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Commercial Regulatory Issues

Fifth Circuit Rejects LitFin Challenge for Lack of Standing

Anyone seeking to challenge a litigation funding agreement got a severe message from the Fifth Circuit court in December. The message is: You’d better have standing. An opinion by Judge Jacques L Weiner Jr. explained that the appellant-debtor in In re Dean did not have standing to challenge a funding agreement that had already been approved by a Texas bankruptcy court. Omni Bridgeway explains that the Fifth Circuit ruled that the debtor would not be impacted, either directly, financially, or adversely, by the funding agreement. This means that the court utilized the ‘person-aggrieved’ test to determine if the creditor was legally able to appeal an order from a bankruptcy court. The Fifth Circuit opinion was unanimous, and was joined by Judge James C Ho and Judge James E Graves Jr. The Texas case began with a voluntary Chapter 7 filing in US Bankruptcy Court for the Northern District of Texas. Scott Seidel was appointed trustee, and saw that he did not have the funds to pursue claims on behalf of creditors. He then entered a litigation funding agreement with Reticulum Management LLC. When Dean challenged the funding agreement, Seidel explained that funding was the best alternative since he couldn’t find a law firm who would take the case on contingency. Dean’s challenge centered around the idea that the agreement would disrupt the legal order of payment to creditors—putting the funders first in line. Ultimately, the ruling is good news for funders in the bankruptcy space, and good news for anyone pursing avoidance actions, breach of duty matters, tax recoveries, and insurance disputes.
Commercial Legal Innovation

Burford Capital’s Chris Bogart: Litigation Funding Innovator

After a notable career with Time Warner, Chris Bogart co-founded Burford Capital, now the global leader in litigation finance. It began with a simple idea: develop a third-party funding company that finances firms and individual claimants in exchange for a share in any settlement or award. As a moneymaker for investors and a way to increase access to justice—it’s a win-win. Carrier Management details that Bogart’s time with media giant Time Warner gave him considerable insight into the challenges of corporate legal departments. While the company had ample funds, spending on a legal budget seemed counterproductive. After drafting a contingency fee agreement for the Time Warner / AOL merger, Bogart realized there had to be a better alternative to paying lawyers by the hour. Burford Capital debuted on the London Stock Exchange in 2009. In October 2020, Burford became the first legal funder to be listed on the New York Stock Exchange. Since Burford’s formation, the insurance industry has leveled endless criticism at the funding industry. It’s no wonder, since keeping insurers honest is a common focus of funded cases. Insurers have asserted that funded cases take longer to litigate, lead to higher awards and greater expenses—all of which become ‘social inflation.’ This is what insurers cite as a reason to raise premium prices, negatively impacting policyholders. Bogart responds to this kind of criticism with a reminder that both funders and insurers are equally interested in fairness and efficiency, since they both work in the same litigation ecosystem. Litigation Finance has come a long way from its humble beginnings in feudal France. Today, funding alleviates the disparity between haves and have-nots in litigation. No longer can big businesses drag out funded cases to drain their opponents' resources. Gone are the days when class action plaintiffs are forced into accepting lowball offers because they lack the funds to move forward.
Commercial Fundraising

Crowdfunded Litigation Catches on in Scotland

Nearly 78,000 people have donated in an effort to crowdfund cases in the Scottish courts. A study published in Edinburgh Law Review details that The People’s Action on Section 30 has raised the most money of any crowdfunding campaign in Scottish legal history. Dr. Andrew Tickell led the analysis. Scottish Legal News explains that Martin Keatings, a pro-independence activist, secured over GBP 68,000 from nearly ten thousand people for his case centered on a hypothetical independence referendum bill, and whether such a bill would be under the purview of Holyrood. This is not the first successful legal crowdfunding venture. In 2019, a fund of more than GBP 207,000 was amassed in an effort to challenge Boris Johnson on the lawfulness of his prorogation of Parliament. Dr. Tickell affirms that legal crowdfunding is a viable and accepted form of legal finance.
Consumer

