chamber of Commerce and as a litigator at Kirkland & Ellis before co-founding Wiley Rein in 1983. About Validity Validity is a commercial litigation finance company that provides non-recourse investments for a wide variety of commercial disputes. Validity’s mission is to make a meaningful difference in our clients’ experience of the legal system. We focus on fairness, innovation, and clarity. For more, visit www.validityfinance.com

Commercial Regulatory Issues

Directors Who Manipulate ESG

As “green values” are still being defined by corporations around the world, public attention is playing a major role in holding corporations accountable for mistreating ESG investment(s). In the United Kingdom, many are calling for directors to be held personally responsible for misapplication of ESG funds. Especially when a company goes into insolvency and there is no capital left due to mismanagement and misappropriation.  Stewarts Law LLP recently debated standard logic, arguing that directors who knowingly engage ESG abuses to inflate returns may face consequences. Stewarts suggests that directors who operate in such a manner could be ‘on the hook’ for ESG fraud by deceiving shareholders and customers alike.  One such example is ClientEarth, a non-governmental organization which is a shareholder of Royal Dutch Shell PLC. ClientEarth is exploring a potential ESG claim against Shell’s board of directors. To help address this problematic scenario, the United Kingdom has issued financial disclosure recommendations sponsored by the Taskforce for Climate-related Disclosures.   Whatever the case maybe, Stewarts suggests that directors can expect growing scrutiny on ESG investment disclosures in the future. Furthermore, Stewarts recommends that directorships prevent personal liability by well-funded claimants looking to claw back investment dollars lost due to ESG classification. 
Commercial

The Story of Legalist 

Managing over $665M in assets, Legalist Inc. is focused on becoming one of the leading litigation finance firms in America. Legalist has raised nearly $400M over the past six month, according to the Wall Street Journal. Eva Shang is a Harvard dropout and one of Legalist’s co-founders.  The Wall Street Journal reports that in 2016, then 20-year old Ms. Shang had a hard time raising capital to fund Legalist. Eventually, Ms. Shang and her co-founder, Christian Haigh, raised a $100,000 grant from Peter Thiel and a $1.5M investment from Y Combinator to get Legalist off the ground. Today, managing well over a half billion dollars, Legalist’s strategy focuses on three verticals: litigation finance, bankruptcy and government receivables.   WSJ profiles Ms. Shang as a standout, successful young female entrepreneur leading one of the most interesting litigation investment firms in business.
Commercial Regulatory Issues

Utah to Require Litigation Investment Disclosure(s) 

Utah legislators have enacted a new law for commercial lenders, who are now required to file loan details with the state. Commercial litigation funders are included in the Utah legislation, but only when lending amounts lower than $1M. New York and California have issued similar legislative guidelines in recent months as state governments look to coordinate safeguards for the lower tier of the marketplace.  Mondaq.com published insights from Manatt, Phelps & Phillips LLP on Utah’s commercial lending guidelines. Below, we have generated a list of requirements lenders will be forced to disclose:  
  • The total amount of funds provided.
  • The total amount of funds disbursed to the borrower, if less than the amount provided.
  • The total amount to be paid to the commercial lender.
  • The total dollar cost of the transaction.
  • The manner, frequency and amount of each payment or, if the amount of each payment may vary, “the manner, frequency, and estimated amount of the initial payment.”
  • A statement of whether there are any costs or discounts associated with prepayment of the commercial loan, including a reference to the section of the agreement that creates such cost or discount.
  • If any portion of the borrower's loan was paid to a broker rather than to the borrower, the amount paid to the broker must be disclosed.
  • A description of the methodology that will be used to calculate any variable payment amount and the circumstances that may cause variations in the payment amount.
Commercial Deals

Naples Global and LegalPay to Fund Board Dispute Litigation 

United States hedge fund Naples Global LLC has teamed up with India’s litigation investor, LegalPay, to launch a $5M fund that will support executives pursuing disputes with their board of directors. The fund aims to level the playing field as first generation founders navigate the perils of entrepreneurship. Naples Global says the new investment in India signals the firm’s approach to expanding international opportunities.  Inc42.com reports that many founders in India find themselves between a rock and a hard place, often saddled with problems related to balancing relationships financially. These relationships can lead to disputes with the board of directors. Naples and LegalPay’s new fund aims to help ease the burdens entrepreneurs face in board dispute situations. The fund will be awarded a percentage of successful litigation proceeds.  Inc42.com says that the fund was organized to meet the needs of the market in India. An uptick of cases between founders and board members prompted Naples Global’s partnership with LegalPay. 
Commercial Deals

