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Commercial

Podcast Episode Covers Dispute Funding for Companies in Financial Distress

David Prager of Duff & Phelps, Howard Brod Brownstein of The Brownstein Corporation, Tatiana Markel of BakerHostetler, and Ken Epstein of Omni Bridgeway engaged in a virtual discussion on dispute funding for financially distressed companies. This two-part podcast was produced by Turnaround Times.  Below are some key highlights from part 1 of the Turnaround Time podcast, which can be found here.   DP: What makes litigation funding such a breakthrough opportunity? HB: I’m a turnaround pro, so I get called in when a company has some degree of distress—the company may not even know how much distress until we start to dig. If there’s distress, there is neither the appetite nor the resources available to prosecute claims. It’s a potential asset for the company—but they may not have the wherewithal to realize. In the context of bankruptcy, there’s an inability to pay obligations. Litigation funding provides an opportunity to create a level playing field. Companies can recover assets, pursue cases, etc. DP: As you counsel your clients, when do you bring funding into the mix? What’s exciting to you about this structure? TM: I work at a big law firm. Litigation funding and contingency were not really something Big Law firms did—and traditionally don’t do. Five to ten years ago we talked about litigation funding, but only recently have we begun doing these deals in earnest. Our firm is a risk-averse midwestern firm. Litigation funding allows us to bridge the gap between large cases with huge potential recoveries, and the firm’s reluctance to accept that much risk. The sweet spot is a large-damages case, but it will take a long time and be costly. All in all, I’m a fan of litigation funding—we’re grateful for the industry. DP: We talk about plaintiff work—a small guy with a claim as a wronged party. Is that the limit of litigation funding, or are you looking at other things? KE: There is single case funding, and then portfolio case funding where you can fund a law firm, or several contingency cases. There’s also client-side funding, you can provide funding to a trust—which provides a lower risk profile.  DP: There’s been discussion about ethical issues with fee sharing, or confidentiality issues. What are your main ethical concerns? TM: From the perspective of what a funder needs to consider when assessing a deal—from an attorney perspective—attorney-client privilege. When assessing a case, a funder needs to review the underlying documents. While privilege doesn’t attach to discussions with a funder, but funders don’t need to see privileged documents. The laws in that are a bit unsettled. DP: So what safeguards do we take? Sign an NDA. Funders have their own form, which is similar and ironclad, to provide for the common interest. This confirms the intent for documents to be confidential.
Commercial

The Problem with Origination Credit—and How In-House Clients Can Address it

The gender gap in the legal industry is easy to recognize, thanks to Burford’s 2020 Equity Project study. But recognizing the problem is only half the battle. Origination credit continues to be a sticking point—as women consistently receive less than their fair share. This fuels a cycle of inequity that can reverberate through a law firm and beyond. Burford Capital reveals its 2020 Equity Project study surveyed General Counsel and senior in-house lawyers. Of the respondent pool, a staggering 52% had no idea how origination credit was awarded at the firms they utilized. Why does that matter? Because money flows in via those GCs, which gives them considerable power to influence the firms they hire. The problem began when male lawyers inherited clients from their predecessors. Senior male partners mentor male lawyers more often than female lawyers. This leads to female lawyers receiving lower-then-average compensation almost 80% of the time. And 67% of senior female lawyers state that they’ve experienced gender bias that has impacted their business development. The simple act of asking about origination credit can bring needed attention to the issue. More than 150 GCs wrote to their law firms in January of 2019, demanding that they close the gender gap. These included Microsoft and Coca-Cola, among other heavy hitters. That’s a positive step forward—but the progress must be more widespread in order to inspire lasting change. It’s been speculated that more GCs don’t ask about the gender gap or origination credit simply because it doesn’t occur to them. It’s also likely that many law firms don’t share what they consider insider information. If this issue is to be adequately addressed, habitual changes must be implemented.
Commercial

Could Avalanche Overtake DeFi in Crypto Market?

You don’t have to know everything about cryptocurrency to know that it’s changing the  investment landscape in major ways. Avalanche, a competitor to crypto giant Ethereum, enjoyed a robust opening followed by steady gains. Now speculation abounds about how big Avalanche can grow, and who might be edged out in the process. News BTC details that Ethereum’s climbing fees have caused an exodus to Avalanche for blockchain access. Meanwhile, Avalanche is expanding its reach to include Initial Litigation Offerings. Third-party legal finance is a new entry into the cryptocurrency space—one with deep pockets. Litigation Finance, industry-wide, controls roughly $10 billion in assets, most flowing from high-end investors into a more accessible and transparent market. There’s a synchronicity to this development, given that the essence of litigation funding is to level the playing fields in a variety of industries. Avalanche continues to innovate and expand as the company positions itself to overtake industry leaders.
Announcements Commercial

