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Commercial

The Tom Girardi Saga Continues

Remember the lawyer from Erin Brockovich? He married a former cocktail waitress. They bought multiple luxury houses and two private jets. If that sounds like the sensationalized stuff of reality TV, that’s because it is! The Girardis eventually wound up on The Real Housewives of Beverly Hills. So what happened? Institutional Investor details that Girardi applied for, and received, a loan of over $5 million from an Arizona-based litigation funder—Stillwell Madison. Ostensibly, the money was to be used for cases against Shell Oil, Eli Lily, GlaxoSmithKline, and others. If the cases made money, a portion was to be paid to the funders under the terms of the funding agreement. Instead, Girardi’s firm defaulted on their payments to the funders. Eventually, Girardi’s firm made a payment deal with Stillwell Madison, though Girardi neglected to mention that he had defaulted on another funding agreement with a different funder—Law Finance Group. Later, Girardi allegedly stiffed at least ten families in a case against Boeing. The families had lost loved ones in the Lion Air Flight 610 crash. As lawsuits for non-payment flooded in, it came to light that Girardi had taken out multiple loans—often reusing the same collateral. Erika Girardi filed for divorce against her husband in late 2020, just before Jay Edelson filed to sue both Girardis, the firm Girardi & Keese, and two litigation finance firms among others. Edelson alleges that Girardi has embezzled settlement proceeds that rightly belonged to clients so that he could continue to fund an absurdly lavish lifestyle. Stilwell Madison and California Attorney Lending, two litigation funders named in the suit, are accused of structuring an intercredit agreement among themselves. Erika Girardi remains on the reality series and affirms that she had no idea that her husband embezzled funds from anyone.
Commercial

How Litigation Funders Price Based on Risk

Critics of Litigation Finance appear to be celebrating Australia’s proposed cap of 30% on potential returns for litigation funders. It’s hard to argue that such a move would not have enormous, industry-wide consequences. Some say it’s ‘unfair’ for funders to reap high profits while claimants, who were actually damaged by the factors in their cases, receive a paltry sum. But who is really taking on the most risk? Dispute Resolution Blog details what it describes as the ‘real’ value of risk in litigation finance. It also reveals that when educating the public about the benefits of litigation funding, funders failed to impress upon consumers the reasons that lead to litigation funds being priced as they are. Commonly, prices are structured as either a share of the award (usually 30-40%) or a multiple of the capital provided (usually about 3 times). While this might seem high to the uninitiated, this is the same basic pricing structure that was used during the development of litigation funding in the 90s. There are two main approaches to pricing litigation funds: Capital Structure Pricing and Probabilities Pricing. Capital structure pricing is similar to basic accounting, where assets and liabilities are matched. Liabilities are tiered from cheapest to most expensive—starting with senior debt and ending with equity. This model is not unlike getting a good interest rate due to a lifetime of good credit. Someone without any credit could not get that rate because they’re considered inherently riskier. Probabilities pricing is a more academic pricing philosophy basing the cost of the funds on the probability of success. That means occasional losses are factored into the costs of the funding deployment. Time is also a factor since it can be years between deploying funds and receiving an award. Ultimately, the funding industry would do well to be more transparent not just about funding agreements, but about how current pricing is calculated.
Commercial

Litigation Funding as ESG

We already know that litigation is expensive. We also know that even if a claimant can technically afford a lawyer, they can easily be outspent by corporations and other big spenders who may be practiced in avoiding responsibility. That’s why litigation funding was developed—to level the playing field between the Davids and Goliaths of the legal world. PGMBM details that litigation funding is a net gain for society in several important ways. First, it makes it easier for people of average means to pursue litigation. Second, it’s instrumental in holding corporations and governments accountable when they fail to maintain standards or protect the citizenry. Maintaining accountability for corporations, utilities, and others encourages fairness and can be a precursor to impactful social change. Third, litigation funding is increasingly the main source of funding for collective action cases. This is particularly important for rural and low-income citizens who are essentially at the mercy of governments, utility companies, and others. When these entities pollute or cause damage to farmlands or water supplies, citizens often have no recourse other than expensive legal action. With that in mind, it seems clear that litigation funding should be counted among ESG investments—those that focus on environmental, social, and governance issues. This may be coming in the EU, as a Code of Conduct for funders is en route, and will likely pave the way for funders to label themselves as ESG.  
Commercial

