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Commercial

Trends in Litigation Finance Include Increased Corporate Use

Last year, the UK saw a sharp decline in the number of commercial litigations. This happened due to the combination of economic shortfalls, and corporations opting not to pursue litigation during a pandemic. EY research shows that nearly a third of survey respondents opted not to pursue litigation during the pandemic. That implies a backlog of meritorious claims.  Burford Capital details that while litigation is expected to increase this year, many businesses might find themselves unprepared for how expensive that litigation can become. With that in mind, EY suggests a rise in the use of Litigation Finance. As one EY partner told Law.com, the UK business community has been cautious about taking advantage of third-party funding. But as the pandemic amplifies financial uncertainty, businesses are increasingly willing to make use of the practice. As in-house lawyers grow more amenable to the concept of third-party legal finance, more are opting to use legal funding to manage risk and costs associated with litigation. In addition, there are options that funding offers which can generate income streams without pursuing additional litigation—such as monetizing existing awards or cases. So expect a litigation funding boom post-pandemic--perhaps an even larger one than we've experienced over the past few years.
Announcements Commercial

Delta Capital Partners Management Launches Delta Credit Solutions

Delta Capital Partners Management LLC, a global private equity firm specializing in litigation and legal finance, is pleased to announce the launch of a new venture, Delta Credit Solutions ("DCS"). DCS will offer an array of litigation finance credit solutions that satisfy the needs of claimants, respondents, law firms and businesses across the globe. Delta believes that traditional lenders do not treat litigation or arbitration claims, judgments or awards as valuable assets, and that Delta's experience providing equity-based litigation funding allows the firm to recognize the value behind these types of claims. Accordingly, Delta now seeks to provide a suite of credit-based financing options to individuals, businesses, law firms and other professional service firms, financial institutions, investment funds, and other parties with direct financial interests in the outcome of litigation, arbitration, or asset recovery. Delta intends to offer several types of financing products through DCS, including:
  • recourse financing for claimants, respondents, businesses, law firms and other professional service firms;
  • non-recourse portfolio financing for larger portfolios of diverse pre- and/or post-settlement claims, judgments or awards;
  • non-recourse financing for the enforcement of court judgments and arbitration awards that have already been rendered, but which have not yet been collected or are otherwise time delayed;
  • non-recourse capital facilities for law firms and other professional service firms, as well as for insolvency practitioners; and
  • non-recourse financing in a senior priority credit tranche of an otherwise equity-based litigation finance investment.
Delta believes that such an array of litigation finance credit solutions will offer many benefits by providing capital on favorable terms which can be used for a variety of purposes, including:
  • funding new or ongoing litigation, arbitration, investigations, asset recoveries or enforcement projects;
  • expanding business operations;
  • financing operating expenses and/or capital expenditures;
  • risk management and diversification; and
  • distributions or dividends to partners, shareholders and/or employees.
By combining the credit underwriting process, capacity, and cost of capital of a traditional lender with the flexibility and due-diligence expertise of a litigation funder, Delta believes it will be able to deliver optimal, customized financing solutions.   Moreover, the bespoke nature of DCS's products will enable law firms, other professional service firms, and businesses to gain liquidity by utilizing their claim portfolios and contingency cases as assets against which they can borrow. Christopher DeLise, Delta's Founder, CEO and CO-CIO, stated, "As the litigation and legal finance market continues to evolve, Delta has perceived an increased demand for credit-oriented financing arrangements for professional service firms, businesses, financial institutions and governmental entities to access cost-effective, credit-based capital for a variety of purposes, including funding, growing and de-risking their operations.  We are pleased to now be able to offer such solutions due to Delta's expertise in sourcing and underwriting that will enable us to put significant capital to work in this exciting and burgeoning area of litigation and legal finance.  By launching DCS, Delta believes that it will be able to remain a funder of choice for sophisticated parties across the globe." About Delta
Delta Capital Partners Management LLC is a global private equity firm specializing in litigation and legal finance, judgment enforcement, asset recovery, and related strategies. Delta provides capital and related services to individuals, businesses, private investment funds, law firms and other professional service firms across the world that seek to hedge their financial exposure, reduce legal spending, enhance the probability of a successful and timely resolution of claims, and maximize the effectiveness of their core businesses.
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Announcements Commercial

