Trending Now

All Articles

3220 Articles
Commercial Regulatory Issues

Litigation Finance Catches on in Canada

Like many places in the world, Canada’s cost of litigation can be prohibitively high. Even meritorious claims may not be worth what it costs to pursue them—leaving good people victimized and the unscrupulous free from dissent. Enter third-party litigation funding. That’s when everything changes for Canadians seeking justice. MONDAQ explains that Canadians are beginning to see that help from litigation funders can go a long way to bridging the gap between those who can afford proper legal representation, and those who need assistance. In addition to helping individual plaintiffs or group claimants, litigation funding in Canada is also a tool used by savvy GC’s to limit legal spending and even monetize existing litigation assets. Canadian common law prevented the practice of third-party legal funding, believing it would enable meritless cases. Recently though, courts came to understand that justice is better served when more people have access to the legal system, and to good legal counsel. Court approval is not required for a funding agreement in either private commercial arbitration or litigation. In fact, third-party funding is business-as-usual in these types of cases. Litigation funding is also used to enforce judgments or to monetize claims without adding to legal budgets. Insolvency is another area where legal funding is making a difference. The Bluberi case affirmed that the CCAA does allow for monetizing assets to provide interim financing when needed. In a case involving Crystallex International, courts determined that arbitration financing was permissible—even necessary to successfully restructure an outstanding debt. As legal funding becomes the norm in Canada, knowledge of funders and funding agreements is more vital than ever. Knowing how to select and approach an experienced legal funder can make or break a case—especially one against a well-monied corporation or government. Indeed, funding should be considered by every commercial litigator.
Commercial

A Looming Potential Risk of ESG Investment

Bloomberg predicts that by 2025, nearly a third of assets under management will consist of ESG investments. Representing advances and social justice in environmental, social, and governmental systems, sustainable investments sound like a great idea for all concerned. But are they? Dentons suggests that wrapping up investments in festive ESG packaging may have the opposite of its intended impact. The FCA penned an open letter earlier this year on the topic, expressing concern over purported ESG investments that have little to no relevant impact on ESG causes. ESG credentials are one way investors decide where to put their money. If investors are told they’re making sound investments that advance ESG goals, they may have a legitimate grievance if this turns out not to be the case. One may ask—what if the investor makes money? Surely, investors wouldn’t bring a suit over a profitable investment? In truth, making money would not negate a claim of fraud if the ESG claims made were knowingly false or intentionally misleading. At the same time, if the value of the investment has increased, it might make more sense for investors to simply sell rather than go through the time and expense of filing a legal case. Recent developments in the LitFin space may increase the risk of investor lawsuits regarding ESG claims. The opt-out class action model in use in places like England and Wales makes cases about investment disclosures potentially lucrative. Such cases may make use of the ‘same interest’ requirement, if the same platform and information were used in the transactions. Even without a financial loss, investors may experience distress at having invested in something that was not presented properly. Such damages are rare in civil cases, but ESG investing is a growing topic that may lead to new thinking about how distress should be compensated.
Commercial Regulatory Issues

Judge Considers Acceptability of ATE Insurance as Security for Costs

After-the-event insurance is a common means of covering costs by both defendants and plaintiffs in litigation or arbitration cases. Often, such insurance can also be used as security for the defendant’s costs. Recently though, Deputy Master Nurse found in Addlesee and Ors v Dentons Europe LLP that not all ATE policies are suitable as providing security for costs. Stewarts Law explains that in this instance, there was a strong likelihood that the policy in question could not wholly be used as security for costs, and that only half of the policy value could be used as such. This decision necessitated that the litigation funder provide an additional GBP 1.3-1.6 million in security in case insurers determined that the claims were exaggerated—and therefore not pay the full amount. The scuffle over costs was one of many in a class action over a gold dust investment scheme advanced by the now-defunct Anubus Holdings Limited. The defendant, a legal advisor for Anubus, facilitated the scheme and endorsed it to investors. Claimants are funded by Managed Legal Solutions Limited, with an agreement for an undisclosed portion of any award. As is now common among defendants in class actions, Dentons applied for securities for costs against the funders because they aren’t able to order security against individual claimants in a class action. All this back and forth typically results in higher legal fees and costs passed down to claimants. A similar case previously ruled that ATE insurance could represent 66% of security for costs, rather than the 50% suggested in this case. This seems to hinge on contract language, specifically the word “exaggerated,” which is vague at best and arbitrary at worst. Suffice to say that going forward, the language used in ATE insurance policies will be more important than ever.
Case Developments Commercial

