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Commercial

Who is Litigation Funding Really For?

When litigation funding began in earnest, funded cases tended to be those against deep pocketed corporations and governments. While Litigation Finance is a boon to justice, it’s also a business, with capital concerns. As such, most funded cases were chosen based on their ROI potential. MONDAQ details that the growth of the litigation funding industry is leading to an expansion of the potential client base. In the last three years, assets held by funders have more than doubled. Investors are flocking to legal funding seeking uncorrelated assets that can generate impressive returns. As new players enter the field, funders are casting a wider net. Rather than funding only large class actions, funders are bankrolling medium and even small cases, individual plaintiffs, and portfolios held by a company, university, or corporation. As opportunities to enter funding agreements increase, cases that were once viewed as too expensive to pursue are more likely to move forward. As a result, small businesses in particular stand to benefit from new funding opportunities. With the evolution of the industry in full swing, it's likely the client base will expand even further to encompass a wider range of potential claimants.
Announcements Case Developments Commercial

Operator of Great Northern, Southern, Gatwick Express and Thameslink to face legal claim worth up to £73m as over 3 million consumers are overcharged for London train fares

A legal claim seeking compensation worth up to £73m for routine overcharging on train tickets affecting an estimated 3.2 million passengers has been filed against the operator of one of Britain’s busiest commuter railway networks.

The collective claim against Govia Thameslink Railway (“GTR”) – the operator of the Great Northern, Southern, Gatwick Express and Thameslink lines - was filed on Wednesday 24th November with London’s specialist competition court, the Competition Appeal Tribunal (the “Tribunal”).

It was filed by Mr Justin Gutmann, a consumer rail campaigner who last month secured the landmark legal approval to bring to trial collective actions seeking compensation worth up to £93 million against two other rail operators, the South Western and Southeastern rail franchises, over the same issue.

The claim revolves around the lack of access to so-called ‘boundary fares’ – where travellers holding a London Travelcard should be offered discounted tickets taking them from the boundary of any zone covered by the card to their destination.

GTR is alleged to have not made ‘boundary fares’ sufficiently available for Travelcard holders to purchase, nor making passengers aware of their existence. The rail company’s failure has left customers with little option but to buy a higher fare than was necessary because their travelcard already entitled them to travel part of their journey. It is calculated that 240 million journeys since November 2015 could have benefited from boundary fares if travellers had been aware of them.

This is a breach of the UK’s competition rules (s.18 of the Competition Act 1998) and an abuse by GTR of its market powers. Great Northern serves destinations including Cambridge, Peterborough, King’s Lynn and Ely while Thameslink is a key commuter line to central London linking Brighton, St Albans, Bedford, East Grinstead and Luton Airport. Southern serves destinations including Brighton, Hastings, Portsmouth, Southampton, Eastbourne and Milton Keynes.

The claim is thought to affect an estimated 3.2 million passengers who held travelcards and used GTR services since November 2015.  The abuse is ongoing despite GTR also being the parent company of Southeastern.

Mr Gutmann, formerly of Citizens’ Advice, said: “This claim is the latest step in my campaign to stamp out routine overcharging of millions of passengers by some of Britain’s top rail operators. The failure of these companies to make Boundary Fares more freely available is scandalous and has been going on for years. It’s a practice that needs to stop – and passengers who have overpaid deserve compensation.”

What is the claim about? What are boundary fares?

Boundary fares allow passengers who own a Travelcard to travel beyond the zones it covers without doubling up on payment. Independent research has demonstrated that such fares are not readily available online or over the telephone and are rarely offered at ticket counters unless expressly requested. This practice is an abuse of the company’s dominant position and in breach of UK competition laws.

Who is eligible?

Passengers who owned a Travelcard at any time from 1 October 2015 and also purchased a rail fare from a station within the zones of their Travelcard to a destination outside those zones may be eligible for compensation under the Consumer Rights Act 2015 (“2015 Act”). This allows for a collective claim to be brought on behalf of a group of individuals who are alleged to have suffered a common loss. As a result of the 2015 Act, groups of persons who have all lost out do not need to bring an individual claim to bring compensation for their loss. Instead, these consumers may all receive compensation through a single, collective claim brought on their behalf by Mr Gutmann.

Affected passengers will not have to pay any legal costs to participate in the claim and do not need to do anything at this stage to be included in it.

What next?

The Competition Appeal Tribunal will now determine whether or not Mr Gutmann’s claim is allowed to proceed. Anyone who would like to receive further information about the claim, can visit the claim website, www.BoundaryFares.com, to sign up for updates.

