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Commercial Deals

Frozen Accounts Seek Litigation Funding

Business professionals sometimes find themselves in a situation where their operating account has been frozen due to an unforgiving legal circumstance. Evolving past this scenario can be painful, especially with no access to capital.  The Canadian publication Alllaboutestates.ca, shares that litigation funding is a smart decision when funds are tied up, regardless of the reason. For example, estate litigation often yields situations where property and other assets are haggled over before the ultimate decision of ownership is reached.  With competing claims on capital or property, whoever feels they are the rightful owner may find his or herself with no cash on hand to take sophisticated legal action. Claims of fraud are one such instance, according to the report. Other scenarios include multiple parties claiming various percentages of a pot of money. What is the most efficient way to litigate success in such instances? Alllaboutestates.ca highlights that litigation funding is emerging as a strong option in various instances when accounts/assets are frozen, with claimants forced to wrestle up cash in order to properly pursue a legal argument. 
Commercial

Litigation Finance Predictions for 2022

Litigation Finance has enjoyed a successful 2021. More players entered the funding space, funds were raised at a rapid clip, and more capital was deployed than in any previous year. Overall, there’s a general recognition that litigation funding brings fairness to the legal system.

Validity Finance’s Ralph Sutton has four predictions for Litigation Finance in the new year. He believes that the public’s understanding of third-party funding will increase, expanding the idea that it is a net gain for society. A recent survey showed that nearly 90% of attorneys who have used litigation funding affirm that it gives clients greater access to justice. That bodes well for the continued growth of the industry.

Third-party funders are beginning to recognize their place in the sociopolitical ecosystem. Funders are taking steps to advance initiatives related to the environment, social justice, and governance. So-called ESG goals are inspiring funders to give grants and zero-profit loans to worthy entities like the Innocence Project. A roundtable held earlier this year consisted of academics, funders, and judges to consider starting a social impact litigation fund to provide capital for worthy causes.

Offsetting risk via insurance is expected to grow in popularity. ATE (after the event) insurance is not a new product, but it’s being used in new ways to mitigate risk in funded cases. Ultimately, this type of insurance allows fund managers to keep more awards and settlements. While expensive, insurance for cases or portfolios can protect principal amounts—sharing risk between funders and insurers.

Changes in rules regarding ownership of law firms by non-lawyers could lead to sweeping, industry-wide changes. Exceptions to ethical Rule 5.4 may offer firms the ability to raise capital like any other business. This, in turn, allows law firms to recruit new talent or take more risk. Many states have or are considering this rule change, including California, Florida, New York, Illinois, and Texas.

Commercial Fundraising

The Impact of COVID on Litigation Funding

While many industries suffered during the pandemic, Litigation Finance has flourished. Most industry professionals believe the growth and maturation of third-party legal funding will continue into the new year and beyond. Bloomberg Law details that in the first nine months of this year, law firm revenues increased an average of 14%. In some AMLaw 100 firms, per partner profits have reached an all-time high. The introduction of regulations impacting legal funding, along with the founding of multiple professional organizations has led to changes within the industry. Economic factors alter the ways some cases are vetted for funding. For example, assessing a defendant’s ability to pay an award or judgment. Because of this, it can be more difficult for plaintiffs to get backing from a litigation funder. Meanwhile, business interruption claims against insurers are plentiful, but insurers are successfully getting cases dismissed more often than not. It’s likely that in the coming months, funders will flock to complex cases with the potential for high payouts. Cross-border breach of contract cases covering manufacturing and logistical failures, or delays in delivery are the most common. Inflation rates and competition for legal talent are expected to accelerate the rise in prices for legal services. Fortunately, the funding market has no shortage of capital, and that is expected to continue as investors seek out uncorrelated investments. Changes in law firm ownership rules are pending in multiple jurisdictions. This change is expected to result in third-party funders buying into big firms, altering some dynamics while offering clients more creative and flexible pricing options. The discussion over disclosure of funding agreements will continue until or unless a consensus is reached. While some jurisdictions are passing regulations requiring disclosure, others have determined that the source of funding is rarely relevant to the facts of a case.
Commercial Deals

Litigation Funding Gaining Popularity in Poland

Polish attorneys are navigating the lack of congruence in the country's emerging third party litigation funding space. Many claimants are not aware of the benefits of third party funding, and the different aspects of how investments of this nature can benefit their bottom line.  RP.pl reports positive structural shifts taking shape, rallying popularity in third party litigation finance. Many international investors have entered the Polish market looking for returns. RP notes that in terms of arbitration proceedings, third party funding has now become a permanent fixture in Poland.  The RP feature outlines several visionary funding scenarios for claimants and plaintiffs to consider. One unique instance applies to both parties participating in third party funding, for example related to a counterclaim. RP shares that this feature is extremely risk-focused, in that the funder would habitually require a high degree of certainty as to the counterclaim’s success.  The success of Poland’s third party litigation funding market hinges on overall public awareness. Many individuals are looking to attorneys to promote and inform awareness associated with features of third party funding. 
Commercial

Longford Capital’s Justin Maleson is Bullish on Litigation Finance

Big Law’s acceptance and public embrace of litigation finance is a major milestone, says Justin Maleson of Longford Capital. As one of the first litigation funders in the United States, Longford sports a rich history of litigation finance innovation.  LawDragon.com recently profiled Maleson in a broad discussion spanning Longford’s pioneering start, to how the funder is developing and driving creativity in litigation finance. Maleson underscores that the versatility of litigation finance is similar to a Swiss Army knife, allowing for different use case tools to fit unique situations.  Longford rejects most litigation finance cases presented for evaluation. Hence, Maleson highlights his career as a defense attorney as prime background for assessing the best cases for investment. Maleson also notes that the litigation funding space will continue exponential success, with the right marketing propelling top tier investors.   Maleson attributes Longford’s success to a novel, modern approach to litigation investment. The firm initially sprouted via single claim funding. Today, Longford monetization techniques include sophisticated portfolio products, inventive business development facilities and original defense solutions.  The people behind Longford are what Maleson values most. He claims that if not for the close connections between his peers, the entire innovation and pioneering spirit at the company would be muted. 
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.