Insurance Comparison Site Facing Antitrust Complaint

More than 20 million potential claimants believe they overpaid on their homeowner’s insurance because of overt bias on a price comparison website. Augusta Ventures is backing the claim for an undisclosed percentage of any potential award. Law 360 explains that Home Insurance Consumer Action, the group formed to advance the claim, asserts that the website abused the “most favored nation” clause. These made expansion and challenges by competitors more difficult and restricted 30+ insurers from offering lower prices elsewhere. Kate Wellington, director of Home Insurance Consumer Action, affirms that such sites play a vital role in helping consumers make informed decisions. This site allegedly did the opposite, and rightfully should refund their customers. According to the claim, plaintiffs are owed damages regardless of where they purchased their insurance. Again we see the value in litigation funding helping homeowners who could otherwise never hope to seek compensation from Comparethemarket.com individually. The site has already been fined $24 million, but has stated its intention to appeal.
Case Developments Commercial

Kleiman v Wright Bitcoin Case Kept Alive by Litigation Funding

Can a marketing rep of average financial means successfully mount a civil case against a billionaire? A few decades ago, probably not. But now that third-party legal funding is on the scene, a complex civil suit is finally reaching the trial phase after years of delays. CoinGeek details that Kleiman sought funding for years before securing it. Evidence exists suggesting that Kleiman offered substantial interest in “the Bitcoin space” to potential funders in exchange for bankrolling the lawsuit on behalf of his late brother’s estate—a brother he describes as being the co-creator of Bitcoin. In his disclosure of interested parties in the case, Kleiman listed “BTCN 1610-491 LLC.” This implied that Kleiman obtained legal funding from either BTCN 1610-491 LLC or a related funder, Parabellum. Kleiman was not forthcoming about the specifics, but eventually, lawyers affirmed that BTCN 1610-491 LLC is owned by Parabellum—and that Parabellum was the funder of record on the case.   In the case itself, parties have agreed not to bring up the issue of litigation funding, so long as neither side puts the issue in question. At the same time, it’s been suggested that third-party funding prevents defendants from confronting their accusers. This may be even more true in the case of Wright—a well-known name in blockchain currency. One significant factor here is that if the case does not go Kleiman’s way, Wright may be able to recover his legal costs from the funders, according to Florida law. This happens in instances where funders allegedly maintain control over the claim in the form of “value-added” services that clients may utilize along with their funding. Given the length and complexity of the case, legal expenses on both sides are bound to be staggering.
Consumer

Legal Funder Accused of Misusing $10 Million

Litigation lending has a reputation for unscrupulous, or even predatory behavior. One such lender, KrunchCash, was recently accused of squandering a large investment, hiding relevant information, and using threats to intentionally amplify risk to that investment.

Law 360 details that a complaint filed in a Florida federal court alleges that KrunchCash, its subsidiary, and owner Jeffrey Hackman have repeatedly threatened investors with sabotaging the litigation they invested in. Over the course of two years, KrunchCash also allegedly hid recoveries and misappropriated funds.

Earlier this year, investor Pursuit Special Credit Opportunity Fund LP learned of the actions of KrunchCash and hired lawyers to protect its investment. By this time, KrunchCash was cash poor and had become a one-man operation. Jeffery Hackman, the suit alleges, had become secretive, aggressive, and unpredictable.

Pursuit invested more than $10 million that was intentionally put at risk of a complete loss. When Pursuit wanted to move funds into an escrow account—Hackman refused to do so, according to the complaint.

The claims in the case include breach of contract, unjust enrichment, breach of fiduciary duty, and constructive fraud. In addition to seeking $10 million in damages, Pursuit also seeks penalties under Blue Sky Laws—a Florida legal provision designed to protect investors from just this kind of misappropriation.

