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Commercial

Manolete Partners: Onward and Upward

Manolete Partners has been called the top insolvency litigation funder in the UK. In the midst of a major growth spurt, Manolete currently boasts greater than a 50% share of the insolvency funding sector. Vox Markets details that one of Manolete’s main strengths is its vertical expertise, which puts them in an ideal position to price risk. Insolvency cases tend to result in higher awards—with fewer than 5% going all the way to trial—so they reach completion sooner than complex litigation cases. Next week, the moratorium on medium and large company insolvencies will be lifted. This could mean a flood of new business for Manolete, and a dramatic reduction in case duration.
Announcements Commercial Fundraising

Longford Capital Raises $682 Million for New Investment Fund

Longford Capital Management, LP, a leader in commercial litigation finance, announced the final closing of its most recent fund (including a parallel fund, “Fund III”), at $682 million.  Longford’s assets under management now exceed $1.2 billion, placing it among the largest private equity firms focused on investments in legal assets.  Fund III is the third private investment fund Longford has closed since the firm began operating in 2013.

Fund III includes repeat investors from Funds I and II, as well as many new investors, attracting capital from state and municipal pension funds, university endowments, foundations, single and multi-family offices, and high-net-worth individuals.  Fund III will invest in the outcomes of commercial disputes, antitrust and trade regulation claims, and intellectual property claims that Longford believes to be highly meritorious and have a strong likelihood of success.  Fund III has already committed nearly $270 million to new investments.

“Litigation funding continues to gain acceptance among law firms, their clients, and investors alike,” said Timothy S. Farrell, co-founder and managing director of Longford Capital.  “We have seen significant growth in interest in litigation finance from leading institutional investors and high-net-worth individuals eager to put their money to work in an uncorrelated asset class.

“The significant capital we have raised gives us the latitude to be flexible and to innovate,” he added.  “Groundbreaking agreements with top law firms – like our arrangement with Willkie Farr & Gallagher – are hallmarks of our innovative approach and how we seek to generate returns for our investors.  We are grateful for our investors and our law firm and corporate partners.”

Since 2017, Longford has doubled the size of its underwriting team to manage the growing demand for its capital and added several talented business executives to scale its business.

“We’ve assembled an exceptional team of former first-chair litigators from leading law firms and experienced executives from great companies, and our team is the wellspring of our success,” said Farrell.  “Private practice litigators and corporate general counsel bring their matters to Longford because our team has walked in their shoes, and each member dedicates his and her thoughtful, diligent and individual attention throughout the lifespan of a matter.  This will remain a key element of our culture as we continue to scale our business.”

About Longford Capital

Longford Capital is a private investment company that provides capital to leading law firms, public and private companies, research universities, government agencies, and other entities involved in large-scale, commercial legal disputes.  Longford was one of the first litigation funds in the United States and is among the world’s largest litigation finance companies with more than $1.2 billion in assets under management.  Typically, Longford funds attorneys’ fees and other costs necessary to pursue meritorious legal claims in return for a share of a favorable settlement or award.  The firm manages a diversified portfolio and considers investments in subject matter areas where it has developed considerable expertise, including business-to-business contract claims, antitrust and trade regulation claims, intellectual property claims (including patent, trademark, copyright, and trade secret), fiduciary duty claims, fraud claims, claims in bankruptcy and liquidation, domestic and international arbitrations, claim monetization, insurance matters, and a variety of others.

