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Commercial

Litigation Finance Transaction Attorney One Sheet

Why should non-litigators be aware of litigation funding? Transaction attorneys are well positioned to glean knowledge of funding opportunities to better serve their clients and gain overall firm market share and partnerships.  Austin, Texas-based DealLawyers compiled a one sheet with tips for transaction attorneys as they navigate and educate their clients on litigation finance possibilities. Claims of all shapes and sizes should be considered monetizable assets. Litigation funding should be considered a tool to maximize asset potential, according to DealLawyers.  Universities are one such example of organizations naturally averse to public litigation, yet who can leverage funding opportunities to protect intellectual property rights. With a litigation funding investment’s clear differentiation from a traditional loan, clients of every size can benefit from zero capital investment, while sharing in the upside of only successful claims.  The EBITDA value is tremendous for traditional firms not privy to litigation finance. Most importantly, litigation funding investors are passive participants in proceedings. Clients and their respective attorneys are in complete control without a proverbial backseat driver.   Read DealLawyer’s one sheet provides an expanded view of the emerging litigation funding space, and opportunities non-litigators should consider as they look to expand their business.  
Commercial Legal Innovation

How Technology is Reshaping Litigation

The legal landscape has been slower than other industries to embrace technology. Yet e-discovery tools and contract-review software are finally opening the doors to enhanced legal tech. The third-party legal funding market is one industry that’s making use of available tech to predict outcomes, source cases, and clarify costs.

Canadian Law Review’s National Magazine’s new interview with Amanda Chaboryk, Disputes and Litigation Data Lead at Norton Rose Fulbright, talks about her role in advancing tech in law. Below are some notable comments from Chaboryk:

  • "In general, the last decade has seen a lot of changes in the law. We’ve seen increasingly innovative forms of alternative pricing arrangements and insurance products. So in the UK, success fee arrangements include conditional fee arrangements and damage based agreements—which of course are subject to certain conditions."
  • "Just as a whole, the insurance market has developed, with some insurers offering dispute resolution and after the event insurance solutions for both litigation and arbitration. The increase of risk transfer insurance and the sophistication of the market has just been huge for litigation funding and insuring cases as a whole."
  • "If I had to divide the case types into the most common, I would say meritorious claims for damages whether through court or contract—some will be brought by single claimants, some through group actions. The scope is very large, I’ve even seen now some funders funding defamation, divorce and personal injury claims. Years ago I wouldn’t have thought that was possible."
  • "In terms of data stewards, I’ve noticed over the past few years that sometimes law firms will hire consultants or people with different data-related skill sets—especially if you think about different sources of data that law firms have."
  • "Looking at a judgement or a decision—look at all the data points you can, as well as the causative actions and the data that was cited. There’s a lot of publicly available data, and that’s why tools like Lex Machina have been transformational."
Commercial Regulatory Issues

Litigation Finance in Arbitration: Current Trends

The mainstreaming of Litigation Finance is expected to continue long after COVID. The practice's use in arbitration has become increasingly common, despite an overall dearth of legislation to regulate it. Stockholm Chamber of Commerce Arbitration Institute details that while third-party legal funding is no longer a new industry, the number of cases in which parties disclose funding agreements is rising. In the early days of funding, such disclosures were left up to individual courts to order, or not. Another initial source of contention was the recoverability of costs paid to funders by clients. The question of whether funders should be limited in the fees and percentages they take remains largely unanswered today—as do questions surrounding security for costs in funded cases. Typically, third-party funding is not reason enough to order security for costs. As a rule, arbiters don’t have authority to identify, or request the identity, of a third-party funder. This led to the SCC encouraging disclosure of any parties with a financial interest in the outcome of a dispute. This includes not just funders, but parent companies and owners. Typically, claimants are offered funding for arbitrations, but in rare cases respondents can receive funding as well.
Commercial Deals

