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Commercial

Australia Considers Arbitrary Price Cap for Class Actions

It’s no secret that the Australian government is concerned about class actions—especially those with potentially high awards. In recent months, a law requiring third-party litigation funders to hold specific licenses came into effect. Disclosure obligations were formalized and may become permanent. Now there is talk of imposing a 30% cap on how much claimants can be charged by funders in collective actions. Burford Capital explains that it’s very likely that the figures used as the impetus for these changes are being misinterpreted--specifically, data published last month by Professor Vince Morabito regarding Australian class actions. For example, the study shows that 54 class actions were filed in one year, and 69 filed the next. That seems to suggest that class actions are rising in number. Except that many of the filings happened in a rush before new funder regulations were instituted in August—11 cases were funded in the two days leading up to the deadline. The study also did not control for duplicate class action filings, which are common. It’s also been suggested that shareholder class actions are up—but in fact, they’re roughly half of what they had been since 2017. Not only that, but the actual number of funded class actions is down as well. Class actions backed by funders were roughly 75% in 2017; that number has fallen to around 46% this year. With that in mind, why focus on funding and class actions? When using data to dictate public policy, it’s essential that the data is properly interpreted by industry insiders. There’s nothing to support the idea that 30% is the appropriate amount for a funder’s share, nor is there evidence that courts need more power to evaluate and approve or reject funding agreements. Here’s hoping there’s more discussion before an arbitrary, and potentially harmful, regulation is passed.
Commercial

What is Esoteric ABS and Why Does Everyone Love it?

As the world economy inches toward some sense of post-COVID normalcy, asset-backed securities are demonstrating their resilience. Unlike traditional ABS classes like leases, car loans, student loans, or credit card debt, the term ‘esoteric ABS’ can be applied to assets that can be traded for non-recourse funding. CFO Magazine explains that the ABS market can provide low-cost funding on the basis of assets like aircraft, rental car fleets, or say—a catalog of popular music. Litigation Finance is a rapidly growing industry that aids businesses and consumers in a number of ways with the use of this ‘esoteric ABS.’ Oasis Financial, for example, provides funding for injured parties to cover lawyers and medical fees on a non-recourse basis. Its success during the height of the COVID pandemic demonstrates the desire for esoteric ABS in the capital market. Global Jet Capital and Sunnova Energy have also made use of this marketplace. During the first month of COVID-related shutdowns, court stoppages, school and business closings, financial professionals were in panic mode. But esoteric ABS markets in “niche” areas like litigation funding are largely recession-proof. In fact, investors flocked to invest in litigation funding as it is uncorrelated to the market as a whole—bolstering litigation funding to a multibillion dollar industry. It is now possible to use non-recourse legal funding to pursue litigation businesses couldn’t otherwise afford, or to monetize assets that would normally be considered illiquid. The market for esoteric ABS is maturing and expanding with no signs of slowing.
Commercial

Prairie Mining Files Energy Charter Claim Against Polish Government

Since 2018, Prairie Mining has maintained that actions committed by the Polish government deprived the company of the value of its investment in the Jan Karski and Debiensko mines. Mining News details that the mining company’s case is funded by Litigation Capital Management, an Australia-based, UK-listed funder. The case will be heard under the United Nations Commission on International Trade Law Rules. The claim for losses could reach AUD $1.5 billion. The investment made in the two mines costs an estimated AUD $1.3 billion to develop.  
Commercial

Legal Funding in Global Jurisdictions—How are They Different and What’s Next?