How Litigation Funding Benefits a Personal Injury Plaintiff

Litigation funding for personal injury plaintiffs is increasingly common, due to the myriad benefits it affords those heading into a costly legal battle. However, funding isn’t just about the money. Legal Scoops details the main benefits of pursuing legal funding for personal injury plaintiffs:
  • Justice. One of the most valuable aspects of third-party legal funding is that it increases access to justice. Funders allow more people to access the legal system in a fairer and more equitable manner.
  • Protection for the public good. The credible threat of lawsuits for illegal or unethical behavior is bound to keep businesses and insurers honest. Without backing from funders, even plaintiffs with strong cases may fall victim to lowball settlements.
  • Managing Risk. Experienced funders can advise on legal strategy and tend to have more experience when it comes to litigation, insurers, experts, and may be better equipped to navigate your case type. At the same time, funders have no decision-making power in the cases they fund—so the plaintiff makes the calls.
  • Efficiency. Funders know how to reduce the time duration of cases and how to best minimize costs.
Third-party legal funding is an innovative way to pursue a personal injury matter, and may have even more benefits than pure financing.
Commercial Deals

L&F Acquisition Corp Defies Expectation with Acquisition Target

All eyes are on L&F Acquisition Corp, launched by former chair of Kirkland & Ellis, Jeff Hammes, and CEO of Keller Lenker, Adam Gerchen. It was assumed that the SPAC would focus on acquiring a legal tech firm, however, the pool of potential targets expanded to include companies focused on Governance, Risk, and Compliance. Law.com details that it was then that Gerchen and Hammes reached an agreement with ZeroFox to take the company public. The expected valuation is about $1.4 billion. The complex and ambitious deal will also include acquiring IDX—a data breach response and digital privacy protection firm. This will enable the company to offer solutions for privacy and protection from cyber-attacks. It’s been suggested that time is a key factor in this deal. A SPAC has only two years from inception to securing a deal—otherwise, it can face liquidation. Since no one wants to risk that, it makes sense to expand the options for acquisition. According to Scott Mozarsky, formerly of Bloomberg Law and Vannin Capital, getting a good deal done requires a willing buyer and seller—plus impeccable timing. Mozarsky suggests that Hammes and Gerchen could have focused solely on the legal market and come up with a deal—but seem to have stumbled into the existing deal instead.
Case Developments Commercial

Billionaire Leon Black Accuses Co-Founder of Malicious Smear Campaign

Is Josh Harris, co-founder of Apollo Global Management, engaged in a plot to take down his former partner? Leon Black thinks so. He’s currently fighting a civil claim from his former mistress, Guzel Ganieva, who has accused him of sexual assault. Black is adamant that she is extorting him and that the years-long affair was consensual. Fortune explains that Black has filed a countersuit against his former lover, saying that an unnamed litigation funder and an as-yet-unidentified public relations team have joined forces, specifically to malign him publicly. Allegations against Harris assert that he used a PR firm to spread misleading information about Black’s business relationship with criminal sexual predator Jeffrey Epstein. Black was cleared of wrongdoing by a review commissioned initiated by Apollo, and appointed Marc Rowan as CEO last year. This effectively left Harris in the cold, possibly spurring his alleged campaign of harassment. How likely is it that a litigation funder would engage in a coordinated effort to smear someone? Surely such a gamble could reflect poorly on everyone involved, regardless of the outcome. We will keep an eye on any further developments. 
Announcements Commercial Fundraising

LexShares Raises $100 Million Litigation Finance Fund

 LexShares, a tech-enabled leader in litigation finance, today announced the oversubscribed closing of LexShares Marketplace Fund II (LMFII), a $100 million fund dedicated to investments in commercial legal claims. LexShares’ deployment of the fund will be overseen by new chief executive officer, Cayse Llorens, who joined the firm’s senior leadership team in 2021.

Investment in the fund was led by Titan Advisors, a $4.5 billion alternative investments firm, with additional participation from several institutional investors and select family offices.

“We are excited about our participation in LexShares Marketplace Fund II and our relationship with LexShares,” said Rob Wilson, Titan Advisors’ Director of Insurance Dedicated Funds. “We feel LexShares’ increasing prominence in an industry with multi-decade growth potential supports the objectives we share with our investors. We believe in LexShares’ mission to use technology to source high-quality investment opportunities and, more broadly, to use capital to empower litigants with valid claims to fully access the promise of the civil justice system.”

The successful closing of LMFII follows another major milestone for the litigation funder. In 2021, LexShares received a majority investment from Brockhurst Capital Partners, a Chicago-based private equity firm focused on specialty finance. As part of the investment, Brockhurst’s founding partner, Mr. Llorens, was named LexShares’ CEO. An accomplished technology entrepreneur and investor, Mr. Llorens will guide the firm’s strategic direction while spearheading LexShares’ deployment of LMFII.

