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Commercial Resources

Webinar on Increasing the Value of Insurance Claims with LitFin

A free online webinar will cover the fine points of utilizing Litigation Finance to unlock the value of insurance claims. It is possible for insurers and policyholders to make use of non-recourse funding when pursuing matters of bad faith, reinsurance, coverage issues, subrogation, and more. Chambers and Partners details that the upcoming webinar will offer insight on these issues from leading litigation funders and lawyers with experience working with funders. Topics include:
  • Funding reinsurance and insurer subrogation claims.
  • Funding policyholder claims and using bad faith claims to resolve third-party actions.
  • Explanation of how non-recourse finance is secured by potential litigation awards or settlements.
The panel of speakers is scheduled to include:
  • Linda Kornfeld, Partner Insurance Recovery-Blank Rome. A prominent insurance recovery lawyer in predominantly high-stakes litigation. Her specialties include risk mitigation and maximizing recoveries.
  • Gavin Beardsell, Investment Manager and Head of New Zealand – Omni Bridgeway. Based in the Sydney office, Beardsell’s experience in managing insurance matters spans over 25 years.
  • Maurice Thompson, Senior Equity Partner – Clyde & Co. Thompson has nearly three decades of experience advising clients in the natural energy industry, and founded the Global Drones Group.
  • Simon Christian, Editor – Chambers and Partners. Editor of the High Net Worth Guide, Christian has an LLB from University College London and studied for the BPTC at City Law School.
Commercial Regulatory Issues

New Jersey Disclosure Rule Puts Undue Burden on Litigants

Much has been made of the US District Court of New Jersey’s Local Rule 7.1.1, which requires disclosure of any non-recourse legal funding used to support a case. Some have suggested that this “harmless” rule will encourage transparency and increased oversight. But does it? Law 360 explains that the rule necessitates burdensome filings requiring tens of thousands of attorney work hours—leading to increased expenses for clients. At what point should we ask what purpose this serves, and whether or not it’s worth the extra resources. After all, it can be argued that transparency is a vague, even arbitrary goal. Why should legal funders and their clients be subjected to it, given all the good that funding does? Commercial litigation funding works to ensure that litigation focuses on merits rather than legal games meant to frustrate parties with fewer resources. Funded plaintiffs cannot be pushed into lowball settlements or stalled until they run out of money. This, of course, leads to increased fairness—which should be everyone’s goal. This is emphasized by the fact that funders only take on cases with merit. A solid claim backed up by compelling evidence and a clear illustration of damages is what funders are looking for. The cacophony of accusations of ‘frivolous litigation’ simply cannot be supported by evidence. Confidentiality is an essential part of any case. Any legal professional should view intrusions of confidential information with suspicion. Protecting attorney-client privilege is a vital part of that relationship. It’s worth noting that other legal services are exempt from mandatory disclosure, such as consultants or strategists. Perhaps the most sinister part of Rule 7.1.1 is how easily it could be weaponized against clients who use legal funding. Defendants concerned about a losing case, or frustrated with untenable settlement offers, could make spurious demands for funding agreements, even when no suggestion of impropriety is present.
Commercial

Australian Funding Partners Declares Bankruptcy

Once hailed as the team behind the Banksia class action, Australian Funding Partners has gone into administration. In October, Supreme Court judge John Dixon found that the litigation funder and five lawyers involved in the case had committed fraud, and made dishonorable attempts to charge unnaturally high legal fees to Banksia claimants. Lawyers Weekly details that in 2018, AFPL reached a settlement with Banksia Securities over an investor loss of AU $660 million in 2012. Later, a class action participant challenged the nearly $5 million in legal fees and a further $12 million+ in funder commissions. The Victorian Court of Appeal did not approve them. As a result of the actions of AFPL and the attorneys involved, Norman O’Bryan and Michael Symons were ordered removed from the roll. Prosecutions may soon follow for the pair.
Commercial Deals

What Makes a Case Attractive to a Litigation Funder?

