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Case Developments Commercial

Apple Rejected U.K. Litigation Insurance Details 

Cupertino, California based Apple Inc. is facing a $2.3B litigation battle in the United Kingdom, as nearly 20 million iPhone and iPad users claim Apple abused application payment ethics rules. Dr. Rachel Kent of King’s College London is the proposed class representative custodian.   Law Gazette reports that Dr. Kent has submitted a proposal of litigation trajectory and corresponding budget to finance the claim to trial. Attorney’s for Apple petitioned the court for details of Dr. Kent’s litigation budget, pressing for detail on ‘after the market’ (ATE) insurance premiums. Dr. Kent is said to have $20M+ in liability protection covering litigation against Apple.   Apple challenged that Dr. Kent’s litigation budget and ATE premiums are not subject to confidentiality. However, the U.K. tribunal hearing the case rejected Apple’s logic. Presiding justices cautioned that ATE premium details could motivate Apple to tactically forecast the insurers' anticipated claim risk. While refusing to disclose details of Mr. Kent’s litigation budget and ATE premium agreements, the court did not grant privilege to details of the insurance premium agreements. As such, Apple may engage alternative market research avenues to obtain the information. The court expressed concern that Apple may seek to increase pressure on Dr. Kent’s legal team by driving up litigation costs during the dispute.   
Case Developments Commercial

U.S. Attorney Reviews Advanced Legal Fee Agreement  

The U.S. Attorney's Office in New York’s Eastern District is set to review potential conflicts of interests in an advance fee agreement related to alleged agents of a foreign government.  Law.com reports that U.S. District Judge Brian Cogan will entertain deliberations as to whether Trump’s inaugural committee chairman Thomas Barrack was in conflict with a written agreement to advance Matthew Grimes’ legal fees.  Both men were arrested in July 2021, under suspicion of being unlawful foreign agents of the United Arab Emirates in the United States. Both men are accused of failing to properly register with the attorney general’s office in a now botched enrichment scheme.   Attorneys representing the accused are quick to submit that no fee advancements have yet occurred. The three week trial is expected for September 2022.  
Commercial Regulatory Issues

Turkey’s Litigation Finance Future 

Turkey's economy has been targeted by aggressive international profiteers, according to officials in Ankara. The Capital Market’s Board fined a group of United States banks who signaled clear hawkish intentions with surprise illegal short selling of Turkey’s stock market in 2021. The banks included marquee firms such as Goldman Sachs International, Credit Suisse Securities Europe and Barclays Capital Securities.  Imrquits.com recently profiled Mondaq’s contemporary Overview of Turkish Litigation Practice. Litigation finance is a bright new concept in Turkey, and many are hopeful of its usage as a potential international diplomacy tool. The volatile Turkish Lira and global inflation pressures continue to prompt Turkish officials’ call for international diplomacy rather than targeted economic conflict. Litigation finance may be useful in closing regulatory arbitrage loopholes that have the potential to snowball into crimes against humanity. For example, Turkey is covered by New York Human Rights provisions to certain acts committed outside the state of New York (§ 298-a.). If a New York bank willfully intends to target Turkey’s vulnerable economy by violating human rights laws, claims based on such aggression can be financed without armed conflict.  Savvy international litigation funders may look for unique opportunities to finance profitability diplomatic solutions, rather than exacerbate Turkey’s economic vulnerabilities. 
Commercial Regulatory Issues

Flaws in Credit Agreements and Their Impact on ATE Insurance 

As the third party funding ecosystem matures, businesses' organizational systems and processes are sure to evolve. A credit agreement has traditionally served as a loan vehicle to fund litigation. The loan earns interests while an “after the event” (ATE) policy is secured to insure the loan. If litigation is successful, credit agreement facilities traditionally can be helpful. 

However, Andrew Mckie’s new essay on LinkedIn points out flaws in credit agreements, many with too many moving parts that are convoluted. Mckie argues that legacy credit agreements are prone to misselling and misrepresentation. When credit agreements are mis-sold, Mckie points out that many ATE policies are rendered void, a commonly undesirable consequence for parties of failed litigation. 

When a credit agreement gets to the stage of ATE policy cancellation, Mckie prompts the disadvantaged to evaluate the capacity of professional negligence as a culprit. Depending on the severity of the matter, negligence can be career-ending malpractice.  Mckie’s thematic point concludes that modern litigation funding agreements have dynamism that credit agreements simply lack in design.  Read the entire essay to learn more. 
Commercial Deals