Justin Gutmann represents the passengers bringing this legal case against Govia Thameslink Railway Ltd. Mr Gutmann has a wealth of experience working in the consumer rights sphere and he has strong expertise in the transport sector. He has spent a large part of his professional life dedicated to consumer welfare, public policy and market research, and he was recently approved as class representative in similar cases against the South Eastern and South Western rail franchises.

Mr Gutmann’s final job was Head of Research and Insight at Citizens Advice. He spent eight years working for London Underground. Mr Gutmann is represented by Charles Lyndon Limited and Hausfeld. His claim is funded by Woodsford, a global ESG and litigation funding specialist.

Commercial Regulatory Issues

Vultures in Litigation Funding—The Exception, Not the Rule

As litigation funding grows in popularity and legislation struggles to keep up—much attention is drawn to the outliers who fill funding opponents with fear. Unscrupulous funders get plenty of press coverage, further clouding already contentious issues. The FCPA Blog explains that multiple funders are currently facing civil suits for theft, fraud, and basically twisting the funding model into a dishonest profit center that harms clients and investors alike. Scams like double-promising shares of awards, or outright theft of funds make the entire concept of third-party funding seem suspect. It also adds fuel to the fires of those who want to over-regulate, or even curtail the practice altogether. These fraudsters aren’t just harming the Litigation Finance industry. They’re impeding access to justice, which is an essential component of legal funding. Ordinary people wronged or cheated by corporations, governments, or industry norms rarely are able to see their day in court. But litigation funding allows individuals and groups to have proper legal representation so cases can be adjudicated on a more level playing field. Thus far, funders have largely self-regulated. Ensuring that the unscrupulous are held accountable for misdeeds may become more important than ever in order to maintain integrity across the industry.
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.”

Consumer

What’s in the New York Consumer Litigation Funding Act?

Litigation Finance has grown exponentially in recent years, with legislation trying to catch up. Opponents of the practice warn of frivolous litigation and usurious lending rates—owing to involvement from venture capitalists and other high-end investors. A recent New York Post editorial demanded increased oversight and new legislation governing the practice. National Law Review details that over nearly two decades, the litigation funding industry has evolved into a powerhouse force. It has created dynamics and partnerships that didn’t exist before, giving rise to a host of knotty concerns that must be untangled for the industry to gain mainstream acceptance and appeal. Several US states have adopted regulations that are already in place in some global jurisdictions. These new rules may place caps on the rates funders can charge, or mandate that funding agreements require specific types of disclosure or court approval. A new bill introduced before the New York State legislature, the New York Consumer Litigation Funding Act, includes an array of provisions. These include:
  • Communications with funders are protected under attorney-client privilege and work product rules.
  • Funders will not exercise control or decision-making over the cases they fund.
  • Referral fees to plaintiff lawyers are disallowed.
  • Third-party funding entities must register and post a bond.
  • Maximum annual interest rate will not exceed 36%.
  • Prepayment of the advance without penalty.
  • Funding agreements must disclose exact terms, in plain language, including the maximum possible amount the consumer will pay.
While these seem straightforward, some provisions here do not take all relevant factors into account. Fee and interest caps, for example, don’t consider that funders are taking 100% of the financial risk in a case. Still, it’s largely agreed that some formal regulation is necessary, and this bill may serve as a first step. 
Commercial Regulatory Issues

Class Action Reform Spurs Intense Response from Funders

The Australian government’s bid to reform class actions, and by extension third-party litigation funders, is nearing its climax. A parliamentary committee assembled to examine the bill has expressed support. A key argument in favor of increased legislation is that funders ostensibly make profits that are out of proportion to the risk taken and the costs incurred. Australian Financial Review explains that while this may seem reasonable on its face, the new legislation failed to consider some vital aspects of funding and class actions. The haste inherent in the consultation process seems unnecessary, even suspicious. Non-government members of the committee had less than one day to read and respond to the 68-page report. The report is expected to be put before the chamber for debate. The response from the Labor and Green parties, who have combined their efforts to block the bill, suggests concerns about the constitutionality of the bill. Legal firm Phi Finney McDonald was quoted in the report from the Labor party, describing the government’s efforts to paint this reform bill as a consumer protection win as “Orwellian gaslighting.” The fate of the bill seems to rest on a a few swing votes, including Stirling Griff, Jacqui Lambie, Pauline Hanson, and Rex Patrick. Patrick has already stated that his position is emphatically in support of access to justice. As such, he is unlikely to support the bill. The Green party also submitted a dissenting report, which claims the bill is designed to attack the business model of litigation funders in order to lower the number of class actions. Greens insist that the intention of the new bill is to protect the wealthy and empowered, while reducing the ways in which ordinary people can access justice. Aside from the ethical aspects, there are numerous questions of the constitutionality of the bill. If it is passed, there would likely be a spate of litigation to parse constitutional questions—which most believe is a poor solution to an already complex issue.
Consumer