Singapore Widens Door for Litigation Funding Use Cases

As of yesterday, the Singapore Ministry of Law is extending the third-party legal funding framework in order to cover more types. These include domestic arbitration proceedings, some cases heard at the Singapore International Commercial Court—and related mediation proceedings. Ministry of Law details that Singapore first welcomed third-party funding in 2017, though only for international arbitration and related mediation. The funding industry has grown since then, and the response to the practice has been overwhelmingly positive. In addition to extending case categories that may now utilize TPF, the Ministry has amended several professional conduct rules. These include:
  • Lawyers involved in cases using TPF must comport with Legal Profession Rules 2015 regarding conflicts of interest.
  • Registered Foreign Attorneys may be subject to additional scrutiny when TPF agreements are used, as could foreign TPFs.
  • Amendments regarding orders for adverse costs, as well as security for costs, in cases utilizing third-party funding.
  • Singapore Statutes Online, part of Singapore’s government website, lists these amendments in full.
Commercial

New Jersey Disclosure Regulation Rankles Litigation Funders

Debate continues as to whether the New Jersey district court’s new disclosure rules impacting litigation funding are a celebration of transparency or a futile exercise in unnecessary regulation. What happened? Reuters explains that US District Court Judge Freda Wolfson signed an order amending local rules—and necessitating disclosure of all non-parties that offer non-recourse legal funding to participants in the case. Parties must also affirm that litigation funders will not make decisions regarding litigation, strategy, or settlements in the case, leaving those up to the client. Members of the ILFA expressed disappointment, not only with the content of the new rule but with the fact that the District of New Jersey did not consult with ILFA members. Executive Director Shannon Campagna stated that the passage of this rule is unnecessary and will almost certainly create more problems than it solves. Of course, issues regarding legal disclosure inspire passionate responses from every side. Even though the New Jersey rule doesn’t require the release of the entire funding contract, it does open the door to increased disclosure if there’s reason to believe funders are controlling a case. One ethics expert, Lucian Pera of Adams and Reese, said he felt that disclosure requirements haven’t had much impact on any proceedings he’s aware of. If anything, the new rule is likely to impact wording in funding agreements—and that’s all. While it is important for courts to know if funders have inappropriate control over case decisions, it’s unlikely that such information would be spelled out in a funding agreement. Harold Kim from the Institute of Legal Reform is clear in saying that disclosure rules haven’t made much difference in California and Wisconsin. Still, the passage of the New Jersey rule indicates that courts see the rise of litigation funding and its growing acceptance into mainstream legal practice. Kim believes that the new rule can best be described as ‘opening the door.’
Commercial

Nicky Foulston’s LionFish Off to a Running Start

Nicky Foulston inherited the racing circuit Brands Hatch when she was a mere 19 years old. In just over a decade, she had taken a loan of GBP 6 million and used it to turn Brands Hatch into a powerhouse circuit. She ultimately sold it for a staggering $195 million in 1999. This Is Money details that Nicky Foulston is now the chief executive of RBG (formerly Rosenblatt Ltd)—a much-respected legal firm that was founded by Ian Rosenblatt.   LionFish, a litigation finance firm, is managed by Tets Ishikawa, who spent most of his career as an investment banker. Under Ishikawa’s leadership, LionFish has outshone its industry competition by being more flexible about agreement structures and pricing while offering faster decision and deployment times. In the year since its founding, LionFish has received over 350 requests to fund cases with dozens still under consideration. They have accepted multiple cases that are already underway, with an expectation that high returns could translate into impressive shareholder dividends. Big things are expected for both RBG and LionFish under the direction of Nicky Foulston, who analysts describe as ‘shrewd’ and ‘ambitious.’ Post-pandemic growth is already on the rise. There’s no reason to think that both of Foulston’s current legal ventures won’t become stunning successes.
Announcements Commercial

New Research: CFOs Increasingly Aware Of Commercial Litigation Assets And Poised To Unlock More Value From Legal