Litigation finance specialists partner to provide funding and ATE cover

Apex Litigation Finance Limited today announces a partnership with Maxima Litigation Finance Limited to provide litigation funding to a scheme generating 200-plus cases per annum.
The partnership will see Apex provide litigation funding for the scheme from an unnamed third party, with Maxima arranging comprehensive ATE cover. Working together, the two firms have won the exclusive rights to provide these services to the scheme comprising commercial litigation cases in a specialised area. This new scheme will also provide ‘spin-off’ litigation to which Apex and Maxima will have the first option on providing funding and ATE, respectively. Speaking about this new deal Maurice Power, CEO of Apex, said: “We are extremely excited to have been chosen to provide litigation funding to this new scheme. The volume and size of cases are perfect for the Apex funding model and will make Apex one the highest volume providers of litigation funding solutions in the UK.” Maxima who have brokered litigation funding and ATE since 2007 are also enthusiastic about the arrangement. Mark Andrews, Co-Founder of Maxima says: “Our client needed a litigation funding and ATE solution bespoke and built from the ground up, Apex offered that willingness and skill to work together to build a solution.” About Apex Litigation Funding: Apex Litigation Finance Limited brings together experts from the legal and finance sectors to provide third party litigation funding to litigants (corporates, liquidators and individuals) who are unable to pursue a claim due to the prohibitive cost of litigation. Although the claim may have merits, uncertainty over the total costs and the potential risk of being ordered to pay the defendant’s cost, should they lose the claim, prohibits access to justice for many claimants. Our process is augmented by artificial intelligence systems to assess risk. As a professional litigation funder, Apex will make available funds to pay legal and other costs associated with a claim in return for an agreed share of any successful return. If there is no recovery, or if the claim is lost, there is nothing to repay. For details please see www.apexlitigation.com
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Commercial

LCM Interim Results: Half Year Ending Dec 31, 2020

LCM CEO Patrick Moloney details that LCM has made strong progress in the first half of its fiscal year. Quality applications are up, and demand for legal finance is increasing as predicted. Most of the direct investment portfolio is balance sheet funded, and portfolio investments are reaching maturity. While timing remains somewhat unpredictable, that should smooth out as portfolio investments increase over time.

LCM, via Polaris, details strong increases over the period. By the numbers:

  • Total assets under management rose to AUD $322 mil by March—an increase of 92%.
  • Applications increased by 5%, totaling 266.
  • Total invested capital: AUD $99.4 million, which represents a 189% increase.
  • Gross profits: AUD $5.4 million
  • Total Equity: AUD $80.6 million.

LCM has made excellent progress in building portfolio finance agreements with a dozen resolutions in Aviation and Construction Corporate Portfolios—both of which are performing according to expectations. Partnership with DLA Piper is poised to expand reach into newer and less saturated global markets.

Chief executives remain confident of LCM’s ability to rise to the increased demand driven by the continued presence of COVID. It’s expected that financial unrest will continue until COVID is controlled around the globe. Even after a return to normalcy, the rise in insolvencies is expected to persist through the next year and beyond.

Commercial Consumer

Proposed New Jersey Rule May Require Disclosure of Third-Party Legal Funding

The District of New Jersey has proposed an amendment that, if enacted, would require disclosure when a plaintiff or defendant is utilizing third-party legal funding. The proposed Rule 7.1.1 would require filed statements detailing all information about non-parties providing funding for attorney fees and expenses, in exchange for a percentage of any award. Law.com details that the comment period for the new law lasts through May 21. The new rule would only apply to legal funding that covers expenses directly related to the case—not in situations where plaintiffs receive money for household or personal expenses during a claim. If the proposed rule becomes law, New Jersey would become the 25th federal district (out of 95 total districts) to require disclosure of third-party litigation funding. Steven Richman, chairman of the District of New Jersey Lawyers Advisory Committee, cited a recent ruling as the impetus of the new rule. In a case against generic drug Valsartan, the defendants petitioned the court for information regarding third-party funders. The judge ruled that funding was not relevant, and denied the motion. A similar rule is being proposed at the federal level, owing to a negative impression of litigation funders that many say is undeserved. One professor at Cardozo Law School, Anthony Sebok, asserts that mandated disclosure is unlikely to turn litigants away from the practice. He goes on to say that disclosure rules can wind up costing everyone involved additional time and expense.
Commercial

UK Sub-Postmasters Clear Names in Legal Battle

Earlier convictions for theft, fraud, and false accounting have finally been quashed after a legal skirmish lasting more than a decade. Thanks to support from third-party funder, Therium, thirty-nine sub-postmasters cleared their names after being prosecuted by the state-owned Post Office. The employees had been charged over shortfalls in various branch accounts. It was eventually discovered that Horizon, the IT system used by the Post Office, was to blame for the perceived financial shortfalls. Financial Times explains that more than 700 other sub-postmasters were convicted of crimes based on Horizon evidence. Many convictions required defendants to pay back the “stolen” funds. Lives were ruined due to these convictions, marriages ended, bankruptcies declared, some even died as convicted criminals. Prime Minister Boris Johnson referred to the situation as “an appalling injustice” and welcomed the court’s ruling. The court determined that the Post Office ignored sub-postmasters’ complaints about the IT system and disregarded their assertions that the system was to blame. Some defendants have vowed to hold Post Office officials accountable for the damage caused by the malicious prosecutions. Lord Justice Timothy Holroyde stated that the Post Office’s egregious failures of investigation and disclosure were an affront. Were it not for legal funding from Therium, the wronged parties would still be waiting for justice. It’s predicted that this ruling will inspire a civil lawsuit for malicious prosecution, among other charges. In such cases, compensation must return the claimant back to the same financial situation they were in before the prosecution occurred. Meanwhile, the Post Office is asking for governmental help to pay the expected compensation, saying they are in no financial position to do so.
Commercial