The Impact of Small Verdicts and Settlements on the Trucking Industry

After last year’s report on nuclear verdicts in trucking cases, the American Transportation Research Institute has released a new study—this time examining the impact of small verdicts and settlements on the trucking industry. In it, it’s suggested that smaller verdicts may be causing a spike in insurance prices. Landline Media details that the report points to an increasingly litigious society spurred on by the relatively new practice of Litigation Finance. By describing funders and the lawyers who work with them as ‘collecting small awards as part of a booming business,’ the ATRI tips their hand as being anti-funding. Third-party legal funding allows those who have been harmed by a big company to have their day in court. That’s a net benefit, regardless of a rise in insurance rates. ATRI’s report suggests that it’s not so much ‘nuclear verdicts’ driving insurance premiums, but the sheer volume of smaller payouts. The report also refers to “settlement mills,” which may sound nefarious, but simply refer to a small efficient firm making short work of viable claims. It cannot be denied that litigation funding leads to an increase in lawsuits. That’s because many people with valid claims lack the financial resources to pursue them. The ATRI seems to suggest that addressing the inaccessibility of justice is less important than insurance rates, even as it affirms that the majority of reported claims never see a courtroom. With regard to verdicts versus settlements, the report suggests that settlements tend to include higher payouts. Further, more severe injuries increase the likelihood of settlements. In terms of cost, verdicts have a much higher overall legal spend than settlements. Ultimately, the best way to keep insurance premiums low is to be above reproach—not to impede injured parties seeking justice.
Case Developments Commercial

Tinder Founder Alleges He Was Misled About App’s Value

As difficult as it might be to imagine someone being misled by a Tinder communique, Sean Rad, a co-founder of the app, alleges that’s exactly what happened. Last week, Rad testified that Match Group (which also owns Hinge, OKCupid, and PlentyOfFish) undervalued Tinder by billions. PoliticSay reports that Match valued Tinder at about $3 billion. This figure was accurate two years earlier, but since that time, revenues increased fourfold. Rad alleges that Match “intentionally cooked the books” in order to lowball the founders on their purchase. According to Rad, the proper value of Tinder was at least $13.2 billion. An already complicated legal proceeding is being further clouded by allegations of conflicts of interest. One witness, Jonathan Badeen, had to drop out of the suit as a plaintiff due to an arbitration agreement. Attorneys for Match seized on this, attempting to paint the agreement as a conflict, saying Badeen’s agreement entitles him to a large (but undisclosed) payment if the case is concluded in Rad’s favor. Two other witnesses, former Tinder execs Rosette Pambakian and James Kim, also have deals with litigation funders. They say the money is not in exchange for testimony, and that the deal was necessary to make up for income lost when they joined the lawsuit. While the judge is allowing witnesses with funding agreements to testify, the defense may raise the issue during trial. More recently, Rad’s lawyers took issue with a juror who repeatedly arrived in court with a copy of the New York Post. Jurors are not allowed to view outside media during trials. Greg Blatt, who set the value of Tinder in advance of the sale, continues his testimony this week.
Announcements Consumer

LawCash®, Momentum Funding®, and Ardec Funding Will Merge to Form Cartiga — Push the Legal Tech and Financial Industry Forward

LawCash, Momentum Funding, and Ardec Funding, three companies that have pioneered the legal financial services industry for over 20 years, announced their new unified brand, Cartiga. Cartiga's focus is providing three primary legal services: plaintiff funding, attorney working capital, and risk management technology. Its mission is to map the way to a better future with fair and innovative solutions that help law firms and their clients navigate challenges, identify opportunities, and optimize litigation outcomes. "By combining these three industry leaders, our goal is to create a transformative organization that will drive change and innovation in the legal services industry through technology and personal connection," says Cartiga CEO Charlie Platt. "Aligned now with a common vision and data-first technology strategy, Cartiga will continue to provide for the financial needs of law firms and plaintiffs across the nation while charting a new path for the litigation industry." Cartiga's name reflects a long history of cartographers who have helped travelers and explorers find their way across challenging and often uncharted terrain through the practice of making maps. It represents the company's vision to enable better decisions by providing more insightful direction for legal industry stakeholders by utilizing technology and data. Cartiga aims to pioneer the next generation of legal services through strategic partnerships and industry-leading resources to help attorneys and law firms improve their businesses and better assess risk. About Cartiga
Cartiga combines deep legal experience and expertise to provide industry-leading products for plaintiff and attorney funding, as well as data-driven solutions that help law firms build stronger, more profitable businesses. Learn more at Cartiga.com.