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Commercial Special Features

Key Takeaways from the LFJ Podcast with Mani Walia of Siltstone Capital

On the latest episode of the LFJ Podcast, we spoke with Mani Walia, Managing Director, General Counsel and Chief Compliance Officer and Siltstone Capital. Siltstone is a Houston-based alternative investment firm that invests in litigation finance claims, focusing on $500,000 to $5 million funding requests. Siltstone is also producing LitFinCon, the inaugural litigation finance conference in the Houston area, set to take place on March 2nd and 3rd of 2022. Below are some key takeaways from the discussion: Re: Siltstone's focus areas Siltstone was founded nearly ten years ago in 2013 by a group of entrepreneurial, energy focused investors. Our team being entrepreneurial, was able to recruit folks with a very interesting set of backgrounds—not just energy sophistication on the nitty gritty of energy assets, but a legal team that understood that there might be value in claims. Through the course of our energy work, we discovered that there may be times that we have to evaluate cases and see if there is any merit to a potential case. And that’s where my addition to the team was something that shaped how we look at things. I have a litigation background and am honored to have learned how to case pick from one of the premiere litigation firms in the country. We had the impetus to start a litigation finance fund focused on energy because of the unique skills set that our team displays. So these two strategies are distinct, they have different bases and stakeholders—but there’s overlap. Re: Limited Partners and Structuring of Funds I’ll note that our funds are separate, so we have a set of funds that are tailored to the energy investor, and then a separate set of funds for those who might want exposure to litigation finance. We’re proud to have successfully closed our second such litigation finance fund in December of last year, 2021. Some folks want a little exposure in both areas, in particular because of the uniqueness of our team—the energy expertise and the focusing on finding value in energy litigation. Re: Types of Claims: Jurisdiction, Single case v Portfolio, Sizes? First, we’re really proud to have entered into a very collegial space. Most of the litigation finance brethren that we have have helped pave the way for entities like us. We’re guided by our experience, so we enjoy a laser-like focus with helping provide solutions only in the commercial context. We haven’t ventured outside into consumer finance or injury cases. We also, for the same reasons, enjoy funding patent infringement cases. Earlier in my career, I tried patent infringement cases and by actively litigating a case or subject matter you really develop the ability to understand what makes a case meritorious or advantageous or what makes the case not good. So those are the two sub-focuses in our commercial lending. We enjoy looking at single case risk or portfolio funding. Q: On ESG Investing & Access to Justice At the end of the day, the job of a funder is to make sure there’s access to justice for somebody who thinks he or she should have a day in court. Embedded in that is an inherent ESG leveling-the-playing-field thought process. Learn more about Siltstone's upcoming event, LitFinCon (the inaugural litigation finance conference in the Houston area), here.
Commercial Regulatory Issues

Developing Law and Litigation Funding in Israel

Courts have established a welcoming environment for third-party legal funding in Israel. Individual issues still remain vague, as no comprehensive rulings governing funding have been issued. Still, courts have responded positively to funding, which led to rapid growth in both liquidation and general litigation. Woodsford Litigation Funding details the most important developments in the Israeli markets. It speaks to funding being an accepted part of the legal landscape. Over the last five years in particular, TPLF has grown rapidly. Here are some key takeaways from the evolution of the funding landscape in Israel:
  • There are no set limits on how much fees or interest funders may charge.
  • Court approval is required for funding agreements in liquidation matters.
  • There are no specific legal provisions governing third-party funding.
  • TPLF ethics are guided by the Bar Association Rules, which do not include specific guidelines for lawyers advising clients on litigation funding.
  • No public bodies are currently responsible for oversight of funders.
  • Under Israeli law, there is no prohibition on funders having a say in the litigation process, strategy, or settlement decisions.
  • Class actions have been legally permitted in Israel since 2006.
  • Civil Procedure Regulations hold that only parties involved in litigation may be liable for adverse costs. This does not include third-party funders.
  • ATE insurance, while not prohibited, is not commonly used.
  • Except in liquidation matters, disclosure of TPLF is not automatically required. In some instances though, courts may compel disclosure.
  • Funders do not enjoy privilege protections the way client and lawyer communications do.
For a more comprehensive overview of the litigation funding sector in Israel, check out Woodsford's detailed report. 
Case Developments Commercial

Did Quinn Emanuel Urge Betrayal in Leon Black RICO Case?

