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Commercial

Third-Party Legal Funding in Germany

Germany is already well-known for its robust legal system, and is a preferred venue for international and domestic arbitration. Litigation funding has been in use in Germany for more than two decades. For most of that time though, funding has been used by cash-poor clients on a single case basis. This is beginning to change as funders step up and develop new solutions to meet complex legal funding needs. Burford Capital details the many ways in which funding can be used by companies to reduce risk and get an immediate influx of cash for a case that could take years to resolve. Third-party legal funding is typically deployed on a non-recourse basis. Essentially, the company is advanced a portion of an expected award in a meritorious case. If the case is successful, the funder is paid back for their investment, plus an agreed-upon portion of the award. If the case fails, the funder loses its investment, but the company pays nothing. Monetizing claims may seem simple, but it actually requires extensive expertise to value claims correctly. This expertise is an essential part of successful litigation funding—if the funders aren’t valuing cases accurately, their bottom line can be adversely impacted—leading to less deployable cash to go around. Expertise is only half the battle though. Big cases call for big investments, and not every firm is equipped to handle a large portfolio of cases, or even one very big and complex case. The time it can take a case to completion can be long or unpredictable. Delays are common, not to mention appeals. Monetizing cases allows companies to better control cashflow. The timing of funding deployments is controlled and known beforehand. This is also true of award enforcement. The help of experienced funders can make this process worry-free for companies in exchange for a share of the recovery.
Commercial

Mainstreaming Legal Funding: Good News or Bad?

Third-party legal funding is on the rise, both in terms of major players and client requests. Money is pouring in from investors, and some hedge funds are even funding litigation without input from established litigation funders. But is mainstreaming litigation funding a good thing for industry professionals who already appreciated it before it was cool? Therium suggests that while mainstreaming can make some things less unique or special, that doesn’t have to be the case with Litigation Finance. Competition between funders is robust, and new funding entities are being launched regularly. That’s actually good news for plaintiffs looking for funding. An influx of smaller, boutique funders with a specialized focus are even more beneficial to those in need of bespoke solutions. A constant inpouring of capital means more people who need funding will get it. The main reasons legal funding is catching on have more to do with investment considerations than with general economics. Investors love investing in litigation for a few key reasons:
  • Possibility for large rewards—20% annually is not uncommon
  • Returns are uncorrelated to the stock market.
  • Alternative asset classes are a smart way to diversify one’s portfolio
What about the impact on law firms? Most analysts believe the mainstreaming of legal funding will offer greater opportunity. It will likely also lead to firms building relationships with funders, incorporating more sharing of risk into their existing business models. This may also lead to solidifying a hierarchy of funding classes—from large corporate funders to small boutique firms. Educating the public has long been a goal of the funding industry. When the public has a solid understanding of how funding works, the process of pitching funders becomes more streamlined with less wasted effort. In short, there’s no reason to fear the mainstreaming of third-party litigation funding. There’s room, and deployable cash, enough for all.
Commercial Regulatory Issues

Crypto Litigation Finance – Regulated Bitcoin is a Game Changer

What’s the connection between Litigation Finance and cryptocurrency? David Kay, CIO of crypto litigation finance entity, Liti Capital, says that the overlap between these two topics is an increasingly popular discussion in the digital assets theatre. News Nation USA explains that bringing cryptocurrency transactions into the Litigation Finance space is a way of leveling the playing field. Like traditional funders, crypto-focused legal funders provide funds that people can use to finance a meritorious legal case. Investors can use blockchain tokens (LITI, wLITI) to buy equity. Liti Capital finances appeals for crypto investors. Currently, over a thousand investors who lost money during the Binance outage are seeking more than $20 million in damages. Kay is expecting an epic battle once charges are brought against the world’s largest crypto exchange. Now that the SEC has approved a Bitcoin ETF, many suggest it’s bad news for so-called meme coins like Dogecoin and other fly by night cryptocurrencies. As new legislation is passed over the next few years, major industry adaptations are sure to follow. Coins with no real-world utility may fall by the wayside. Kay offered tips for building a portfolio of cryptocurrency. Diversification is necessary, as it is in most types of investing. Bitcoin is relatively stable—but still saw huge swings in the last year. Scams and fraud are also common in the crypto space. Knowing what you’re up against can make all the difference. Ultimately, careful study is the key to smart investing in the crypto space.
Consumer

