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Commercial

The History of Litigation Finance in Canada 

In 2015, Omni Bridgeway opened the first litigation finance office in Canada’s history. Omni’s overarching goal was to offer access to Canada’s justice system. Since then, demand for investment in the Canadian litigation finance industry has continued to grow exponentially. Sophisticated, bespoke solutions are being developed in Canada to support marketplace innovation.  Omni Bridgeway’s new insights into the Canadian ligation finance industry suggest that ‘funding is not a monolith.’ All metrics point to the market supporting a cornucopia of different products and services to fit a variety of client needs in the space. Canada’s litigation finance space was born by funding large meritorious cases that afforded access to the risky enterprise of litigation. Litigation finance investment now serves as a risk mitigation tool in Canada. A basket of litigation claims can serve as a cross-collateralization facility. Anchoring a portfolio of cases can produce multiple returns for future firm and investor success stories.  AmLaw 100 firms are starting to embrace pooling portfolios for even grander return expectations over the long term. Similarly, the evolution of Canada's litigation finance space is begging the question of what other financial products are needed to meet opportunities for revenue generation. 
Commercial

Litigation Finance Turns Justice into a Financial Asset

We’re all familiar with the phrase ‘equal justice under the law.’ Yet some would say the accuracy of that statement is debatable. Meanwhile, litigation funding, a practice developed specifically to increase access to justice, is sometimes painted as a way of exploiting lawsuits for financial gain. The Hill details that so-called ‘patent trolls’ develop IP or patent lawsuits with no intention of taking them to court. This could leave a damaging impact on small businesses that must spend limited resources fighting the accusation. The Litigation Finance industry has been accused of increasing its investment in so-called patent trolls—especially since patent lawsuits have become a popular case type for funders and investors. Those who oppose funded patent cases make much of Litigation Finance investors being hedge funds and private equity firms. Steps to curb third-party legal funding for patent cases have been introduced. The Pride in Patent Ownership Act would require disclosure of the identities of patent owners. The thinking is that this transparency would discourage funders from bankrolling patent cases. The bill is supported by Democrat Patrick Leahy and Republican Thom Tillis. Also under fire is the NHK-Fintiv rule, which states that a Patent Trial and Appeal Board review is denied if a case is already underway. This would send a message that the validity of the patent is uncertain—otherwise, PTAB could have made a ruling on the merits of the case. Those who oppose funding patent litigation claim that the current system “punishes” innovators by forcing them to prove that their innovations aren’t based on, or utilize existing patents. Some even assert that third-party legal funders are “twisting” existing patent law—generating a profit for investors by taking it from business owners and product developers. The word “extortion” has even been used to describe funder involvement in patent cases.
Consumer

Calls to Regulate Consumer Legal Funding

A recent opinion piece on Consumer Legal Funding pulls no punches in its condemnation of the industry. Its author, Kirsten John Foy, refers to being a “victim” of “predatory practices” of third-party funders. Foy utilized the services of a third-party funder after a violent police assault led to his hospitalization. To cover his living expenses as he awaited legal adjudication, Foy received a cash advance against his expected settlement. Lohud explains that after a settlement was reached, Foy’s financial obligations to the funder left him with what he describes as a “small fraction” of a six-figure settlement. The majority of the settlement was owed to legal funder LawCash. It’s unclear what interest rate or funding terms Foy agreed to, yet what is clear is that despite having a voluntary agreement with LawCash, Foy felt victimized and misled—claiming that LawCash had capitalized on his misfortune. As we know, the Consumer Legal Funding industry is experiencing tremendous growth. Non-recourse funding has been in the US for decades and has grown into a multi-billion dollar industry. Foy suggests that laws capping interest rates and mandating disclosure would reduce the victimization of those who accept funding—as well as expose conflicts of interest. Foy paints the funding industry as taking advantage of its clients: first responders, the wrongfully convicted, injured athletes, victims of corporate negligence, and other survivors of police brutality. Foy regards his story as a cautionary tale and hopes it will encourage lawmakers to enact further regulation, including interest caps. Time will tell how many legislators agree.
Case Developments Commercial

When Clients Go Bankrupt, Who Pays? 

This week in the United Kingdom, a case is being heard involving the ligation powerhouse Cadney, regarding their former client Peak Hotels & Resorts Limited. The case involves Peak’s insolvency and inability to pay £4.7M in fees and outstanding costs. The UK Supreme Court justice presiding over the case stands to grapple with the thematic undertones of litigation finance, and whether a lien should be considered litigation funding or not.  LawGazette.co.uk asks the question if attorneys should be penalized for protecting themselves when a client is unwilling to issue due payments. It appears that the case may hinge on whether Cadney’s “deed” or “lien” against Peak is structured as a litigation finance agreement.  Cadney foreshadows an unsuccessful ruling in the case would result in chilling industry effects. However, Peak seems to be arguing the structure of the deed harbors rights and rules associated with a losing litigation finance agreement, henceforth Peak is not liable for fees.  The case is ongoing; and we will continue to provide updates as they arise.
Commercial Legal Innovation