A former model sued Leon Black, the founder of Apollo Global Management, alleging sexual assault. According to a brief filed last Monday, Wigdor, the firm that represents ex-model Guzel Ganieva, was approached with a deal to betray its client. Reuters chronicles that Black sued Wigdor and Ganieva in Manhattan federal court. Black asserts that the sexual assault accusation is part of a racketeering conspiracy to ruin his name. He also accuses an unidentified litigation funder. Wigdor, in turn, claimed that the racketeering accusation is improper and that the suit is a clear effort to retaliate against the firm representing Black’s accuser. Wigdor is demanding sanctions against Black and his counsel, Quinn Emanuel. The recent filing alleges that a partner at Quinn Emanuel, Michael Carlinsky, offered Wigdor’s counsel a chance to have the racketeering charge dropped in exchange for information on Josh Harris—believed by Black to be a co-conspirator. This deal, if accepted, would have required Wigdor to turn against its own client. Wigdor revealed details of the conversation with opposing counsel only after Black’s lawyers disclosed them first, in a brief opposing sanctions under Rule 11. Still, Carlinsky disputed the contents of the filing, saying the discussion was off the record—perhaps forgetting that off-the-record conversations are not immune from consequences if they involve illegal activity. Black is no longer represented by Quinn Emanuel in the suit against Wigdor and Ganieva. They did not offer a reason for this decision. A Wigdor representative asserted that the firm may be attempting to extricate itself from initial accusations against Wigdor for racketeering. Meanwhile, Josh Harris may be the mysterious unnamed funder of the sexual assault lawsuit. He is believed to have a grudge against Black after being passed over for promotion by his former mentor. Harris denies involvement and denies knowing Ganieva. 
Commercial

Litigation Finance Fine Tunes How Legal Claims are Pursued

Despite the benefits being obvious, debate continues as to whether Litigation Finance is a net positive for the legal system. Some say that easy access to lawsuit funding may result in frivolous, docket-clogging litigation. But is that accurate? Validity Finance clarifies that litigation funding has an array of benefits, some of which can occur before a case even begins. It may seem natural to presume that an increase in available funding will result in an increase in litigation. But that’s not necessarily the case. Just the prospect of plaintiffs being funded can be enough to sway potential defendants toward restitution. Funded plaintiffs can’t be dismissed or strong-armed, the way financially strapped claimants can. Litigation funding may actually deter companies from committing breaches or other offenses. Knowing they can be held accountable will increase corporate honesty and encourage good behavior. Funders apply careful vetting to cases, and nobody wants to fund a case that lacks merit. This is in direct conflict with the assertion that funding will result in “frivolous” legal actions. Realistically, the opposite is true. Funders contribute to fewer frivolous cases moving forward. Funded cases give claimants an opportunity to hire expert legal counsel, find solid experts, and conduct the necessary research. This leads to a more truthful and fair proceeding and better access to justice. While some have suggested that legal funding contributes to the cost of legal services, the evidence suggests otherwise. Funders increase price competition. Partial contingency and other alternative fee agreements serve to lower the cost of legal fees as firms compete to offer the best options to clients. Litigation Finance is a simple concept that allows risk to be taken on by the parties who are best able to bear it—while providing societal benefits and financial incentives to do so. This in turn increases access to justice.
Commercial Regulatory Issues

District of New Jersey Litigation Funding Transparency Rule 7.1.1

It’s been nearly seven months since District of New Jersey Local Rule 7.1.1 came into effect. The rule requires disclosure of the existence of third-party litigation funding within 30 days of filing a case. This includes the identity of the funder, a description of the funding agreement (but not the full agreement itself), and a statement regarding whether funder approval is necessary for strategy or settlement decisions. Lexology details that two states and about one-quarter of federal district courts require disclosure of third-party funding. Some proponents of litigation funding suggest that disclosure requirements serve no valid purpose, and may be weaponized against funded plaintiffs. While that concern is valid, so far it doesn’t appear that Rule 7.1.1 is being used punitively, or as a strategy to force settlements. At least not yet. The rule hasn’t even been in place for a year. Why was Rule 7.1.1 adopted at all? It’s been suggested that the rule is a reaction to a ruling in Valsartan N-Nitrosodimethylamine (NDMA) Contamination Products Liability Litigation, 405 F. Supp.3d 612 (D.N.J. 2019). The ruling rejected the idea that judicial trends were leaning toward disclosure of third-party funding. The Valsartan ruling negated multiple other rulings that ordered disclosure of TPLF. The ruling caused outrage among federal judges in the district. This, in turn, occasioned them to draft a local rule that would apply to all cases in the district—effectively using a legislative solution to overcome what some saw as a bad decision on the part of a single judge. In that context, it’s unsurprising that many in the funding community find Rule 7.1.1 to be arbitrary and unnecessary. Indeed, it was a response to a single ruling in one case—albeit one with a ripple effect.
Consumer