How Construction Litigation Funding Can Drive Returns

LF investors are looking to construction and engineering litigation in a bid to diversify earnings. WIth large scale development projects slated for many metropolitan areas, more construction litigation claims are expected in court.  Engineering News Record (ENR) reports that some LF construction portfolios expect to see a 10 to 1 return on investment. Burford is one such firm looking to invest big dollars in construction litigation, noting that construction claims are part of the industry's fabric.  Recently, there have been several LF construction case wins, such as investing $6M in a developer case that saw a settlement of $18M. Another success came by investing $2.1M in a roofing defamation case that saw a $14.5M award. As the real estate and construction LF market matures, large investments are being made in Canada, Australia and the United States. But not everyone is thrilled about the increasing potential of construction LF. Some point out that construction, real estate and engineering fields may become a target for unnecessary legal disputes that only seek to take advantage of once negotiable claims. Others counter that the LF market is too ripe to invest in shaky claims. The premise of LF is to seek quality claims for investment, as the antithesis would drive funders out of business. 
Announcements Commercial People Moves

Former NPR General Counsel and CEO of Texas Public Radio Joyce Slocum Joins Board of Directors of Validity Finance

Litigation funder Validity Finance has announced that Joyce D. Slocum, currently President and CEO of Texas Public Radio, has joined its board of directors. Ms. Slocum began her career practicing law with prominent law firms based in Dallas, Texas.  She soon moved into an in-house practice, spending almost 10 years at The Southland Corporation, and later serving for more than 14 years as general counsel and head of global legal and business affairs for HIT Entertainment.  She joined NPR as General Counsel in 2008, continuing in that role until being appointed Interim President and CEO in 2011.  She culminated her time at NPR as Chief Administrative Officer from 2012 through 2013. Slocum has served President and CEO of Texas Public Radio for eight years.  Shortly after assuming that role, she was elected to the NPR Board of Directors, including as the chair of its Audit Committee, which oversees the company’s litigation and risk management matters. “I have known Joyce for over 25 years, and have observed her business acumen and innovation in all of her many legal and management roles.  She brings to Validity a keen understanding of how in-house counsel view litigation strategy, planning and budgeting.  Her views will be a valuable complement to the perspective of retained counsel that Allen Fagin, former managing partner of Proskauer Rose, brings to the board,” said Validity CEO Ralph Sutton. “Litigation finance is a significant tool to help increase access to the courts for companies that seek to bring affirmative litigation, in addition to dealing with matters they are obligated to defend,” Ms. Slocum commented.  “The mitigation of risk and additional control over budget and timing of expense can be immensely helpful to in-house counsel in crafting and obtaining management buy-in to a strategic plan to protect a company’s assets. I’m pleased to join the Validity board because I believe their client-centric approach to the opportunities provided by this emerging industry will appeal to in-house practitioners.” Ms. Slocum’s appointment to the Validity board followed shortly after its announcement that it has raised a new managed fund of $70 million – the firm’s second “sidecar fund – alongside its permanent capital. In addition to Slocum and Fagin, Validity’s board is comprised of Jonathan Bilzin, Co-President, managing director of TowerBrook Capital Partners; Michael Carpenter, former chair/CEO of Citigroup Alternative Investments; Dewey Shay, CEO/founder, Unison Site Management; and Ralph Sutton, CEO, Validity Finance.
Commercial Regulatory Issues

Hong Kong Commission Recommends Outcome-Related Fee Structures

A long-awaited report from the Law Reform Commission of Hong Kong was published. On the topic of outcome-related fee structures in arbitration, it recommends that prohibitions on ORFSs be lifted. By allowing outcome-related fee structures, Hong Kong will align more closely with other global arbitration destinations. Burford Capital explains the specific recommendations of the commission, which reflect the growing acceptance of ORFSs around the globe. At present, lawyers cannot legally enter ORFSs for arbitration or litigation proceedings. According to the commission, there are restrictions on three specific types of arrangements that should be lifted:
  • CFAs. Conditional fee arrangements involve a lawyer and client agreeing on a success fee when a case ends in an outcome favorable to the client.
  • DBAs. Damages-based agreements occur when a lawyer only receives payment when they obtain a financial benefit for their client. That payment is typically calculated as a percentage of a settlement or award.
  • Hybrid DBAs. A hybrid damages-based agreement involves paying a fee (often discounted) for legal services, in addition to a percentage of any award or settlement.
It’s largely agreed that allowing for more fee structure options is beneficial for clients and legal firms.
Commercial