Validity Finance on Patent Litigation Investment  

Validity Finance released new insights into how the firm evaluates patent claim investment. The firm receives hundreds of cases for review each year, and only selects around 10% for funding.  With significant risk associated with patent litigation, Validity shares some characteristics that make a patent claim attractive for investment.  Validity says that the firm looks at all angles of a case, scrutinizing the most minute details. The  implications of small case elements can play a big role in the outcome of litigation. When pitching a case for review, Validity underscores the importance of inventors being fair and honest. Without honesty, Validity will have good reason to reject the case.   Below are seven points Validity finds meaningful when considering a patent litigation investment: 
  1. How well developed is the patent’s infringement argument?
  2. How compelling is the inventor's story behind her/his invention?  
  3. How well can the investor explain technology behind the patent? 
  4. How well defined is the litigation strategy? 
  5. How reasonable is the inventor’s patent damage forecast? 
  6. Does the litigation investment budget necessary meet equitable investment benchmarks?
  7. How candid is the inventor specific to weak links in the merit of their claim?    
Commercial Regulatory Issues

CFO.com Discusses Litigation Investment and Corporate Recovery  

Generally accepted accounting principles (GAAP) call for litigation expenses to be accounted for during month/quarter of incurrence. Similarly, GAAP holds future recoveries vacant on the balance sheet until award(s) are recovered, oftentimes years in the future. For companies self funding meritorious litigation, application of GAAP may produce a balance sheet that undervalues the firm’s worth. CFO.com suggests that maneuvering costs off balance sheet via litigation finance products and services is potentially a smart idea.   CFO.com reports that with the bespoke nature of litigation investment agreements, chief financial officers are able to arrange scenarios to meet cash flow constraints. Corporate recovery, or affirmative action, can be a useful strategy for companies who develop a portfolio of pursuable claims.  According to CFO.com, litigation finance allows firms to effectively boost net income line items on the balance sheet. More importantly, utilization of litigation investment vehicles drive the ability to pursue claims that normally would be avoided due to cost restrictions.  While firms are raising capital, exploring a merger/acquisition or in the process of going public, CFO.com underscores value in engaging ligation finance tools to maximize valuation.
Case Developments Commercial

Delaware’s Chief Judge Issues Third-Party Funding Standing Order 

A standing order has been issued by Delaware’s Chief Judge, the Honorable Colm F. Connolly, calling for all cases under his supervision that engage third party investment to submit specific agreement details to his bench within the next 45 days. Judge Connolly defines third party funding as any agreement that has been organized on a non-recourse basis in exchange for a share of damage award proceeds.  The order states that Judge Connolly is requiring notice of the third party funder’s identity, address and place of formation (if a legal entity). Judge Connolly is also requiring any information concerning whether funders have a stake in determining the outcome of a case under his supervision. Similarly, Judge Connolly is seeking disclosure concerning the nature of the funding agreement, specific to monetary arrangement.  In other news, Litigation Finance Journal recently reported that Delaware’s Supreme Court issued guidance that allows litigation funding agreements to begin to include provisions for the losing parties’ financial responsibility in covering some (if not all) of the case costs.
Commercial

Information Asymmetry and Litigation Investment Returns 

The Journal of Alternative Investments has released its Spring 2022 issue (Volume 24, Issue 4), profiling legal scholars Thomas Healey, Michael B. McDonald and Thea S. Haley’s take on third party litigation investment returns (Pages 110-122). In their concluding remarks, the authors suggest the marketplace may be overcoming information asymmetry. Furthermore, the authors debate principles of third party litigation investment returns (ROI), which may correlate with general awareness of the ecosystem. ESG seemingly has the potential to help solidify litigation investment’s core application(s) in the future.  The authors note significant foundational frameworks have been constructed to support the blossoming of litigation finance. Barriers to acceptance of litigation finance products and services potentially reside with the embryonic nature of the space. The authors state that potential opportunities reside in offering diversified investment structures to litigation finance agreements. Similarly, engaging technology (via online platforms, or similar) may hold significant opportunities for litigation investors with the mission of attracting broader market penetration.  Check here to read the Journal of Alternative Investments’ full take on the matter.