Case Developments Commercial

Contingency Fees vs Group Cost Orders in Victoria

The Supreme Court of Victoria declined to allow a 25% contingency fee. The decision represents the first time the court has used its power to make a Group Cost Order—which the court determined was preferable to a “no win, no fee” arrangement. Ashurst details that an exception to the prohibition against contingency fees, the power to make a Group Costs Order in class actions, was introduced in Victoria in June of 2020. Thus far, Victoria is the only jurisdiction in Australia to allow this.   A Group Costs Order is a type of contingency fee that requires approval from the court. It necessitates that claimants will pay a portion of the contingency fee out of an award or settlement. This new legislation came about to allow plaintiff law firms to compete on level ground with third-party legal funders. In the first application since Group Costs Orders became law, courts had to determine whether the lawyer’s request for a 25% contingency fee was in the best interests of group members and whether it would be an improvement for claimants over the funding agreement already in place. Lawyers for the plaintiffs compared the Group Costs Order to a TPF agreement, saying it would be better for claimants. The court determined that because of the ‘no win, no fee’ agreement, the comparison should be between the agreement versus the Group Costs Order. Ultimately, the court ruled that the plaintiffs would not be better off with a Group Costs Order. After the decision, the court allowed the parties to take time to reconsider and reapply if desired. While it’s unclear whether courts will grow more welcoming to Group Costs Orders in the future, it seems that plaintiff law firms still find these orders attractive.
Case Developments Commercial

Business Interruption Class Action Filed Against IAG

A class action has been launched against insurer IAG after it denied business interruption claims related to COVID-19. The case has been likened to a test case in Australia. Insurance News explains that Slater and Gordon launched the suit after recognizing that IAG has adopted a strategy to ‘divert, deny, and delay.’ Some businesses have been waiting a year or more for remuneration from their insurers. The action is being funded and managed by ICP, with the goal of having claims vetted and paid out quickly. IAG has stated that it stands by its decisions to hold back payouts, but will abide the court’s ruling. IAG further stated that this industry-wide test case is the best way to gain clarity into the expectations of insurers during a pandemic.
Commercial Deals

UK Legal Firms Join Forces with Litigation Funders

In the early days of litigation funding, legal firms and funders were separate entities. As the industry has grown more widely accepted, an increasing number of law firms are teaming up with funders to offer clients an array of new services. Now some are questioning whether this is really a positive development. Financial Times explains that while lawyers are known to be risk-averse, respected firms like Mishcon de Reya, Rosenblatt, and DLA Piper have their own agreements with funders, or have launched their own funding arms. The UK has experienced an expansion of the funding landscape—with Britain doubling its litigation funding assets within the last three years. As third-party funding is largely self-regulated, conflict of interest is a concern. Globally, TPF is a $39 billion industry, worldwide. Law firms like Mishcon and its upcoming stock market listing bring even more scrutiny. In the UK, damages-based agreements with lawyers have only been legal since 2013. Litigation funding takes this concept one step further, helping increase access to justice. Of course, for a DBA or funding agreement to work, there has to be enough profit potential to make the risk worthwhile. According to the law, and stated industry ethics, third-party funders are not permitted to control strategy or decision-making in the cases they fund. Recently, Rosenblatt decided to prohibit its LionFish Litigation Finance arm from funding its own cases to avoid the appearance of conflict. Elena Rey, partner at Brown Rudnick, suggests that standardized funding agreements would be better for transparency. She asserts that high standards should be the norm for the industry and that this will translate to increased confidence and fewer concerns about conflicts of interest. Therium’s Neil Purslow affirms that even though industry regulation is sparse, courts can invalidate a funding contract if it finds the contract unfair or contrary to the interests of justice. Meanwhile, demand for funding and interest from investors continues to increase.
Case Developments Consumer

Doctor & Consultant Plead Guilty in Pelvic Mesh Scheme

Two men charged with pressuring hundreds of female patients into removing pelvic mesh implants—ostensibly to raise the payout in personal injury claims against device manufacturers—pled guilty to violations of the Federal Travel Act. Eminetra details that Wesley Blake Barber is facing four years in federal prison, while Dr. Christopher Walker could see at least eight. The charges stem from the men’s actions in a mass tort case against Johnson & Johnson, Boston Scientific, and several other manufacturers of pelvic mesh implants. About 100,000 US women are potential claimants in the case, which is connected to an $8 billion settlement. The actions of Barber and Dr. Walker are particularly egregious as surgery to remove implanted mesh is fraught with risk. Many of the women who succumbed to pressure placed on them by the defendants were worse off than they were before the implants. Some women stated that they were not fully aware of what they had agreed to, and few had sought a second opinion. The case was provided with financial support by an unnamed third-party funder. An attorney for Dr. Walker called his behavior “unfortunate” and implied that he would still be providing care to patients. Meanwhile, civil proceedings are underway. About 20 defendants, including other doctors, could be held liable for monetary damages.
Announcements Commercial Fundraising

