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Commercial Deals

Talking IP at the 2021 LitFin Dealmakers Forum

This year’s LF Dealmakers Forum was a hybrid conference, combining in-person guests and speakers with virtual ones. It was a balancing act between providing a normal and engaging experience, presenting high-quality content, and keeping pandemic safety rules firmly in mind. Above the Law details that the forum was a smashing success, and suggests that there were three main takeaways about IP and its relationship to Litigation Finance. First, funders are in control of enormous cash reserves. Many are actively seeking cases or portfolios to invest in. Patent and IP disputes continue to be lucrative and popular areas for funder investment. Often, businesses or researchers don’t follow up on complicated IP litigation due to the time, expense, and uncertainty involved. But with legal funding—such cases become opportunities for sizable payouts. At the same time, diversification remains as important as ever. Next, as the litigation funding industry grows more mainstream, funders have adapted to an array of new situations. In the industry's early days, funding was for class action cases or David v Goliath situations. While that’s still an important part of funding, the industry can now engage in insolvency matters, award enforcement and portfolio funding, as well as help businesses monetize existing legal assets. There’s every expectation that the industry will continue to develop new ways to expand access to justice. Third, the increasing number of players in the litigation funding space creates a need for IP-focused legal teams to stay current on what’s happening. As funders develop specialties and relationships with other legal entities, knowing how to find the right funder for one's specific situation is more important—and potentially more difficult—than ever before. It’s been suggested that the IP community do their own diligence regarding funders. As funders learn more about the IP industry to better serve those customers, so should the IP industry study up on the funding opportunities that exist.
Case Developments Commercial

Supreme Court Rules Data Claim Against Google “Doomed to Fail”

This week, the Supreme Court blocked a data protection claim against tech giant Google—saying that the case was doomed to failure. The court unanimously affirmed the appeal from Google. Law Society Gazette details that in Lloyd v Google, the Supreme Court was asked to overturn an earlier ruling from the Court of Appeal—which held that a representative for millions of iPhone users in England and Wales could file their case outside of the jurisdiction. The High Court disallowed the out-of-jurisdiction filing, though the Court of Appeal reversed this decision the following year. Richard Lloyd began proceedings in 2017 on behalf of anyone impacted by the ‘Safari workaround’ that was in use from August of 2011 through February 2012. Lloyd has said that the recent ruling sets the bar unreasonably high for damages in data rights cases. Lloyd still believes other claims will come forward. The Supreme Court held that damages for any breaches of the Data Protection Act 1998 (section 13) can only be claimed when the alleged breach resulted in material damage or distress to the claimant. Lord Leggatt stated that section 13 can’t reasonably give an individual right to compensation without proof of material damage. This interpretation led the judge to suggest that the claim has no chance of winning because it was framed as a collective action. Without proof of individual damages, the claims cannot hope to win.
Case Developments Commercial

Affiniti Finance Goes into Administration

Last week, one of the largest third-party litigation funders in the UK was placed into administration. According to a notice in the London Gazette, Affiniti has stopped taking in new business. Law Society Gazette reports that Affiniti has not made a public statement, nor have they responded to requests for comment. It’s not clear how the company will resolve the many large funding agreements currently in place. Affiniti was founded in 2014 and began by funding personal injury cases. Affiniti also has a commercial division that focuses on class actions and large claims for individuals. The administrators include Andrew Hosking, Paul Zalkin, and Sean Bucknall of Quantuma Advisory Limited. In the last month, two other firms have been placed on administration: Pure Legal, and Hampson Hughes—both based in Liverpool.
Commercial Regulatory Issues