Burford Capital, the leading global finance and asset management firm focused on law, today releases new independent research probing how CFOs and senior financial officers influence corporate legal departments, legal spend and their companies' success in recovering value through affirmative recoveries. Christopher Bogart, CEO of Burford Capital, commented: "CFOs bring a commercial mindset to other areas of the business—and the legal function should be no exception, particularly given the amount of working capital potentially at stake, measured not only in the many millions now spent on commercial claims but also the even greater opportunity costs of diverting corporate resources and the untapped opportunity to pursue valuable claims altogether." The research suggests that companies are on the cusp of a paradigm shift in how they approach legal assets, and that financial officers understand their value and have new opportunities to more fully leverage tools to unlock them.  Key findings from the research include: Affirmative recovery and cost management programs are extensive—and ready for growth
  • 73% of financial officers report extremely/very extensive affirmative recovery programs, and 84% report extremely/very extensive legal cost management programs
  • 46% report a need for improvement in these programs
Companies have extensive opportunities to enhance liquidity
  • 75% of companies with over $1 billion in annual revenues reported unenforced judgments worth $20-$100 million in 2020
  • Companies with inadequate affirmative recovery programs are 27% more likely to leave money on the table
Financial officers have new ways to apply the same financial approach to legal as other business areas
  • Just 24% say they apply quantitative financial modeling to make decisions about litigation as they do in other areas of the business
  • 39% say litigation variables don't lend themselves to quantitative analysis—revealing an untapped opportunity to utilize tools and partners to quantify legal risk
Bringing a commercial mindset to legal will reinforce more commercial behaviors—benefiting the business
  • 59% believe that pending litigations are assets because they represent future cash flow, even if they don't show up on the balance sheet, and 56% believe that the legal department should have commercial targets
  • However, a significantly large percentage of financial officers aren't yet bringing a commercial mindset to legal
  • Those who conduct quantitative analysis of litigation are significantly more likely to say that their companies need to place greater priority on their affirmative recovery programs—suggesting the kind of appetite for improved performance and financial innovation that leading companies value
The 2021 Legal Asset Report: A Survey of Finance Professionals can be downloaded on Burford's web site and includes snapshots of energy, food, healthcare and other industries. Its findings are based on the online survey responses from 378 senior financial officers of companies with annual revenues of $50 million or more in the United States, the UK and Australia, conducted in March and April 2021 by Bauman Research and Consulting. Over half of respondents hold CFO titles and all are in roles that include knowledge of their companies' litigation expenditures. About Burford Capital
About Burford Capital Burford Capital is the leading global finance and asset management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the New York Stock Exchange (NYSE: BUR) and the London Stock Exchange (LSE: BUR), and it works with companies and law firms around the world from its principal offices in New York, London, Chicago, Washington, Singapore and Sydney. For more information, please visit www.burfordcapital.com.
Announcements Commercial

Legaltech leaders Disputed.io raise further funding

LegalTech company, Disputed.io, has increased investment to over £1.5m from its latest round of investment. The latest funding follows on the back of significant growth for the business after the launch of its first product, CaseFunnel, an automated claims solution 13 months ago. Eighty per cent of the investors followed-on, on the back of the soft-launch of the business’ latest product, FinLegal the first online marketplace for litigation funding.

The latest investors in the business include new investors Perry Blacher a FinTech specialist with 25 years’ experience building and operating online businesses and Alan Falach, the co-founder of Global Legal Group, a London-based global company specialising in the legal market.

Commenting on the investment Alan Falach says, “There are still huge opportunities for the legal sector to use technology and improve the economics of claims and access funding for litigation and ATE insurance. Disputed.io is at the forefront of this evolution and I’m excited to be involved in the venture.”

Founder and Chief Executive Officer of Disputed.io Steven Shinn, adds: “It is a real testament to the vision and products at Disputed.io that we have secured more investment. Perry brings a wealth of experience in start-ups which is invaluable as a high growth start-up and Alan’s knowledge and network in the legal sector further increases our brand equity in the legal sector.

“We have exciting plans for the business over the coming months as the demand for the platforms have grown. We also have ambitious international growth plans and the latest funding enables us to tackle our bold targets.”

Commercial

Litigation Finance Transparency is On the Rise

The regulations surrounding the practice of third-party legal funding are ever-changing. As the practice becomes more popular as a product and an investment—interest in legislating litigation funding grows. Recently, Roy Strom discussed what we can expect in the coming months.   Bloomberg Law business columnist Roy Strom details his early experiences as a journalist covering Litigation Finance. After learning of the practice from a New York Times piece, Strom found a local startup that was starting its own funding practice. That group eventually became the powerhouse funder, Longford Capital. Strom advised funders to advertise their offerings and let the public know that funding is an option. He found that neither funders nor the legal firms that utilize them wanted to talk openly about their business practices. So while third-party funding is a net gain for society, the shroud of secrecy invites suspicion. Dai Wai Chin Feman, Parabellum Capital’s director of commercial litigation strategies, explains that in jurisdictions that have clear rules regarding funding, funders and legal teams are more comfortable discussing their relationship. A perfect example is the Willkie-Longford pact, in which Longford Capital struck a deal with Willkie, Farr & Gallagher to fund about $50 million in cases.  Laws surrounding disclosure vary from one jurisdiction to another, and no lawyer wants to invite court interference into a funding agreement unnecessarily. Rule changes like New Jersey’s new disclosure requirements might actually be helpful for third-party funding—in that it invites greater transparency into the process, though opinions vary widely. Litigation funding can be beneficial to clients, legal teams, and justice itself. It seems counterproductive to be anything less than transparent.