Is There a Need for Tort Reform? Some Say Yes

October is known by some as “Lawsuit Abuse Awareness Month,” referring to an alleged scourge of abuse of the legal system. One purported example is a recent $80 million judgement against Monsanto, a subsidy of Bayer. After a jury determined in 2018 that the pesticide Roundup caused cancer, ATRA President Tiger Joyce claimed it was based on “junk science.” Inside Sources explains that the purported carcinogen, glyphosate, was declared safe by some organizations, but dangerous by others. This, combined with allegations of a “polluted jury pool” have led groups like ATRA to express a desire to see the Monsanto case reach SCOTUS. But should it? And is this indicative of a need for tort reform? Also under fire is a tendency for major class actions to advertise to potential claimants. On the surface, this may appear to treat a class action as a product to be hawked. But realistically, advertising is a reasonable and necessary way to inform the public about information that impacts them. Another allegation is that advertising for claimants prejudices juries. But of course, there are already safeguards in place, voir dire for example, to weed out biased jurors. Joyce asserts that juries can be swayed by the number of claimants in a class action, referencing a survey by Trial Partners Inc. Is that a bias, or simply a natural and reasonable conclusion? Ultimately, these calls for tort reform stem from the idea that legal funding makes it possible for people of modest means to have their day in court against large companies. Holding companies accountable and increasing access to justice is obviously something that should be encouraged, rather than reformed.
Consumer

Anonymous Aussie Solicitor Investigated Over Missing Funds

Solicitor XY, so named because her mental health could be damaged if her name is revealed, has been charged with doctoring invoices to steal funds. Her client, Hanadi Rafraf, sustained injuries in a car accident and was later awarded more than $450,000. Yet her lawyer gave her documents signed by a claims assessor explaining that she would receive $132,000 less than her stated award. Sydney Morning Herald details that the claims assessor, Hugh Macken, has told police that the signature on the fraudulent document was a forgery. Solicitor XY was charged in January of this year for creating a false document to obtain a financial advantage. In addition to this, XY declined to inform the Legal Services Commissioner that she had been charged with a serious crime. She has since claimed that the charges resulted from a dispute over costs, rather than a deliberate attempt to commit fraud. Before the LSC could rule on XY’s request to preserve her practicing certificate, it was discovered that she had fraudulently altered several more invoices in order to obtain funds to which she was not entitled.
Case Developments Commercial

Semiconductor Claim Against Apple Uses Third-Party Funding

Patent filings are on the rise, as 38 Patent Trial and Appeal Board petitions and 71 district court filings occurred last week alone. There have also been a spate of dismissals, settlements, and district court terminations. IP Watchdog explains that some cases are being voluntarily dismissed and refiled due to recent rulings and precedents. Courts have also seen an uptick in new non-practicing entity campaigns. Continental Circuits LLC has successfully sued several tech giants like Samsung, Intel, AMD, and MediaTek—collecting awards. Now, with the support of third-party legal funding,Continental Circuits is suing Apple and TSMC (Taiwan Semiconductor Manufacturing Company) over a set of expired circuit board patents. These originally came from a Florida circuit board company that is now bankrupt. In the case against Intel, the judge ordered disclosure regarding the legal funding in place. After this, the case closed after arbitration.
Announcements Consumer

USClaims Completes Its Seventh Securitization and Continues U.S Growth

USClaims (USClaims.com), the longest continuously operating pre-settlement funding firm in the U.S., today announced its $77.5MM 144A litigation finance securitization. This marks the company's seventh securitization transaction involving this asset class.  It primes USClaims to continue its run of impressive growth across the United States.