As Litigation Finance grows in popularity and sophistication, not everyone is on board just yet. In fact, some clients and even their legal teams aren’t sure how to attract the interest of an experienced litigation funder. As the practice grows in use, understanding it becomes even more important. Lesa Online explains that there are some things funders look for when vetting any potential funding opportunity. This generally begins with an NDA followed by a thorough vetting. This due diligence may include looking into the viability of case theory, the defendant’s ability to make good on an award or settlement, and the evidence itself. Time, cost, and expenses are all considered, including the possibility of security for costs. How is this broken down?
  • Merits. The case should have a very high probability of success based on applicable law and existing evidence.
  • Damages. A sound theory of damages must be present and is typically valued using the most conservative estimates.
  • Budget. How much will the case cost? A viable case must have a solid ratio between what will be spent vs a potential reward.
  • Ability to pay. Regardless of merits or proven damages, if the defendant cannot reasonably pay the award, funders will not be interested. 
  • Adverse costs. Cost exposure is an essential aspect to consider when vetting any case for funding. Insurance is often applicable here as well.
Commercial Resources

The 2021 Litigation Finance Survey Findings

In September, Bloomberg Law surveyed 38 litigation finance providers, 37 lawyers, and 75 legal professionals in the UK, US, and Australia on their interest in and use of Litigation Finance. This survey provides a stirring look at developments and attitudes within the industry. As Bloomberg Law explains, the main area of concern for funders and attorneys is the question of who maintains control over the litigation. Current and pending legislation tends to guarantee that clients retain the right to decision-making even in funded cases. Meanwhile, it appears that ethical implications are of far greater importance to lawyers—with 55% listing it as a concern, compared to just 14% of funders. Matters of return waterfall provisions (based on a multiple of invested capital) and attorney returns subordinated to return of funder capital were of high importance to both funders and lawyers. Factoring duration risk in calculations of proceeds distribution is also important to lawyers and funders—though funders find it a more crucial issue. Funders also focus on the right to withhold funding. When lawyers are considering entering a funding agreement, they tend to look at the factors in this order.
  1. Financial terms
  2. Reputation of the funder
  3. Track record of the funder
  4. Type and quality of in-house legal consultancy
Commercial litigation remains the most popular area of practice for funder/attorney agreements. This is followed by international litigation, antitrust matters, international arbitration, insolvency, patent law, environmental actions, copyright/trademark cases, insurance issues, and product liability. General industry views are largely positive toward funding, though there are some specific areas of concern. At least 39% of funders and 56% of lawyers do not feel that Litigation Finance is transparent as an industry. In more positive news, more than ¾ of lawyers and 97% of funders do not agree with the oft-repeated accusation that legal funding enables frivolous filings and cases without merit clogging court dockets. Still, lawyers were largely neutral on the positive ethical reputation enjoyed by funders. Most interestingly, about half of lawyers and nearly 4/5 of funders disagree with mandatory disclosure of legal funding agreements. In the end, we see that lawyers are 69% more likely to seek out litigation funding compared to five years ago. That’s solid news for this industry that continues to grow and adapt to meet the changing needs of lawyers and clients.
Case Developments Commercial

Woodsford Funds Govia Thameslink Railway Action

A legal claim that could be worth as much as GBP 100 million has Govia Thameslink Railway concerned. It alleges that one of the most active commuter railways in Britain has been routinely overcharging as many as 3.2 million passengers. The claim, filed late last month, is funded by Woodsford. Woodsford Litigation Funding explains that the case addresses a lack of access to ‘boundary fares’ in which commuters with a London Travelcard are entitled to discounted fares from the boundary zones covered by cards to their destination. A similar case, also funded by Woodsford, involves a claim seeking up to GBP 93 million against two unconnected rail operators. Govia Thameslink Railway is accused of not making boundary fares available to riders, nor informing passengers that they were an option. Since November 2015, it’s estimated that 240 million trips could have been more affordable thanks to boundary fares—had commuters been aware of them. This constitutes a breach of UK competition rules, plus an abuse of market powers. To be eligible for inclusion in the class action, claimants must meet specific criteria:
  • Must have owned a Travelcard after 10/2015.
  • Must have also purchased at least one rail fare from a station within a zone covered by the Travelcard.
  • Must have purchased a rail fare to a location outside the zone of the Travelcard.
Potential claimants aren’t required to bring individual claims, nor is there a fee to participate in the action. Funding from Woodsford makes it possible for claimants to sign on at no initial cost to them.
Commercial Regulatory Issues

What Have We Learned from Lloyd v Google?