Mill City Ventures completes nearly $8M in first quarter financings

Mill City Ventures III, Ltd. ("Mill City")(OTCQB:MCVT) announced today the total financings for the quarter were nearly $8M. The amount includes a previously announced loans of approximately $2M. Mill City Chief Executive Officer Douglas M. Polinsky stated, "We have continued to be opportunistic in various financings presented to the Company. We have expanded the scope of our loan profiles and have continued to position the Company to achieve higher returns through our ability to perform due diligence quickly and fund in short order.  Presently, we expect our current loan portfolio to drive results unmatched in any other quarter in the Company's 13-year history." The Company completed a litigation funding loan for $1.8M for an adjudicated settlement relating to people harmed by the California wildfires originating from Pacific Gas and Electric power lines that were downed by trees. The opportunity was introduced to the Company by Witnex, Inc., a litigation finance consulting firm that has assisted in the financing of approximately $1B in plaintiff claims. The loan is secured by the future fees anticipated to be collected. In addition, the Company completed a $3M bridge loan to a real estate investment company that owns and manages nearly $500M in apartment buildings in and around college campuses throughout the United States. The Company also made a $510,000 loan secured by an interest in the previously announced $1.3M in settled claims. Finally, the Company completed an additional $200,000 loan to a current borrower, a financial technology company, which designs and develops products and services for the transaction processing industry. We continue to work diligently with NASDAQ to meet applicable listing requirements. Forward-Looking Statements
Forward-looking statements in this release are made pursuant to the "safe harbor'' provisions of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements reflect current beliefs and underlying assumptions, and are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements, including without limitation continued demand for short-term specialty non-bank loans, increased levels of competition, new products or offerings introduced by competitors, changes in the market rates of loans, and other risks. About Mill City Ventures III, Ltd.
Founded in 2007, Mill City Ventures III, Ltd., is a specialty finance company providing short-term non-bank lending. Additional information can be found at www.sec.gov. SOURCE Mill City Ventures III, Ltd.
Commercial

Commercial Disputes in Mining

Omni Bridgeway’s most recent podcast features commentary by Junior Surivar of McCarthy Tetrault, and Jon Drummer of Paul Hastings. The episode is part two in a series detailing litigation relating to mining disputes. Geoff Moysa hosts.

Below are some highlights from the podcast:

JS: There’s been a noteworthy spike in disputes addressing the finer points of royalties, where before, most disputes related to shareholders and joint ventures.

GM: Why?

JS: New partners can impact how royalties are seen by everyone. The precise interpretation of royalty agreements can be subject to multiple readings. Any time partners shuffle, there’s a chance that royalty agreements will be reread and reinterpreted.

Royalty agreements are generally entered early in a partnership. As situations change over time, the intention of the original agreement may be lost or changed dramatically. When a new party enters the arrangement, everything changes.

JD: Agreed. Intent versus the written document can lead to multiple interpretations.

GM: How likely is it that these disputes can be solved with negotiation?

JS: When there are differences of opinion or interpretation advanced in good faith, negotiation can go a long way.

JD: Yes, and expedited negotiations fast-tracked for results are common.

GM: What about multiple royalties or layers of objections? Have there been increases in disputes from specialized mining royalties?

JD: Not really. But there are many reasons partners might revisit royalty agreements for reinterpretation. There is a rise in mining royalty companies, which leads to all involved parties looking at the value of their royalties more seriously.

GM: Are disputes arising from M&As?

JD: That’s been a trend, yes. There’s been a rise in cases on environmental issues, as well as health and safety concerns, and others on securities disclosure laws. We expect that to continue.

JS: In Canada, we are seeing that on the environmental issues, but in Ontario, changes to the Class Proceedings Act make it more challenging to certify a class. This leads to funders or plaintiffs being less willing to invest in a class action.

Commercial

Litigation Funding as a Stock Market Alternative

As investors remain wary of the stock market, they’re left wondering how to invest effectively. Litigation Funding may prove an attractive alternative for investors depending on their risk tolerance. Litigation funding is uncorrelated to stock trading, and largely insulated from economic conditions. Business Day explains that litigation funding is a strong choice for investors owing to its high-alpha/low-beta risk-return. As an asset class, litigation funding maintains a global presence. More than half of all international investments in litigation funding comes from the US, UK, and Australia. The global market value of the legal funding industry is believed to be around $100 billion.  One of the most attractive aspects of third-party legal funding as an investment is the asymmetrical return profiles. Essentially, the possible payout is far greater than the possible losses—even if the entire investment is lost in an unfavorable verdict or judgment. Funding agreements between third-party funders and clients are generally non-recourse. So claimants aren’t required to pay funders back if their case is unsuccessful. If the case succeeds, however, funders receive an agreed-upon percentage, an award, or a multiple of the monies provided. Success is not guaranteed, and wait times between investments and payouts can take years. Three to five years is common for a commercial dispute to reach completion. But every suit will eventually conclude with either a judgment or a settlement, thus it is ultimately a binary outcome. Profitability via investments in litigation funding rest largely on vetting cases. Considering the merits is merely the beginning—whether or not a defendant can make good on a judgment should also be heavily considered. What we do know is that demand for litigation funding from clients shows no sign of slowing.
Commercial

Are Plaintiffs at the Mercy of Litigation Funders?