Canada Embraces Litigation Funding

Like much of the world, Canada’s legal system can be expensive to access effectively. Even well-off Canadians may not be able to afford to follow up on meritorious claims against powerful defendants. Enter third-party legal funding. This practice affords potential clients the financial support needed to pursue meritorious cases without the risk of incurring a huge legal debt. Above the Law details that the non-recourse nature of litigation funding is a powerful tool for leveling the legal playing field. Commonly associated with class actions, third-party funding has evolved into a resource for individual clients, corporates, and even law firms looking to share risk and reap large rewards. In Canada, litigation funding is being used in insolvency proceedings, IP disputes, award enforcement, and more. Portfolio funding arrangements are increasingly common, allowing risk to be shared across a slate of unrelated legal cases belonging to a single company or firm. Typically, funders receive a percentage of an award or recovery if the litigation is successful. If the litigation fails, the funded party is not obligated to repay the funded amount. The funder, on the other hand, loses their investment. This is why new cases are vetted carefully and why these funder fees are much higher than interest from traditional bank loans. Once laws against champerty and maintenance were set aside in Canada, funding was viewed as a necessary aspect of increasing access to justice. Typically, LFAs (Litigation Funding Agreements) do not need court approval in Canada, though this is a recent development. LFAs are rarely made public except in class actions. The Ontario Superior Court of Justice recently affirmed the public policy benefit of legal funding, particularly for those seeking damages from wealthy corporates. Legal funding in insolvency cases has been a boon to debtors trying to save struggling businesses. Funds can help maintain operations by monetizing existing legal assets, benefiting debtors.
Commercial Regulatory Issues

Anti-Money Laundering Law Could be a Boon to Legal Funders

Until recently, there was a $150,000 cap on the incentive for employees to alert authorities when money laundering occurs. This monetary incentive was only for employees of regulated financial institutions, and was paid at the discretion of the feds. Market Screener explains how the law is changing, and what the impact on Litigation Finance might be. Last year’s Anti-Money Laundering Act was passed as part of the National Defense Authorization Act, and created a program that provides awards to whistleblowers who provide evidence of money laundering activities, even in violation of the Bank Secrecy Act. Thanks to the new act, those who voluntarily provide information to the Dept of Treasury, the Dept of Justice, or to their employer, will be eligible for up to 30% of monetary sanctions above $1 million. The information has to be new to law enforcement, and must result in a recovery of at least $1 million. Why the sizable payments? Workers are likely to face retaliation for whistleblowing, including loss of employment or even blacklisting. Though awards are available, they could take years to materialize—if they ever do. Even counsel for the whistleblowers is subject to risk, which is why such cases are often taken on a contingency basis. Legal funding can help whistleblowers survive financially while they seek new work or await an incentive payout. Non-recourse dispute funding can cover legal fees and other costs associated with whistleblower litigation. In some circumstances, funding can be used for living or work expenses, as whistleblowers wait for claims to be adjudicated. When vetting whistleblower cases for funding, there should be an expected award of at least ten times the requested funding amount. The federal or state case must show government involvement and a strong likelihood of success. Finally, the opposing party must have a demonstrated ability to pay any fines levied.
Announcements Consumer