The acceptance and mainstreaming of litigation funding are happening at different times and speeds in different parts of the world. Much of Europe has made use of the practice for nearly two decades. Other locales, like Singapore and Hong Kong, have only welcomed legal funding in recent years. Omni Bridgeway explores how a jurisdiction that is new to litigation funding can take its cues from those who have had more time to refine their procedures and requirements. In common law jurisdictions like those in Australia, moving away from antiquated concepts like champerty was an important first step. As the practice of third-party funding grew in popularity and scope, Australia took steps to add legitimacy to the industry. First was a review by Lord Justice Jackson, which served as a precursor to new regulations and legislation surrounding the practice—as well as the formation of the Association of Litigation Funders. In Singapore, emphasis is not on the courts to clarify the roles and duties of funders, but on legislation abolishing champerty while facilitating the funding of cross-jurisdictional and multi-jurisdictional cases. Case law is also used to inform the development of legislation and policy regarding funding—particularly funding of actions other than those expressly permitted. While some countries like Australia are allowing courts greater control over approval of legal funding agreements—Singapore case law establishes that a funding agreement is not an abuse of process and that these agreements will only be found unacceptable under extreme circumstances. Meanwhile, UK governments are still loathe to formally regulate litigation funding. Looking ahead, it’s clear that third-party legal funding will continue to grow and adapt to a changing world. Recognition of pending or possible litigation as an asset is commonplace in the UK. Defense-side financing is also gaining steam. It does appear that courts, funders, lawyers, and investors can all work toward the goal of increased access to justice and financial flexibility.
Commercial

High Court Battle Imminent in Woodford Case

The collapse of the Woodford Equity Income Fund is still yet to be resolved. Leigh Day sent a letter-before-action to Link Fund Solutions in March, accusing the ACD of failing to maintain proper liquid asset levels, as well as general mismanagement of the fund. Portfolio Adviser details that Leigh Day has stated its readiness to take Link on in this case—including litigation funding already in place. Litigation funding is increasingly popular in shareholder actions and allows claimants to participate without any cost to them. Link refused to compensate the more than 7,000 investors who lost money in the collapse. Clifford Chance, attorney for Link, promises to vigorously defend against the claim. Meanwhile, Harcus Parker also sent Link a letter-before-action representing a further 6,500 clients impacted by the Woodford collapse. In March of this year, RGL Management began a formal proceeding connected to the Woodford collapse.
Commercial

Asia Encouraged to Embrace Litigation Funding

Around the world, antiquated champerty laws are being struck down in favor of allowing third-party litigation funding. In the late-1990s, litigation funding gained popularity in Australia, England, Wales, and the United States. Since then, it has grown in acceptance and familiarity—and is now a multi-billion dollar industry. Asia Business Law Journal explains that both Hong Kong and Singapore have taken steps to invite participation from the Litigation Finance industry. Both allow for third-party funding in international arbitration proceedings, including enforcement and mediation. Hong Kong later made a clarification that court approval for funding is not required for liquidators. Harbour Litigation Funding founder, Susan Dunn, has seen banks, corporations, and even governments leverage funding in order to pursue legal matters they could not otherwise afford. Some of the newfound growth of litigation funding can be traced back to COVID and the financial turmoil it caused. Cash-poor businesses are looking to free up operating funds and monetize legal or IP assets that are currently sitting dormant. Litigation Finance is also becoming commonplace for collective actions—though this practice continues to rankle detractors. Julien Chase, professor of law at City University of Hong Kong, feels that Asia should take steps to expand the scope of litigation funding. The industry, he says, is moving away from strict regulation toward flexibility and self-regulation. When legislation works with third-party funders instead of against them, the result is better for funders, lawyers, and clients alike. Several sectors have already experienced increased interest in obtaining funding--including insolvencies, intellectual property disputes, and patent law. Any jurisdiction looking to become a litigation destination would do well to welcome third-party litigation funding. Not everyone has a choice, but those who do will be more likely to choose a place that allows for multiple types of fee arrangements, including third-party Litigation Finance.
Announcements Commercial

Forbes Ventures Plc – Update on Litigation Funding Securitisation

Forbes Ventures announces an update to its first Litigation Funding Securitisation. The listing and closing of the GBP 40 million two-year notes (the “First Issue”), for which Forbes Ventures’ wholly owned subsidiary, Forbes Ventures Investment Management Limited (“FVIM”), acts as Collateral Agent, has been subjected to further administrative delays. Those delays have not been within the control of the Company or FVIM. The Maltese Corporate Advisors, who are also the manager of the Securitisation Cell Company which is the issuer of the First Issue, has advised the Company that they will commence the process of listing the first issue in the forthcoming days. It is expected therefore that listing and closing will occur in the next 14 days. The Directors of the Company are frustrated at the continuing delays but have been given assurances by the Maltese Corporate Advisors that there will be no further delays in completing the listing and closing of the First Issue. The listing of the previously announced second Litigation Funding Securitisation of GBP 60 million two-year notes will commence immediately after closing of the First Issue. The Company will make a further announcement upon closing of the First Issue. At that time, the Company will also provide a Corporate Update on the progress that has been made in implementing the strategy set out in the Company’s announcement of 30 September 2020. The Directors of Forbes accept responsibility for the contents of this announcement.
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Announcements Commercial