Roger Allanson Struck From SRA Roll After Alleged Misuse of Funds

While Litigation Finance is increasingly popular as a means to manage costs, it’s not without risks. Case in point: Roger Brian Allanson has recently been struck from the roll of trusted solicitors following allegations of fraud and misuse of funds. Law Gazette details that Allanson received GBP 19 million from litigation funders in order to pursue mortgage cases. These cases did not produce a return in more than 2.5 years. Some funds were used to pay office expenses, and more than GBP 100,000 was transferred to Allanson’s personal account. He did not dispute the bank transfers but denied any breach of trust or misstatements to investors. A judge determined that Allanson’s conduct was premeditated, and that he was motivated primarily by financial gain. Funders trusted him by providing funds, and Allanson betrayed that trust. After the judgment is published, Allanson has 21 days to appeal the decision.
Commercial

Out of the Shadows: The Mainstreaming of Litigation Finance

Litigation funders provide non-recourse funding to litigants, in order to enable them to pursue a meritorious case they couldn’t otherwise afford. It’s a straightforward process with a net societal gain of increasing access to justice. So why aren’t more people making use of it? The CLS Blue Sky Blog details that a newly-published article in the Vanderbilt Law Review, The Shadows of Litigation Finance, explores how Litigation Finance can overcome barriers that have been placed in its path. In the piece, authors Suneal Bedi (Professor at Indiana University and Maurer School of Law) and Willian C Marra (Investment Manager at Validity Finance), examine the awareness problem that plagues the industry, and lay out a scholarly framework with which to evaluate the full impact of litigation funding pre-trial, during the case, and after a case is resolved. Third-party legal finance is an enormous step forward in terms of social justice. Until this industry came to be, those who lacked financial means often lacked any way to seek justice when wronged—particularly by a large business, utility, or government. Litigation funding allows average citizens to pursue valid cases while preventing frivolous claims from clogging court dockets. After all, no funder wants to invest in a frivolous case that’s unlikely to be profitable. One of the interesting points made in the article is that there’s no specific framework to measure the success and benefits of non-recourse legal funding, hence it is difficult to counter the assertion that the use of litigation funding necessitates increased regulation. The pre-claim and post-claim impact of litigation funding are some of the key measurements explored by Marra and Bedi. By examining how funding changes the behavior of litigants at these stages, the authors hope to illustrate the heretofore unseen benefits of litigation funding—such as increased compliance and more equitable bargaining.
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Commercial

How to Proceed After a Defendant Files for Bankruptcy

It may seem like a meritorious case and a competent legal team are all a plaintiff needs to recover funds. But what happens when a defendant declares bankruptcy? The situation becomes more complex for all involved—but it’s certainly not insurmountable if you know how to proceed. Omni Bridgeway explains that after a defendant files for bankruptcy, plaintiffs may feel pressured into taking a lowball settlement or even ending the claim. Plaintiffs may need to hire additional counsel or investigators, prompting costs to escalate significantly. For high-value claims, however, third-party legal funding may be a valuable part of the strategy going forward. Once a bankruptcy is declared, all legal actions against the debtor cease. Often, plaintiffs will ask judges to lift the stay—which gives the judge the option to enforce the stay or to deny the motion without prejudice. Effectively navigating this part of the process is essential, as a judge’s decision here may impact—or even end—the case. In bankruptcy court, plaintiffs often find themselves taking a discount on their claim. The trade-off is that disclosure of the defendant’s finances is more complete, and collecting the funds becomes less complicated. Any settlement stemming from bankruptcy court must gain court approval. Contentious settlements may be subjected to a procedure similar to a small trial—which may require additional counsel and other surprise expenses. More agreeable settlements can be fast-tracked in as few as 21 days. An experienced bankruptcy lawyer is essential for plaintiffs whose disputes wind up in bankruptcy court. Litigation Finance is a good way to fund surprise expenses while sharing risk with the funders—who provide financial help on a non-recourse basis. Ideally, funders should be well-versed in bankruptcy laws and collection strategies to better assist the plaintiffs moving forward.