Litigation financing start-up LegalPay’s maiden fund oversubscribed

LegalPay, a start-up focused on third-party litigation finance, has announced the successful closure of its maiden litigation fund. The Arbitration Focused SPV I, a smaller ticket special purpose vehicle (SPV), designed for upper-retail investors, was launched last month, and has now been oversubscribed, a LegalPay statement said. The SPV I was launched to create a pool of 8-12 legal cases to ensure diversification of capital, while minimising risk for the smaller fraction of investment. The fund allows retail investors to invest as low as Rs 25,000 in a single legal matter. Meanwhile, the start-up has also launched its second SPV that will focus on commercial disputes. Interestingly, the investment opportunity comes with a pre-commit flat cashback of Rs 1,000 on each investment. The venture focuses on B2B commercial disputes that offer an opportunity of an exact monetary value. Matters related to breach of contract, recovery claims, partnership disputes, cross-border transaction disputes and taxation disputes are typically considered. Further, it focuses on financing medium and late-stage litigations in specialised forums. These SPVs help investors diversify by investing in a basket of commercial cases that typically generate a pre-tax IRR of over 20 per cent. Incidentally, the entire investment process is digital and seamless, including signing investor documents, KYC, tracking of the basket of claims, and portfolio monitoring and analytics. Founded by Kundan Shahi in 2020, the Delhi-based start-up is backed by venture capital firms such as 9Unicorns and LetsVenture.
Commercial Legal Innovation

2021 Legal Finance Survey Shows Uptick in Relevance

For the last five years, Lake Whillans and Above The Law have joined forces on a survey detailing the awareness and favorability of third-party legal funding. This year represents the first finding since the onset of COVID as a global emergency. Overall, it found that the percentage of respondents who had first-hand experience with TPF remained about the same. Lake Whillans reports that the last year saw a huge uptick in the use of legal finance for claims monetization, law firm capital, and financing claim holders. This demonstrates the flexibility and capacity for innovation that has inspired the expanded acceptance and use of TPF. Among those survey respondents who had worked with a litigation finance firm, 86.4% stated that they would do so again. About 80% said they were likely to recommend litigation funding to others. The stats in the report show that funding is increasing in use and acceptance. In corporate settings, drivers of seeking litigation funding were split pretty evenly between law firms, GC’s, and businesses. As expected, financial need is still the strongest motivator for seeking TPF. Risk management is the next most popular reason, with corporate finance (using funding to follow up on cases without impacting operating expenses) and the quest for more affordable capital as the other motivators. Small private companies were the most likely clients to seek out TPF, with individuals and publicly traded companies being next.
Commercial Regulatory Issues

Law Commission Review Reveals Conflict Between Funders & Corporates

It stands to reason that litigation funders and big corporations would be at odds over class actions. After all, it’s often funding that makes pursuing these cases possible. Third-party funding provides the tools needed for people harmed by companies or governments to seek restitution. These large entities, and those who insure them, may not be used to this kind of accountability--and blame funders for increasing access to justice. Newsroom NZ details that the problem is that in some jurisdictions, the rich end of town may get their way. Ironic, since that only supports the need for accountability. It’s been suggested that caps on what funders can charge for their services would prevent funders from seizing the lion’s share of an award in a successful case. Funders counter by saying that they endure significant risks that are only worthwhile financially if the payout is large. Jonathan Woodhams, director of LPF, expressed alarm at the intensity of negative commentary against third-party funding. He went on to say that assertions of excessive funder profits at the expense of claimants and a glut of opportunistic litigation are both false and offensive. LPF’s numbers show that it made about 6% profit during the last ten years, with claimants receiving slightly less than 50% of awards and settlements. Adjacent to the call for fee caps is a suggestion that judges should vet and approve funding agreements before cases begin. This would likely require additional study for judges and additional time. The complexities of fee structures and funding agreements may warrant individual scrutiny on a case-by-case basis, but would make more sense if only applied in cases where there’s a potentially oppressive agreement in place. The Law Commission is expected to produce its final report along with recommendations in May 2022.