USClaims CEO, Steve Bashmakov, commented, "We are excited with the market's response to this continuously growing asset class." He continued, "This positions USClaims for amazing growth and further energizes our pursuit to make Litigation Funding Simplified®. We are changing the perspective about the pre-settlement funding industry by being a major asset to trial attorneys and their clients."

Scott Shey, USClaims CFO, added, "We were delighted to see the level of interest we had in this deal.  Stifel (the arranger) continues to be a key partner and really helped us achieve a great result on pricing and syndicating to a diverse investor mix.  This deal continues to highlight the growing acceptance and adoption of the asset class. "

USClaims was established in 1996 and has been consistently voted among the best in the nation within the pre-settlement funding category. In 2021 alone, USClaims earned first place rankings by the audiences of national legal publications in several categories, including "Best Consumer Litigation Funding Provider," "Best Law Firm Funding Provider," and the coveted "Hall of Fame" award from the New York Law Journal.

About USClaims: For 25 years, USClaims has been one of America's largest providers of non-recourse financial support to personal injury victims, some of whom may have suffered catastrophic injuries from defective products, unsafe premises, motor vehicle accidents, and other types of accidents. This financial support provides the injured plaintiff with the means to pay bills and endure the often long and arduous litigation process. USClaims is here to help plaintiffs and their attorneys stay in the fight. For additional information on USClaims pre-settlement funding, please call (877) 872-5246 or visit USClaims.com.

Commercial Deals

LegalPay Closes Interim Financing Transaction with Yashomati Hospitals

India-based tech-focused startup LegalPay announced that the company has closed an interim finance transaction with Yashomati Hospitals Private Ltd—currently insolvent. Economic Times details that this type of finance is short-term lending, typically 6-12 months. The amount of financing being deployed to Yashomati Hospitals is undisclosed, but is expected to be used for operational costs, payroll, and keeping the company running until the Insolvency and Bankruptcy Code provisions kick in. LegalPay is planning a dozen or more such interim financing agreements. Interim financing is most often used by large corporates. LegalPay focuses on mid-level companies that are undergoing insolvencies. The interim financing trend is expected to grow as an investment opportunity, largely due to the potential for high profits, and the provisions under the IBC which work to the advantage of lenders.
Consumer

Litigation Funder Arrested in Slip-and-Fall Fraud Scheme

A fifth member of a slip-and-fall fraud ring was arrested and charged in a Manhattan Federal Court. The scheme, which amounts to more than $30 million, appears to have begun in 2013. Adrian Alexander, age 75, has been charged with mail fraud, wire fraud, and conspiracy to commit mail and wire fraud for his alleged attempts to gain fraudulent insurance reimbursements. The case will be heard by US District Judge Sidney H Stein. Justice.gov details that Alexander, a litigation funder, allegedly deployed funding for the fraudulent lawsuits. He is accused of knowingly financing multiple cases and profiting from the desperation of others. Lawyers and doctors have already been charged as part of the massive scheme. According to the indictment, the allegations include:
  • Staged or false claims of accidents involving 400+ recruits
  • Referrals to specific lawyers who were involved in the scheme
  • Fraudulent lawsuits filed
  • Referrals to specific chiropractors who were involved in the scheme
  • Recruits paid to have unnecessary surgery
Many of the hundreds of people recruited to partake in the scheme were homeless, very poor, substance addicted, or otherwise financially vulnerable. Some were recruited directly from shelters or rehab facilities. Medical and legal bills were paid by legal funders, including Alexander. This is true even in cases where the patient had insurance coverage or was on a government medical program. The scheme was successful in terms of financial success. Alexander reported annual returns of at least 30%. Meanwhile, he owned an MRI facility that was used in the fraud. After charging excessive interest rates to patients, proceeds from the scheme went almost entirely to the lawyers, doctors, and funders, rather than the patients. The maximum sentence for crimes like this is 20 years in prison. However, sentencing, in the event of conviction or a guilty plea, is determined by the judge.