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Commercial Fundraising

Houston’s Armadillo Litigation Funding Banks $750M Investment 

Armadillo Litigation Funding proudly announced the realization of a $750M funding round. The Houston-based third party funder highlights that the investment is its largest series to date. Proceeds will be used to distribute loans to commercial enterprises, with a focus on mass tort portfolio investment. Armadillo’s preferred loan target is $10M - $100M, secured by future claim awards, settlements and miscellaneous contingencies.  Armadillo’s announcement shares insights from the firm’s Chairman and CEO, Nick Johnson. Mr. Johnson notes that Armadillo’s success in raising $750M is further indication of his team’s leadership position in the litigation finance industry. Johnson goes on to say that Armadillo has capitalized on carving out an exclusive niche in mass tort litigation, offering borrowers and investors alike exclusive access to the firm’s wealth of expertise. Over the last decade, industry metrics indicate the impressive growth of mass tort litigation. The last two years have seen the largest mass tort litigation awards in history. Armadillo’s new $750M investment signals further leadership in the sector, according to Mr. Johnson. 
Commercial

Gaston Kroub’s Inaugural LITFINCON Takeaways

Earlier this month, Houston hosted the inaugural LITFINCON conference. The gathering billed itself as the preeminent conference for the global litigation finance industry. Houston is an interesting location for the conference, as the success of hosting LITFINCON in Texas illustrates that litigation finance also thrives outside of New York and London.  AbovetheLaw.com published a LITFINCON debrief op-ed by Gaston Kroub of Kroub, Silbersher & Kolmykov PLLC.  Kroub offered a very positive review of LITFINCON’s organizational makeup and curated content lineup.  Kroub asserts the success of the inaugural conference is a humble achievement, for if the litigation finance space is to be successful, it will require investment in public awareness campaigns over the near and long terms. Kroub offered three takeaways from the conference, summarized below: 
  • Harnessing the power of human capital can be attributed to an ‘amazing’ pool of talent leading innovation in the litigation finance industry. Thought leaders in the space are not limited to intelligent lawyers, according to Kroub. From legal support staff to imaginative financial architects, the industry is powered by the quality of talented individuals. 
  • Relationship incubation will be the cornerstone of driving innovative efficiencies. Given the industry is expected to grow and evolve over time, creating relationships with key stakeholders will pay dividends down the road. 
  • Public awareness of litigation finance at the attorney and client levels are currently at the   embryonic stage. The successful litigation finance investor will be one who is able to lead public awareness in the space, which is why so many funders are attending conferences such as LitFinCon, and producing content online. 
Commercial Deals

Westfleet: 488% Litigation Portfolio Activity Increase 

Major activity in litigation finance investments, as various portfolio deals at $50M+ were recorded in 2021. The largest 200 law firms in the United States appear to be earmarking portfolio funds to take advantage of patent litigation matters, according to a new report. Patent litigation finance budgets increased 61% in 2021, with a total of 64% of capital associated with patent portfolio litigation.  The Westfleet Insider was recently published, offering the ‘2021 Litigation Finance Market Report,’ which notes a substantial increase in litigation investment deals sponsored by the largest law firms in the United States. AmLaw 200 firms saw a near 50% increase in litigation investments in 2021, compared to 2020’s figures. The average deal size in 2021 was $6.5M, encompassing an average single deal of $3.5M, and an average portfolio deal of $8.5M.  As an added bonus, we have made 15 highlights to Wesfleet’s report for your general reference.
Commercial Regulatory Issues

Podcast and Deck: Tax Aspects of Litigation Finance

Cadwalader, Wickersham and Taft LLP, sports a rich 225 year history, and is widely recognized as one of the pioneers in legal innovation. For example, Cadwalader won recognition for leading New York State in LIBOR regulatory contract legislation, receiving acknowledgement from the Financial Times North America in 2021. The Financial Times cited Cadwalader as one of the most innovative law firms in the category of “Creating new standards.”  Recently, Cadwalader’s Mark Howe sat down with Phil Balzafiore to discuss tax implications associated with litigation finance and what tax structures attorneys should consider whilst engaging litigation investment facilities. Howe and Balzafiore also discussed various third party funding products popular in the industry, highlighting potential tax consequences and considerations for risk mitigation.  A slide deck has also been published as a companion to the podcast. You can access the deck by clicking here.   
Commercial

The Attorney’s Guide to Mastering Litigation Finance

The worldwide litigation finance industry is experiencing a renaissance of sorts. With $12B+ in litigation assets under management in the United States, many experts forecast double digit growth in various third party litigation products and services. Mastering a working conceptualization of the evolving litigation finance ecosystem first requires a solid foundational understanding of the industry's architecture.  Lake Whillans’ new white paper aims to provide a contextual guide for legal professionals looking to ‘master’ litigation finance. The white paper explores various litigation investment scenarios, helping indicate the industry's flexibility in organizing a wide variety of product structures to meet various client needs. One key guiding principle to mastering litigation finance, according to Lake Whillans’ insights, is developing strong, robust and innovative litigation portfolio instruments. As an added bonus, we have made 67 highlights to the white paper for your added reference.    
Commercial Regulatory Issues