Consumer

Attorney Under Fire for Missing Oral Arguments Claims Sabotage by Opposition

Attorney Farva Jafri has been ordered to show cause as to why she should avoid disciplinary action for missing oral arguments in a recent case. The Seventh Circuit panel had ordered Farva to appear in court on the matter of costs. Farva did not. Law 360 explains that Farva, in her statement to the Seventh Circuit, asserted that counsel for Oasis Legal Finance and Gary Chodes (former CEO) had settled their issues and sought to end the appeal. She further claimed that attorneys for Oasis misrepresented a conversation in which they agreed to convey relevant details of the settlement on behalf of all involved. The court also pointed out that Jafri did file a motion to dismiss the appeal. But it was filed late Friday night—too late for the court to consider the motion. The court claimed the motion was also incomplete. Even though the dismissal was agreed to by both parties, it was missing vital signatures and did not address issues relating to costs. In an amended motion, Jafri explained that the parties agreed to settle with no payments of any kind. Instead of relaying that to the court during oral arguments, Jafri says opposing counsel made statements that were intentionally misleading and designed to paint her in a negative light. Opposing counsel also reversed its position on costs, saying that appellants should cover costs. According to the motion, Chodes accepted the agreement to forgo a request for fees. Jafri lives in New York and argued that it was not practical or necessary to fly to Chicago for an appeal that had already been dismissed. Barry Irwin, lead counsel for Oasis, agreed to convey this to the court at the oral arguments hearing. He did not, and has since asserted that Jafri’s assertions are inaccurate. Jafri characterized the actions of opposing counsel as a “sandbag.”
Commercial Regulatory Issues

Discovery of Funding Source Allowed by Court in Nunes Farms Libel Action

Recently, Magistrate Judge Mark Roberts released his decision in the NuStar Farms action, regarding discovery of the identity and terms of the third-party legal funder supporting the plaintiffs. Citing “unusual” circumstances in the case, Judge Roberts determined that disclosure was necessary in this instance. Reason details that the plaintiffs in the defamation case never hid the fact that they were using third-party legal funding. Thus far in the case, plaintiffs have only incurred $500 in charges. One plaintiff, Anthony Nunes III, also the corporate representative, is not even aware who is paying plaintiff lawyers. The circumstances in the case elevate the defense’s inquiry into funding from guesswork to a more concrete suggestion of potential conflict. As such, this case differs from say, a personal injury case, or a case where the defendant petitioning for disclosure cannot identify how funding could impact credibility. The question of malice is a vital factor in any defamation case. The government adopted a specific standard so as not to give public figures or politicians an unfair advantage over those they serve. In a defamation allegation, public figures are usually required to prove malicious intent. On that note, it's not yet known whether there has been collaboration between Congressman Nunes and the rest of his family. But the inquiry into the funder’s identity could establish coordination or a lack of it. Why is the identity of the funder even relevant here? If Anthony Nunes III does not know who is paying lawyers for the plaintiffs, this could mean that entities related to NuStar Farms have a financial interest in the case—and would therefore be relevant to an investigation of potential conflicts. Defendants also asserted that a witness in the case may be closely connected to the funders. That would create an obvious conflict of interest and should be disclosed to the court.
Commercial Legal Innovation

Hemp Vendor Apothio Launches Blockchain-Based ILO Token

Blockchain-based token offerings are finding their way into the Litigation Finance sector. Apothio, an Indiana grower and distributor of hemp, has launched the initial litigation offering in the hopes of raising $5 million. Law 360 reports that Apothio is suing California’s Department of Fish and Wildlife, alleging that it illegally destroyed hundreds of acres of farmlands during the hemp growing season. Those who invest in the blockchain tokens will earn revenue if the suit is successful—based on a multiplier of how many tokens are held, and for how long. This will be payable after contingency fees are paid to Roche Freedman. Tokens are being hosted on the Avalanche blockchain, currently being managed by Ava Labs. Investors on the Republic platform can buy into the ILO, which is governed by crowdfunding rules. According to Republic’s website, the litigation offering allows low-level investors to invest in assets, not unlike those a litigation funder would have in its portfolio. That said, single case funding is inherently more risky than portfolio funding. There is a pending motion to dismiss. If Apothio loses the motion, investors will get back 80% of their investment. If the case loses at trial, the investment is lost.