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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.
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.  
Commercial

Is Climate Litigation a New Frontier for Litigation Funding?

As the science becomes more definitive, climate-related lawsuits are growing in number and size. Since 2018, legal actions relating to climate change have almost doubled—at over 1,700 cases globally. Thus far, nearly ¾ of the total lawsuits have been aimed at governments. This is sure to continue as closer attention is paid to the stated goals of the Paris Climate Accord. Capital Monitor explains that this development may be a boon to the Litigation Finance industry on the whole. The emphasis on climate change lawsuits is likely to shift from governments to private businesses, with numbers that may even rival cigarette lawsuits. Maurice MacSweeney, director at Harbor Litigation Funding, stated that his firm has been increasingly investing in commercial disputes. He’s seeing a higher number of climate claims, which is a good opportunity for funders, partly because of the possibility of high awards. At the same time, pursuing cases against climate-destroying corporates is a net gain for the Earth. Sometimes the possibility of a lawsuit is the only thing forcing businesses to behave ethically with regard to the environment. Head of Clyde & Co law firm, Nigel Brook, details that these last few years have been transformational—even before COVID. Human rights cases are being presented with new thinking and theories of culpability. When these lawsuits are won by plaintiffs, a precedent is created and more cases emerge. Product liability legislation can be used to address climate change—for example, an oil company being held accountable for environmental damage. While that hasn’t happened yet, it may eventually, leading to huge changes in the way such cases are argued. Litigation costs can be high, but surely not as high as the price we pay when corporations poison the world we live in. Legal funding provides a viable solution.
Commercial

UKs Largest Divorce Case Ends With $100 Million Award to Ex-Wife

 Temur Akhmedov, the adult son of divorced Russian oligarchs Farkhad Akhmedov and Tatiana Akhmedova, has been ordered by a judge to pay his mother GBP 100 million. The judge, Gwynneth Knowles, reportedly called the younger Akhmedov “dishonest,” saying he would stop at nothing to assist his father. Bloomberg reports that after being awarded a  GBP 627 million divorce judgment, Tatiana Akhmedova’s ex-husband refused to pay. When she learned that her son was helping hide assets from her, she decided her only recourse was legal action. Temur reportedly moved millions into his account from his father’s, later claiming he lost GBP 50 million in stock trades. Akhmedova’s cases in six countries have been funded by Burford Capital. It’s expected that Burford will also finance the recovery of the award, as both Temur and Farkhad have expressed reticence to pay. Because this recent ruling occurred in an English court, Temur’s local assets are likely to be forfeited. Temur described this development as ‘upsetting.’ Tatiana Akhmedova is also seeking to seize a superyacht currently anchored in Dubai, access to a luxury London apartment, as well as a trove of modern artworks being stored in Liechtenstein. She describes her current relationship with her son as ‘very strained.’
Commercial

RBG Holdings Adds Memery Crystal to its Menagerie

RBG Holdings is the parent company for a number of legal entities including legal firm Rosenblatt Limited, Convex Capital Limited, and LionFish Litigation Finance. Now, RBG has added boutique law firm, Memery Crystal, to its stable of businesses. Global Legal Post details that the sale will not impact management as both entities will maintain separate offices and their own management teams. Memery Crystal and Rosenblatt will comprise RBG’s legal services arm to the tune of 29 partners and 66 attorneys. CEO of Memery Crystal, Nick Davis, explains that the purchase will allow the firm to better serve clients by providing a wider range of services via cross-referrals. Staffers will also enjoy more opportunities to add to their skill sets. Subject to regulatory approval, the purchase will be paid in GBP 12 million in cash, and just over GBP 11 million in RBG shares, plus more cash payouts over the next year. The sale is similar to other notable mergers of late—including Kemp Little, bought by Deloitte, and boutique firm Paul Tweed, recently purchased by Gateley.
Commercial

How Legal Funders Help Victims of Investor Fraud

In the United Kingdom, investor fraud is a growing problem. According to the UK’s own national reporting, Action Fraud received more than 17,000 reports of investment fraud—to the tune of over GBP 650 million. So what’s the good news? The Litigation Finance industry can be instrumental in helping defrauded people receive remuneration through collective actions. Pinsent Masons details that the stats we see with regard to fraudulent investment schemes may be just the beginning—because the data collected comes from reported fraud. There may be thousands of investors who don’t realize they were defrauded, and still others who are aware but choose not to report for a variety of reasons—including embarrassment. The numbers surrounding investment fraud are staggering. The UK’s police think tank, the Police Foundation, estimates that over GBP 4 billion has been scammed from pensioners in 2018 alone. As the general public, via the media, becomes increasingly aware of widespread fraud, the government has stepped up its efforts to identify and contain it. Litigation funding is already playing a part in helping defrauded investors find justice. Sadly, defrauded investors are less likely to have the disposable income needed to invest in a legal team. England and Wales are considered strong jurisdictions for litigation funders and claimants due to factors including robust freezing orders and increased use of legal technology. Massive fraud cases with multiple plaintiffs can result in awards in the tens of millions. So it makes sense that funders and legal pros alike are turning their attention to collective actions for investment fraud. As funders step up to provide wronged parties the resources they need to seek justice, fraudsters may soon realize that fleecing average citizens will come with a price. Ultimately, group litigation in fraud cases promises to be a major growth area for third-party legal funders in the coming years.