Litigation Finance as a Creative Bankruptcy Solution

Since the start of 2020, the pandemic has wrought havoc on the business world. According to S&P, 630 public companies have gone bankrupt, an increase from 578 in 2019.   Above the Law explains that the ravages of COVID happened simultaneously as Litigation Finance began mainstreaming. While traditional investments lagged, and financial turmoil ensued, third-party legal funding became the solution to an economy that was essentially stopped in its tracks. How does Litigation Finance help? When we talk about financing litigation, we aren’t just talking about class action lawsuits or conflicts between two distinct parties. In a bankruptcy situation, legal funding can enable recoveries, preserve assets, enforce judgments, and assure that ongoing claims are processed. In fact, there are many common situations where Litigation Finance can make a profound difference:
  • Increase Cash Reserves. For companies in distress, monetizing existing legal assets can increase cash reserves, offering a financial cushion.
  • DIP Financing. Sometimes, a company or estate’s most valuable assets are in the form of legal claims. In these instances, courts have been more open to approving funding agreements—finding that they best serve both debtors and creditors.
  • Financing Creditors. An estate may provide funding to creditors to pursue litigation. In some cases, funding agreements can also resolve claims between funders and debtors.
  • Sale of Legal Assets. An estate may sell off its stake in existing litigation like any other asset in the liquidation process. This may happen to accelerate impending recoveries, offset expenses, or reduce risk.
  • Liquidation or Litigation Trusts. Litigation trusts are sometimes used by unsecured creditors who may not benefit from bankruptcy proceedings. Such trusts allow for the confirmation of a plan to reorganize. Trusts may get seed funding or may rely on contingency agreements.
As more bankruptcy professionals become aware of the benefits of legal funding, its use and potential for adaptability will only increase.
Commercial

Questions You Should Be Asking ATE Insurers

The importance of finding the right funding partner when you need one the most is critical. Risk-sharing can be more important than ever in the current financial climate. With major legal funders exiting the market, some lawyers are getting nervous. Not all of the funding solutions presented seem palatable. Legal Futures details that alternatives to legal funding include potentially costly and unreliable deferments, and on-balance-sheet lending, which can be an increasingly large financial burden over time. Matthew Best, senior underwriter for Temple Legal Protection, recommends a CCA agreement option. The Consumer Credit Act is often thought of as adding complications to client/lawyer agreements. But many who work with law firms in the UK, find the process to be straightforward and fairly simple. Best suggests asking about five specific issues when speaking to an ATE insurance provider:
  • Will I have to obtain approval for disbursements?
  • Will approval be needed after a specific amount?
  • Will I be tied to a particular service provider?
  • Must I obtain approval to issue proceedings?
  • Is approval needed to reject a Part 36 offer?
Asking the right questions up front can help avoid stress and major headaches later on.
Commercial People Moves

LCM Ousts Executive Vice-Chair for Alleged Financial Misconduct

Nick Rowles-Davies, the former executive vice-chairman of LCM, has been dismissed by the company on the grounds of ‘gross misconduct.’ The alleged misconduct occurred in relation to expense claims. Global Legal Post details that CFO Mary Gangemi announced the removal in a statement to the London Stock Exchange. She stated that some expense claims were made that were not in accordance with LCM’s Global Expense Guidelines and Policy. Rowles-Davies has been removed from his board of directors position, effective immediately. Rowles-Davies is a highly respected member of the litigation funding community. His previous experience includes co-founder of Vannin Capital and managing director of Burford Capital. Currently, Rowles Davies serves as the chair of the Commercial Litigation Association, and on the board of CourtCorrect.