The Supreme Court recently rejected the claim filed by Richard Lloyd against Google. Lloyd is the former executive director of Which?, a consumer protection organization. The case involved a data breach from over ten years ago, wherein Safari users were subject to double-click ad cookies without their consent. Law Gazette details that Lloyd v Google tackles two significant issues. First, it examines whether or not there’s a right to bring an opt-out class action in cases involving data privacy and protection. Second, it looks at whether there should be compensation in data rights cases when there has not been proof of individual impact. In February of this year, the UK government debated, then declined, to introduce legislation specific to opt-out class actions for matters involving user data. Their reasoning was that there was another, perhaps better, form of class action. Lloyd pursued this and was not successful. Litigation funders have taken a particular interest in this case—calling it a test case for UK collective actions in the future. Justice Leggatt denied claims made on behalf of roughly 4 million iPhone users in the UK, saying they only have a right to compensation if they have evidence of financial losses or distress. What might constitute evidence of distress is unclear. This ruling means that Big Tech won’t have to demonstrate that they’ve acted ethically. Rather, the people they harm, whose privacy has been violated, have to prove some tangible damage. There are still opt-in class actions, but it’s admittedly untenable to expect millions of clients to collect and submit evidence of the individual impact of a large data mishandling. It also leaves funders in a lurch—choosing between increasing access to justice and risking a large investment on a class action that may never reach a profitable conclusion. Ultimately, we’re left with millions of users allegedly violated by a tech company which will face no tangible repercussions.
Announcements Commercial People Moves

Delta Capital Partners Management Welcomes Michael Callahan as Chief Operating Officer

Delta Capital Partners Management LLC, a global private equity firm specializing in litigation and legal finance, has announced the hiring of new senior executive Michael Callahan. Mr. Callahan joins Delta as its Chief Operating Officer, where he will execute the firm’s strategic and tactical plans worldwide; lead investor relations; and oversee the implementation of new business initiatives, product development, and office openings. Prior to joining Delta, Mr. Callahan worked at Boston Capital for 28 years, where he was a Senior Vice President and the Director of Asset Management. At Boston Capital, Mr. Callahan was responsible for a team of over 60 professionals monitoring and reporting on the performance of Boston Capital's $7.7 billion portfolio, including both lower tier asset management and upper tier investor relations functions.  Mr. Callahan also led the team at Boston Capital that developed a proprietary asset management and reporting platform which was utilized throughout the company. Christopher DeLise, Delta's Founder, CEO and CO-CIO, stated, “We are very pleased to welcome Michael to the Delta team, where his extensive experience in asset management, investor relations, and investment company operations will be invaluable as Delta continues its global expansion and further enhances the firm’s strong position within the litigation and legal finance industry.” About Delta Delta Capital Partners Management LLC is a US-based, global private equity firm specializing in litigation and legal finance, judgment and award enforcement, and asset recovery. Delta creates bespoke financing solutions for professional service firms, businesses, governments, financial institutions, investment firms, and individual claimants. SOURCE Delta Capital Partners Management LLC
Commercial Deals

Burford Managing Directors Talk Potential Law Firm Ownership

Now that several US states are experimenting with non-lawyer ownership of legal firms, it’s no surprise that major players in Litigation Finance are thinking about taking part. Several more states are considering loosening regulations on who may buy into a law firm, including California and Michigan.

Law 360 reports that Burford Capital may be one funder looking to make a law firm investment. Emily Slater (Managing Director) and Andrew Cohen (Director) are jointly responsible for valuing and underwriting the company’s investment risk. Currently, they’re tasked with assessing an investment in legal firm ownership.

With regard to overall strategy, Slater explains that law firm investment compliments Burford’s funding efforts. Permanent equity in a law firm is a long term investment with a collaborative foundation. She goes on to state that there are some key reasons partial ownership by funders can benefit law firms:

  • Investment provides needed capital that can be used to grow and strengthen the business.
  • Partners can maintain equity in the firm after retirement.
  • These benefits may serve to encourage firm management to employ long-term growth strategies and allow more freedom to innovate.

While some have speculated that private equity firms may also race to buy into legal firm ownership, Slater is not convinced. She explains that legal funders have a far better understanding of law firms than other investment managers, which gives them a huge advantage. Beyond that, Slater is confident that Burford will be first to market.

Obviously, ethics will be examined at length as non-lawyers buy into firms. It’s speculated that non-lawyer ownership may lead to financiers making business decisions—such as which cases to take and when to settle—on behalf of lawyers. Andrew Cohen disputes this vehemently. He claims it’s unlikely that investors would make decisions at the client level.