World Bank Group on Third Party Funding 

The World Bank hosted member states of the International Center for Settlement of Investment Disputes (ICSID), which approved a landmark set of rules meant to guide dispute resolution between international investors and State parties. David Malpass, President of the World Bank Group and Chair of the ICSID Administrative Council, signaled an appetite for streamlined systems that radically innovate international arbitration disputes. The World Bank hopes a new, evolved approach to litigation will cultivate international economic growth by expanding investment architectures.   The World Bank, for the first time in history, has issued guidance for third party funding as part of ICSID Conciliation Rules. We have organized the complete text concerning ICSID Conciliation Rule 12 titled “Notice of Third Party Funding” below:  Notice of Third-Party Funding  
  • A party shall file a written notice disclosing the name and address of any non-party from which the party, directly or indirectly, has received funds for the conciliation through a donation or grant, or in return for remuneration dependent on the outcome of the conciliation (“third-party funding”). If the non-party providing funding is a juridical person, the notice shall include the names of the persons and entities that own and control that juridical person.
  • A party shall file the notice referred to in paragraph (1) with the Secretary-General upon registration of the Request for conciliation, or immediately upon concluding a third-party funding arrangement after registration. The party shall immediately notify the Secretary-General of any changes to the information in the notice.
  • The Secretary-General shall transmit a notice of third-party funding and any notification of changes to the information in such notice to the parties, and to any conciliator proposed for appointment or appointed in a proceeding for purposes of completing the conciliator declaration required by Rule 16(3)(b).
 
Commercial Fundraising

Bloomberg Reports Litigation Finance Assets Reach $12.4B

Investments in litigation finance continue their forward momentum, according to a new report. Total third party funder assets under management reached $12.4B in 2021, up 10% from 2020. Additionally in 2021, 28% of litigation funding investment went to the top 200 law firms in the United States.     Bloomberg Law’s recent statistical data focusing on the litigation finance industry notes an investment of $2.8B in new litigation finance contracts in 2021. According to Bloomberg’s report, the largest law firm helped drive an 11% increase in third party finance industry growth, as compared to 2020’s metrics. Similarly, Bloomberg highlights that Big Law 200 firms gobbled up 41% of litigation finance investment in 2021. That is up 46% from 2020, according to Bloomberg.  Experts signal that a recessionary climate is the best climate for litigation funding to prosper over the near future. Bloomberg’s survey data captured self-reported facts and figures from 47 of the United State’s litigation finance investors and hedge funds, who are leaders in the space.
Commercial Regulatory Issues

Chief Justice of Ireland Discusses Litigation Investment Access 

Ireland’s population has experienced a long history of affordability challenges when accessing the Irish court system. The Chief Justice of Ireland’s Supreme Court has issued new guidance that hints at an open-minded approach to innovating third party funding facilities as tools in accessing the rule of law. This new perspective is a product of a conference held last year by the Chief Justice’s Working Group on Access to Justice.  Independent.ie reports that Chief Justice Mr. Donal O’Donnell has suggested that reforming access to third party funding and litigation investment is a top priority for Ireland’s regulatory innovation. Chief Justice O’Donnell appeared to signal a fresh approach to implementing improvements in facilitating access to justice. The Chief Justice urged a mindful approach to evolution in the industry, calling for careful inspection of regulatory innovation systems and processes now in place.   Scholars in Ireland also support broader access to litigation funding instruments in business, including insurance firms, bankruptcy managers, liquidators and trustees who seek innovative ways of boosting asset liquidity and the general bandwidth available to creditors.  
Case Developments Commercial

Canada’s Supreme Court Considers Advancing Award Costs 

Canada’s Supreme Court (SCC) issued historic guidance for First Nation Indian tribes, ruling that the Beaver Lake Nation’s “pressing needs” may include not having adequate capital for litigation. SCC’s ruling further includes a provision for Beaver Lake to qualify for advance costs to finance litigation fees as necessary. The SCC decision signals pathways to reconciliation between tribes and governments who potentially may stand to navigate complicated, lengthy negotiations and millions of dollars in litigation investment.  BLG.com reports that Beaver Lake questioned if the government of Canada along with the province of Alberta compromised the tribe's capacity to enjoy their traditional way of life. Various government factions of Canada are accused of pillaging Beaver Lake tribal lands with industrial resource projects that forever tarnished hunting and fishing ecosystems. Having already spent $3M on litigation fees, SCC estimates that Beaver Lake will need to invest $5M more in litigation costs for the trial.  The contentious question of whether Beaver Lake had adequate capital to fund litigation was first approached by a case management judge, who ruled the impoverished First Nation lacked adequate funds for quality litigation. Alberta’s Court of Appeal overruled the trial judge’s assessment. The SCC effectively ruled in favor of the case management judge’s assessment.