ATR Incensed by “Judicial Hellholes”

The American Tort Reform Foundation has recently published a list of jurisdictions that are innovating and expanding protections for the public good. The trouble is, ATR dramatically refers to these enlightened jurisdictions as “judicial hellholes.”  JD Supra details that ATR lists eight “hellholes” to avoid for high verdicts, litigation-finance-friendly rulings, or open-door policies. California, apparently, is number one because a court held e-commerce companies strictly liable for items sold on their sites. Also, the AG took a more expansive view of laws meant to curb public nuisance. New York makes the list because of the large number of ADA and asbestos lawsuits. South Carolina and several Illinois counties also make the list for their stance on asbestos litigation. ATR also maligns what it refers to as a “plaintiff-friendly” atmosphere. The city of St Louis makes the list as a venue known for large “excessive” verdicts. It seems clear that ATR displays a clear bias toward defendants that include alleged polluters, unscrupulous insurers, and those who fail to make legally-mandated accommodations for the disabled. As one might expect, the 2022 “Hellhole watchlist” includes dire warnings about the spread of litigation funding.
Commercial

Leveling the Playing Field with Litigation Funding

Why has Litigation Finance taken off in recent years? There are many contributing factors. The rising costs of litigation certainly play a part in the popularity of third-party funding. The COVID pandemic led to disputes as insurers and corporates battle in lawsuits involving breach, insolvency, and business disruption. The innovation happening in the legal funding landscape has made the practice more versatile than ever. Increasingly welcoming legislation has helped refine TPLF and increase consistency across jurisdictions. Lawyer Monthly details that the benefits of Litigation Funding are myriad. Its use reduces the strain on litigants because the financial risk immediately shifts to the funder. The non-recourse nature of legal funding means companies and individuals alike can take on meritorious litigation without risking their existing capital. Funders investigate cases thoroughly, evaluating them for merit before offering a funding agreement. This ensures that the case is a strong investment while signaling to the opposition that the case is supported and believed to be meritorious. This alone may be enough to convince a defendant to put a reasonable settlement offer on the table. Some data suggests that as many as 80% of cases settle before trial. Hundreds of years ago, it was alleged that champerty and the concept of non-participants funding a legal action were not in the public interest. Modern rule of law disputes this. Gradually, countries around the globe have abolished champerty and maintenance prohibitions, and continue to introduce laws that recognize the value and necessity of legal funding. It’s well established that a society of laws that restrict runaway governments, offer basic civil rights, and punish criminals performs more optimally than societies that don’t. With that in mind, increasing the chances that wrongdoers will face appropriate consequences is a net gain for society. By allowing meritorious cases to proceed regardless of the finances of the plaintiff, litigation funding does exactly that.
Commercial

New Burford Q1/22 Quarterly

Buford’s new quarterly for the first quarter of 2022 has been published. Flush with global uncertainty from the evolving pandemic, Burford’s quarterly aims to explore litigation finance growth opportunities.   Downloading a copy of the quarterly will provide concept blueprints that explore value generations powering 2022 litigation finance. The quarterly expands upon enterprise building techniques, and expert contributors digest upcoming challenges which many will face across the global industry. Here are some topics that Burford’s Q1/22 Quarterly Covers: 
  • Best practices for delivering effective diversity campaigns in litigation finance.
  • Worldwide antitrust competition insights.
  • Asset recovery trends. 
  • International arbitration trends. 
  • Patent and IP litigation trends. 
  • Insolvency and bankruptcy trends. 
Burford issued 30 highlights to the quarterly, containing some interesting points that stand out.
Commercial Regulatory Issues

Aussie Funders Want to “Save Class Actions”

There is a third party funding battle playing out in Australia. The argument Omni Bridgeway, Vannin Capital, ICP, Litigation Lending and Balance Legal Capital are making Is that the Australian government’s proposed 30% cap on litigation investment compensation is egregious.  SaveClassActions.com.au is the fund created to “Save Class Actions” in Australia. The 30% litigation funding cap has yet to receive a robust review by the Australian Parliament. Proponents of the cap tease a design to give courts more power to oversee class action award distribution.  Save Class Actions has an entirely different outlook. SaveClassActions.com.au is a modern, media rich campaign to safeguard Australian litigation finance innovation, according to the site.  As this ongoing debate develops, we will continue reporting on the unfolding ligation finance developments out of Australia.