The core benefit of Litigation Finance is clear—to provide increased access to justice to those who could not otherwise afford it. It’s a noble, necessary, and attainable goal. So why the rush to over-legislate the industry? The Australian suggests that lawyers and funders alike are focused solely on profit as plaintiffs fall by the wayside. Foreign investment in Australian litigation finance firms is massive. Some say that currently, legal funding is the most profitable asset class in Australia. Given what COVID is doing to the economy at large—that makes sense. One case, in particular is held as an example of plaintiffs losing out while funders and lawyers rake in profits. Employees of Appco Group Australia were offered a settlement that a judge openly mocked. The 1,172 claimants asked for an estimated $65 million and were instead given $1.9 million—half of which would go to litigation funders. This left less than $1 million to be divided among nearly 1,200 plaintiffs. Courts then had to determine whether to approve the settlement or allow funding to be withdrawn. Justice Michael Lee instructed lawyers to do better by their clients, accusing them of trying to rid themselves of a case that was neither as speedy or profitable as funders and the legal team had hoped. A case against ISG Management claiming that they cheated workers out of sick time and other employee entitlements left claimants in similar straits. A class action morphed into cross-claims against thousands of workers who could now be held liable for overpayments made over many years. Every court case carries risks for defendants and plaintiffs. That’s the nature of litigation. At the end of the day, Litigation Finance needs to be profitable in order to continue helping clients. While there may be some merit in the push for increased legislation, feigning outrage that a business seeks to be profitable doesn’t help anyone.
Consumer

USClaims Becomes a Skyline Partner of the New York State Trial Lawyers Association (NYSTLA)

USClaims is proud to announce that it is now a top sponsor of the New York State Trial Lawyers Association (NYSTLA). With its $100,000 commitment at the Skyline Partner level, USClaims joins with 5-Star Legal Funding to support one of the strongest trial lawyer associations in the country. This momentous partnership furthers USClaims' mission of making Litigation Funding Simplified ™. Donna Lee Jones, President of USClaims, summed up the importance of this partnership:  "Now more than ever, we must support trial lawyers in their never-ending battle of protecting clients' rights.  USClaims recognizes that litigants continually face hurdles in the path to justice.  USClaims is here to help the 3000 trial attorney members of NYSTLA overcome those hurdles."   This strong support for NY trial lawyers was echoed by Robert Gentili, co-founder of 5-Star Legal funding:  "5-Star has always had the passion to help over the past 15 years.  Working together with USClaims, we now have unlimited resources and stand united with NY trial attorneys and their clients."  USClaims is the only litigation funding company committed to NY trial lawyers at the Skyline Partner Level. About USClaims:  USClaims (www.USClaims.com) provides pre-settlement litigation funding nationwide, and has been in continuous operation helping attorneys and their clients since 1996 – the longest of any pre-settlement litigation funding company in the United States.   Its flagship offering is non-recourse financial support to personal injury victims, many of whom have endured tremendous suffering from wrongful conviction, motor vehicle accidents, unsafe premises, medical malpractice, defective products and other wrongful harms.  This financial support provides injured plaintiffs the means to pay their personal bills, including for surgeries, and endure the often long and arduous litigation process.  USClaims also provides specialized lending to personal injury law firms to help them grow their practices.  Through its unparalleled service, USClaims aims to change the perspective of the pre-settlement funding industry and, most importantly, to become a major asset to trial attorneys.   USClaims accomplishes this goal by low rates with no hidden fees, non-compounding rates, a 2x cap on the funded amount, in-house attorney underwriters, and funding within 24 hours of approval.   USClaims has repeatedly been voted one of the best litigation funding companies in the country, and supports trial lawyer associations nationwide.
Commercial

New Zealand Pursues New Regulations for Litigation Finance

As litigation funding grows in popularity in New Zealand, so do calls for legislation. Currently, there are no existing laws in New Zealand that specifically apply to the practice, nor is there a statutory class actions regime. Omni Bridgeway explains that defendants and claimants alike would benefit from more clear and detailed regulations for the industry. New laws could provide guidance and policy directives on common issues impacting collective actions. It would make sense that New Zealand look to Australia for guidance when developing a legislative regime. Providing justices wide latitude during the proceedings and requiring court approval for settlements have worked out well. In Omni Bridgeway’s submission to the Commission, they suggest that New Zealand allow both opt-in and opt-out class actions. A closed class system is generally believed to have advantages to an open-class system. Specifically, it demonstrates that claimants are engaged and serious about the case. This is significant since a common complaint about litigation funding is the fear that funders will pursue nuisance cases that lack merit. Champerty laws exist in New Zealand, though they remain unenforced. Omni Bridgeway listed the idea of abolishing champerty laws, among other proposed changes. These include adding several provisions to the licensing requirements—including minimum capital requirements, standards for disclosure and reporting, and specific requirements regarding conflict management. Funder’s fees remain a contentious issue, with many funders deriding laws that ensure 50% of gross recoveries go directly to claimants as excessive. It’s been suggested that any cap on funder fees could dissuade funders from taking on collective actions. Still, legislators have suggested that this figure is too low and that funders should never get more than 30% of any award in the cases they fund. The position advanced by Omni Bridgeway is echoed by independent research on various regulatory models.