Before founding Brockhurst, Mr. Llorens was a venture capital investor at Invest Detroit Ventures, OCA Ventures, and Hyde Park Venture Partners. Previously, he led software engineering teams through the $240 million IPO of R1 RCM, the $1.8 billion acquisition of Coyote Logistics by UPS, and the $400 million acquisition of BSwift by Aetna. Mr. Llorens graduated summa cum laude in computer engineering from the University of Illinois Urbana-Champaign and earned his MBA with honors from the University of Chicago Booth School of Business.

Mr. Llorens joins the LexShares management team and board of directors alongside the firm’s co-founders, president Jay Greenberg and chief investment officer Max Volsky.

“Over the past eight years, LexShares has become one of the most active litigation funders in the market, using technology-driven insights to help our team source more than 140 investments,” said Mr. Llorens. “From the start, LexShares has sought to facilitate greater participation in the legal system while expanding access to a growing asset class. Backed by this fresh capital, we will continue to explore new applications of technology where it meets the law, strengthening LexShares’ position as a leader in the middle market of commercial litigation finance.” 

About LexShares

LexShares is a leading technology platform for litigation finance, with an innovative approach to originating and financing high-value commercial legal claims. LexShares funds litigation-related matters, primarily originated by its proprietary Diamond Mine software, through both its online marketplace and dedicated litigation finance funds. Founded in 2014, the company is privately owned with principal offices in Boston and New York. For more information, visit

lexshares.com.

About LexShares Marketplace Fund II

LexShares Marketplace Fund II (LMFII) is the company’s second discretionary fund dedicated to providing access to a portfolio of litigation-related assets. LMFII has retained Seward & Kissel LLP as its legal counsel, BDO USA, LLP for tax and auditing services, and SS&C Technologies Inc. as its fund administrator.

This release may contain “forward looking statements” which are not guaranteed. Investment opportunities posted on LexShares are offered by WealthForge Securities, LLC, a registered broker-dealer and member FINRA / SIPC. LexShares and WealthForge are separate entities. Investment opportunities offered by LexShares are “private placements'' of securities that are not publicly traded, are not able to be voluntarily redeemed or sold, and are intended for investors who do not need a liquid investment. Investments in legal claims are speculative, carry a high degree of risk and may result in loss of entire investment.

Commercial

Maximizing Global Litigation Portfolios

Burford Capital is a worldwide leader in legal asset management and litigation finance. With a footprint in New York, Hong Kong, Singapore, Sydney and Washington, Buford’s legacy is pegged to innovating law structures and philosophies.  The Buford Quarterly recently profiled thoughts and ideas focused on maximizing litigation finance portfolios. Buford’s Craig Batchelor directs the firm’s investment underwriting risk. Batchelor further outlines some strategies for accelerating legal capital via litigation funding.  Here are some key takeaways from Batchelor’s findings: 
  • Litigation finance portfolio management is not understood by most. Therefore, experts must teach and learn from global thought leaders on litigation finance portfolio management structures. 
  • Data should be engaged to assess how litigation assets may appreciate over time, via clever execution of portfolio planning.
  • Prioritization of litigation assets is best focused on winning at the beginning, for exponential legacy portfolio returns. 
  • Mergers, acquisitions and competition based litigation funding is currently undervalued, according to Batchelor. 
Check out the Buford Quarterly to learn more on litigation finance portfolio management.   
Commercial

New Woodsford Guide, Litigation Funding 2022

Woodsford released a new guide titled, “Litigation Funding 2022.” The guide explores the practice of law across 23 jurisdictions worldwide. This is the sixth Litigation Funding edition by Woodsford.   Woodsford’s guide covers global jurisdictions from Spain, Sweden, Japan and India, as litigation funding across the planet continues to mature. Australia’s government is exhibiting some legislative pushback to litigation investors, something Woodsford teases as an, “attack on the access to justice.” Broadly, Woodsford reports that litigation funding is being embraced through innovation. One such example is that the British Virgin Islands approved it’s first litigation funding agreement back in 2020. Similarly, the Cayman Islands enacted the Private Funding Legal Services Act in 2021, which is considered a major achievement for the Caymans. Likewise, Singapore’s International Commercial Court has approved its own third party funding framework.  In New York there is resounding support for litigation funders, service providers and their investors. Experts are hailing third party funding as a mechanism to level the playing field and create new channels for justice to prosper.  Woodsford profiles ligaition finance as a significant contributor to the legal fabric of the world. Check out Woodsford’s complete guide to learn more.