Longford Capital CFO Laura P. Pearl to Retire and Transition to Senior Advisor

Longford Capital, a leader in the commercial litigation finance industry, today announced that on May 31, 2021, Laura P. Pearl will begin her retirement and transition to a senior advisor role with the firm. Ms. Pearl has been Longford’s Managing Director and Chief Financial Officer since 2016. “Laura has made an indelible mark on our firm’s growth and progress, and the leadership role it plays in the global litigation finance industry,” said Timothy S. Farrell, Co-Founder and Managing Director of Longford Capital. “The Longford team is grateful for Laura’s financial acuity, tireless commitment, and hard work, and looks forward to continuing to benefit from her advice and friendship.” As part of its succession planning process, Longford will elevate Joshua A. Leavitt to Managing Director and Chief Financial Oofficer, also on May 31. After a national search, Longford added Mr. Leavitt late last year as Chief Accounting Officer. He has worked closely with Ms. Pearl, part of a careful predetermined plan to prepare for her retirement and transition to her new role. “It’s been a privilege to contribute to the growth of Longford Capital, and by doing so also participate in a richly innovative element of our legal system,” said Ms. Pearl. “I am particularly proud of how we’ve attracted new talent and scaled our team to accommodate the growing demand for our capital. I’m grateful to be handing the CFO title to a talented leader like Josh.” “Since joining Longford, I’ve been impressed by the sophistication of its business and strong collegiality of its team,” said Josh. “Laura’s contributions are palpable. It is an honor for me to step into her shoes, and I look forward to having her ongoing counsel.” Mr. Leavitt was CFO of Math Venture Partners Management, LLC, an early-stage venture capital firm, where he upgraded and institutionalized back-office operations and investor reporting processes. He was previously a founding member of the executive team at JHL Capital Group, where as CFO and Executive Vice President for Operations, he built the middle and back-office infrastructure needed to enable the alternative asset manager’s growth from approximately $11 million to more than $2 billion in AUM. He also co-founded Zoku Technologies, a Software-as-a-Service (SaaS) secure online vault business, where he served as CEO, and held senior positions in other high-growth ventures. Mr. Leavitt earned his MBA at the University of Chicago Booth School of Business. He is a registered CPA and has held Series 7 and 63 licenses. About Longford Capital Longford Capital is a leading private investment company that provides capital to leading law firms, public and private companies, 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 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 monetizations, insurance recovery matters, and a variety of others.
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Commercial

Mergers Predicted for Litigation Funders

Litigation Finance is a rapidly growing and evolving industry, and has been since its emergence during the last financial crisis. The practice helps law firms accept more contingency cases, allows businesses to monetize illiquid assets, and can turn existing IP into a profit center.

Asertis explains that third-party litigation funding has demonstrated its worth many times over. A Post Office scandal in the UK was finally brought to light when funders allowed 39 sub-postmasters who had been wrongfully convicted of financial crimes to seek access to justice. The Dieselgate scandal against several German automakers was also aided by third-party legal funding.

It’s expected that even more new entrants to the litigation funding market will present themselves in the near future. While this may increase competition among funders, its great news for law firms and potential claimants who need funding to pursue legal action.

Will litigation funders see an explosion of mergers the way banks have in recent years? Some say so, especially after the merger of IMF Bentham and Omni Bridgeway in 2019. In addition to mergers, many funders—both established and upcoming—are developing specialized and niche areas of focus, offering them an edge over funders with less specific knowledge.

Litigation funding has been mainstreamed and is here to stay. As the practice continues to grow and adapt, all eyes are watching how access to legal capital benefits lawyers, businesses, and clients.