When Divorce Litigation Finance Turns Ugly 

Protecting access to justice is a hallmark of the litigation finance industry. Divorce is no exception. Success stories rain in regarding instances where one party is being ‘jerked around’ with no access to capital. Litigation funders pride themselves on enabling access to justice, but what happens when a funder does its part and the couple decide to push the funder out of its just reward?  Hunters Law examines an instance of divorce with a near £1M award, structured to bamboozle a litigation funder out of its return. The contentious debate of whether the funder was defrauded is not the question, according to author Polly Atkins’ review of the situation. Offering several citations, Ms. Atkins points out the precarious loophole that many divorce litigation agreements embody, one being that the funder is a third wheel that can be cut off if clever clients orchestrate such an occurrence during divorce proceedings.  Ms. Atkins goes on to outline that the funder in question has various avenues to clawback their reward in this particular proceeding. Check out the entire post to learn Ms. Atkins’ full take on the issue.
Commercial

Allen Fagin is Bullish on Litigation Finance

Allen Fagin is a former partner of Proskauer Rose LLP, where he served as the firm’s chairman from 2005 to 2011. Today, Mr. Fagin is a senior advisor and board member of Validity Finance LLC. Recently, Mr. Fagin penned an op-ed for Reuters Westlaw on the innovative aspects of litigation finance that are contributing to the United States’ legal system.  Writing in Westlaw Today, Mr. Fagin reports that litigation finance is now widely embraced by large firms, with 76% of in-house attorneys reporting usage of ligation finance tools. Mr. Fagin goes on to assert that legal finance will continue to grow in popularity over the next decade. Fagin forecasts that many law firm leaders will continue to explore the benefits of litigation finance to meet and even exceed client expectations, while expanding the firm’s bottom line.  Fagin points to new research findings of the 2021 Law Firm Business Leaders Report, published jointly by Georgetown Law and the Thomson Reuters Institute … highlighting that 80% of law firm leaders are empowered to drive innovation in their office. While this seems exciting, the same study points out that 47% of respondents felt that firm partners were a barrier to such innovation.  Check out Fagin’s complete op-ed to learn more.  
Consumer

Missouri Legislature Explores Litigation Finance Regulation

Missouri’s House of Representatives recently introduced the “Consumer Litigation Funding Model Act” in an effort to regulate disclosure of litigation funding agreements at the time of case discovery. If the bill is passed into law, all litigation finance investments would be regulated by Missouri’s Department of Commerce and Insurance. The bill appears to be a lobbying product of the American Property and Casualty Insurance Association.   BusinessInsurance.com reports that the bill states that  “... A consumer or the consumer's legal representative shall, without awaiting a discovery request, provide to all parties to the litigation, including the consumer's insurer if prior to litigation, any litigation financing contract or agreement under which anyone, other than a legal representative permitted to charge a contingent fee representing a party, has a right to receive compensation or proceeds from the consumer that are contingent on and sourced from any proceeds of the civil action, by settlement, judgment, or otherwise.” Additionally, the bill would guarantee regulation on various consumer protections such as being able to cancel a litigation funding agreement within a five day grace period. Also, if a case is won but the collected damages are less than the litigation funder’s investment, the claimant would not be responsible for the excess of the recovery, according to the bill.  
Commercial Legal Innovation

Liti Capital Announces Staking Program

Switzerland-based Liti Capital has announced a new staking program on the Polygon Network. Liti Capital purchases interest in litigation assets to help claimants fund cases. If the case is successful, token holders earn a portion of the proceeds. Liti Capital’s new staking program offers an intermediary method of earning a return on investment during a case’s lifecycle.  According to a recent Liti Capital press release, the executive team researched various options before choosing Polygon for their staking efforts. A second layer protocol on top of the Ethereum blockchain, Polygon offers significant cost savings and efficient transaction speed. Case in point, the Ethereum blockchain processes around 14 transactions a second for around $25.00/transaction. The Polygon network can process nearly 65,000 transactions a second for less than a penny/transaction.  Liti Capital claims its new staking program can garner significant interest.  For example, up to 1M Liti Capital “$wLITI'' tokens can be staked for 30 days for a 5% return, according to the press release. A 60-day saking period is said to garner 7%, and 90 days 10%. Various options are available to stake a portion of the proceeds for different time periods. A Liti Capital token holder can cash out their stake at any time, and the system will calculate earnings accordingly.  
Commercial

Litigation Funding Misconceptions

According to a Bloomberg survey, 88% of lawyers believe that third-party legal funding increases access to justice. Noted legal scholar Maya Steinitz describes the practice as the most important development in civil justice in this generation. American Bar Association explains that despite some detractors, litigation funding has ingratiated itself firmly into the legal world, and shows no signs of slowing. Legislation is catching up, expanding the uniform application of rules and guidelines regardless of jurisdiction. At the same time, common misperceptions persist. Some lawyers worry that if they obtain third-party legal funding, they must repay the funder. In fact, litigation funding is provided on a non-recourse basis. If the case is not successful, funders lose any monies deployed. There is confusion as to what TPLF can be used for—and whether it must be used exclusively for paying lawyers. In fact, funding dollars can be applied to operating budgets, to cover case research, consulting, or expert fees, and can even be used to cover personal expenses as plaintiffs wait for their case to resolve. One of the more pervasive misconceptions about Litigation Finance is that accepting monies will allow funders to make decisions about case strategy or settlements. This is false. Funders cannot influence strategy or settlement amounts, nor can they legally push for a case to end more quickly. Are all litigation funding documents discoverable, and will that complicate matters? Not really. Even in places where disclosing funding contracts is necessary, exact details are kept sparse. Judges, on the whole, are ruling that funding need only be disclosed when there is a compelling reason to do so—specifically to avoid unnecessary complications. Finally, some think that using a funder and providing them information about a case negates attorney-client privilege. It doesn’t. Discerning reality from rumors will go a long way toward ensuring that those seeking funding understand the process, caveats, and benefits.