The Future of Banking and Litigation Finance

An obvious question is how will innovation in the banking and litigation finance sectors evolve together? Litigation funding is serving as a de-risking mechanism that doubles as a conduit to justice.  Oonbazul.com recently hosted a discussion titled, “Third Party Funding Executive Roundtable: A Perspective for Banks.” The panel brought together experts from Hereford Litigation, including Mr. Dakis Hagen QC, Mr. Edward Grundy, Managing Partner, Mr. Ben Mays, Managing Director, and the Managing Director from Kroll, Mr. Jason Kardachi.
  • According to the panel, banks are exploring litigation finance tools for asset recovery. Benefits include risk being absorbed by funders who are motivated to see a return on their investment. 
  • While funders do not control third party litigation, many in-house bank collection operations lack such motivation to innovate. 
  • As such, experienced funders have partnered with leading banks to engage in litigation finance as a risk mitigation strategy. 
Looking at the international horizon, forecasts suggest that high profile cross-border banks will broadly explore litigation finance facilities. Similarly, investors will look to leverage sophisticated  banking relationships that service a new generation of global litigation funding business. A symbiotic relationship that stands to increase overall bank profitability.
Commercial Special Features

How Our Top-5 Articles of 2021 Foretell What’s Coming in 2022

Litigation Finance has enjoyed another year of growth and innovation, as we enter a shocking third year of the COVID pandemic. New funds have arisen, affording more potential claimants an opportunity to experience their day in court. New entrants are emerging in the funding space, innovative investment opportunities are popping up in the form of ILOs on the blockchain, and prominent examples of the benefits of legal funding are arising with increasing frequency. Each of our top-5 most popular articles in the last year illustrate an industry trend we think is worth keeping an eye on. These trends also offer clues as to what we can expect in the coming year. Below are the top-5 articles from 2021:  #5) Litigation Finance and Patent Litigation—Fast Friends 2021 Trend: One thing we’ve learned about third-party litigation funding is that once clients and plaintiffs get a taste of it, they recommend it highly. This leads to explosive growth in specific sectors. In this contributed post, Slingshot Capital founder Ed Truant explains that in 2021, Patent and IP litigation went from a relatively uncommon investment to one that is highly sought out. Some of this can be attributed to the pandemic and the investor rush toward uncorrelated assets. But some of the popularity of IP litigation investment stems from the possibility of awards in the multi-millions. As funders sharpen their due diligence skills and use new tech to predict case outcomes, the likelihood of sourcing meritorious patent cases grows. From the article: “It used to be the case that patent litigation was viewed negatively by the litigation funding community...Then about two years ago, I noticed an increase in the number of patent cases being brought to the attention of funders, and in the number of funders marketing that they are interested in providing financing to patent cases.” What does this mean for 2022? If/when COVID restrictions are lifted and life slowly returns to normal, we’ll likely see similar growth in other sectors. We know that when law firms and clients have a good experience with funders, word gets around. The expectation is that Litigation Finance will improve in recognition and accessibility. As a largely self-regulating industry, third-party legal funding continues to position itself as a public good. We have every reason to believe that will continue in 2022 #4) Litigation Finance Basics 2021 Trend: The popularity of this article, originally published in 2017, reveals interesting things about the business of legal funding. Legal professionals and many types of investors are taking an increased interest in litigation funding. It also underscores that this widespread curiosity about the industry is leading people to investigate it from its humble beginnings to its current role as a public good. From the article: “We don’t all have the same access to the legal system. Those with money have more access than those without. Litigation finance allows claimants without money to have the kind of access to justice that those with money currently enjoy. Obviously, that threatens some, but for the rest of us, litigation finance should be celebrated as a means of achieving equality of opportunity when it comes to preserving our legal rights.” What does this mean for 2022? We predict more of the same, probably on an even grander scale. As regulations become more welcoming to funders, investors are taking greater notice of the practice. Now that regulations are relaxing around non-lawyer ownership of legal firms, the potential for lawyer/funder co-ownership of firms has earned the interest of many prominent investment firms. Jurisdictions around the world are relaxing champerty and maintenance restrictions and creating an environment more welcoming to third-party funding for an array of legal matters. This includes arbitration, patent and IP litigation, and claims enforcement. The popularity of a back-to-basics piece like this one, demonstrates that more people in more industries are curious about what litigation funding can do for them. #3) The Impressive Growth of Commercial Litigation Finance 2021 Trend: Our third entry is another Ed Truant piece illustrating an interest in Litigation Finance from people outside the legal field. In this piece, however, emphasis is placed on the addressable market for litigation funding. This tells us that financial experts are looking toward third-party funding as a future investment. From the article: “I think it is important for all stakeholders to understand the size of an industry, so investors can determine whether it has the scale and growth attributes necessary to justify a long-term approach to investing in the sector.” What does this mean for 2022? We predict that hedge funds and private equity firms will continue to flock to the litigation funding sector. This may happen at an even faster clip, as certain types of litigation rise to prominence in the coming year. Breach of contract, insurance litigation, and issues of employer responsibility as related to COVID precautions are expected to flood court dockets in 2022. This amid an effort to catch up on the backlog of cases caused by court delays and closures.  More litigation means more opportunity for investors to avail themselves of the benefits of TPLF as an uncorrelated asset. #2) Investor Caveats in the Commercial LitFin Asset Class 2021 Trend: As an increasing number of investors seek out litigation funding, the pitfalls associated with this type of investment aren’t as well known. Ed Truant of Slingshot Capital, shows up again on our list, as he explains how investors can better understand this asset class. Matters of tail risk, gross vs net returns, portfolio valuation, and deployment risks are all areas investors will want to be familiar with. After all, just because an asset is uncorrelated, does not mean it is free from risk. From the article: “The asset class presents a unique opportunity to add an asset that has true non-correlation, along with inherent ESG attributes. This makes litigation finance a very attractive asset class. However, an investor needs to do their homework prior to executing an investment.”  What does this mean for 2022? The emphasis on ESG investing bodes well for the future. Litigation Finance’s commitment to investing in environmental, social justice, and governance litigation shines a light on the fact that LitFin investments can be simultaneously lucrative, and a net gain for society. #1) Bank Cartel Claims Europe Announces $12 Million Funding Round 2021 Trend: The popularity of this article is an affirmation of the growth and expansion of Litigation Finance in the EU market. The piece details three antitrust cases in which the fund will deploy cash. The banks are accused of engaging in cartel behavior—one of the most serious types of antitrust charges. This type of piece serves to illustrate how litigation funding helps fight corruption and works toward the public good. It also shows us that fundraising capital is out there for experienced funders with proven track records. From the article: “In these three cases, for example, the pension and hedge funds that lost millions of dollars...can effectively claim their damages through actions before a national court. ...in most cases, the remaining question to be decided is the amount of damages. This makes antitrust litigation very attractive for investors.” What does this mean for 2022? We think this means even greater global expansion for Litigation Finance. While funding still has its naysayers, the global mood toward third-party legal funding is largely positive. As the practice casts a progressively wider net—most of those who have used litigation funding to pursue their litigation report being satisfied with the results. Legal funding is already growing in India, Singapore, Germany, South Africa, and China. There’s no reason to think expansion of the industry will not continue in 2022.
Case Developments Commercial

US Magistrate Judge Denies Facebook Request for Litigation Funding Info

It appears that Facebook will not receive discovery information from an AI startup after all. In the case of Neural Magic Inc vs Facebook Inc, US Magistrate Judge Marianne Bowler struck down Facebook’s motion for discovery. Reuters reports that Facebook’s motion sought information on the litigation funders backing Neural Magic in their case against the social media giant, including the funder’s identity and specifics about the funding agreement. The judge in this case, as in many similar cases, ruled that the information requested was irrelevant to the case. Facebook has advanced the theory that it wants funder information to dispel the perception of a ‘David v Goliath’ conflict, which the company fears will prejudice a jury.
Commercial Regulatory Issues

The Unpredictable Nature of Case Times

Even with new technology available to funders, solid estimates for the amount of time it might take for a class action to reach completion remain elusive. One way to shorten the start-to-finish length of a class action, is to follow an opt-out plan rather than one that requires book building. Law Gazette details that collective proceedings may require a long wait to reach an award or settlement. Sometimes, several resolutions can drop in rapid succession. Three collective proceedings orders have been approved in rapid succession after a six year wait. In Merricks vs Mastercard, the court pointed to opt-out CPOs as a means for consumers to get justice when anti-competitive conduct harms consumers en masse. In fact, the court’s reasoning included the idea that it makes no financial sense for individual consumers to seek justice one by one. The outcome in Merricks vs Mastercard is considered a landmark verdict, one that may pave the way for opt-out proceedings. That’s good news for legal funders and claimant legal teams, who prefer opt-out proceedings that do not require a lengthy and complicated book build. Two subsequent cases, Gutmann vs First MTR South Western Trains & Others, (class members backed by Woodsford Litigation Funding) and Justin le Patourel vs BT Group plc (class backed by Harbour Litigation Funding), affirmed that a trend is growing in favor of opt-out CPOs as an efficient and suitable method for customers to seek redress. Perhaps those who suggested that Merricks vs Mastercard would open the floodgates to widespread use of CPOs are correct. According to third-party litigation funders, claimant lawyers, and consumers who have been taken advantage of by anti-competitive actions, that’s just fine. At the same time, Lloyd vs Google suggests that some situations are not appropriate for opt-out proceedings. The ruling denying an opt-out model implies that further clarification is on the horizon.
Commercial People Moves

Philip Holden Joins Asertis

Asertis, said to be the United Kingdom’s fastest growing litigation funding firm, is proud to announce that Philip Holden is joining the group.  Mr. Holden is a respected attorney who will support the Asertis team in negotiating new litigation finance deals.  Asertis is proud to announce that Mr. Holden is, “A Fellow of the Association of Business Recovery Professionals, Philip was an equity partner with a major law firm (DLA) before moving to become Head of Financial Recovery at the insurance market Lloyd’s, subsequently establishing his own independent business specialising in litigation management, advisory and insurance run off which was sold to a listed PLC in London in 2005”