Experity Ventures Acquires Anchor Fundings

Experity Ventures LLC (EV) the parent company for several technology driven specialty finance business units that are focused on the litigation finance space has acquired 100% of the equity of New York based Anchor Fundings. The financial terms of the transaction were not disclosed. Experity Ventures Founder and Chairman, Joseph Greco commented, "We are pleased to complete the acquisition of Anchor Fundings. We have watched Anchor closely and continue to be impressed with their growth, discipline and approach to the space and are excited to help them continue on their success trajectory as part of our industry-leading platform” Anchor Fundings Founder and CEO, Charlit Bonilla commented, "We are very excited to partner with the Experity Ventures team and platform to continue our growth and outstanding performance. The Experity platform enables us to offer additional services and solutions to our valued clients and partners as well as being able to leverage their innovative technology and efficient capital structure. Anchor Fundings has built a strong brand in the marketplace and we will continue to build momentum and recognition for the Anchor brand under the Experity platform”. Experity CEO, Ryan Silverman added, “Charlit and his team have built an impressive business and the pairing of Anchor inside of Experity is very complementary and strategic. We believe that Anchor is an important ingredient in our plan for continued growth, performance and leadership in the legal funding and finance space”. About Anchor Fundings Anchor Fundings is a New York City based consumer litigation finance firm founded in 2013 by Charlit Bonilla. Anchor provides immediate and value-added liquidity solutions for plaintiffs, attorneys, and healthcare providers. Anchor is differentiated by their experience in workplace accidents which allows them to participate in some of the largest most complex litigation. Since inception, Anchor has become a go-to capital source for plaintiffs, attorneys and medical providers nationwide. About Experity Ventures Experity Ventures, founded in 2019, is the parent company for Nexify Capital and Nexify Solutions, MedSolve Financial Group, ProMed Capital and Thrivest Legal Funding, LLC / dba Thrivest Link. Nexify Capital has entered into several strategic financing and operational partnerships with legal funding companies in the United States. Nexify Solutions develops and markets best in class enterprise and work flow software for the legal funding market place, which is designed to automate pre-settlement funding from intake to decision analytics, to servicing and payoff, while offering full accounting and reporting capabilities. MedSolve and ProMed capital are leading providers of medical receivable funding solutions to healthcare facilities. Thrivest is a direct to market pre-settlement legal funding company that has successfully provided thousands of non-recourse advances to individuals with pending litigation, predominately in personal injury cases. Experity has offices in Philadelphia, New York, Nevada and Florida. For more information on Experity, please visit www.experityventures.com
Consumer

Legal Funder Under Fire for Cash Advances in NFL Concussion Case

Craig Mitnick, a New Jersey lawyer who represented hundreds of NFL players in a concussion settlement, has asked a federal judge to vacate the award to a litigation funder. Balanced Bridge Funding (formerly Thrivest) provided advances to former players while they waited for settlement monies. Mitnick has been ordered by an arbitrator to repay more than $2 million in loans. Legal Newsline details that in his filing, Mitnick claims that Balanced Bridge, along with lawyers at Fox Rothschild, committed ethics violations. However, much of this stance has already been rejected by arbitrators. The Consumer Financial Protection Bureau has long had a bee in its bonnet about Litigation Finance. Recently, the CFPB was instrumental in multiple funding agreements being ruled invalid due to prohibited assignment of benefits. This was reversed in 2019, but other issues came to light. Specifically, that lawyers were encouraging clients to obtain advances on settlements from firms in which they hold financial interests. Mitnick encouraged former NFL players to sue the league over its alleged failure to inform players about the risks of brain injuries. After a consolidation of the lawsuits and a dispute with another firm that entered a fee-sharing arrangement with Mitnick, Fox Rothchild and Mitnick ended their relationship—leaving tens of thousands of dollars unpaid. Despite making $1.9 million in repayments, the amount owed is still over $2 million. Ultimately, Mitnick was ordered to pay Balanced Bridge $2.3 million in back interest, as well as a further $150,000 in fees and expenses. Mitnick’s firm asserted that the contracts couldn’t be enforced, as they were non-recourse in nature. But the agreements stipulated that if the firm defaulted, the creditor may pursue the debtor’s assets to recoup the outlay. These events have been touted as evidence that litigation funders are greedy. In fact, what this case may illustrate, is the importance of standardized contracts and clarity of expectations.
Commercial Legal Innovation

Blockchain Tech Meets Litigation Finance

The concept of blockchain investing is still a mystery to many consumers. To many it sounds complicated, risky, and predicated on guesswork. Blockchain-style investment in third-party legal funding is a new concept, and one that brings with it questions about transparency and disclosure. Law 360 explains how one hemp company, Apothio LLC, launched an ‘initial litigation offering’ to be used in its upcoming federal court battle. The company is suing a California county after the county allegedly destroyed acres of hemp plants—saying that the THC content was above the legal limit. This ILO is listed on the Republic platform, using blockchain technology and standard crowdfunding rules. Litigation tokens are purchased by investors, representing a percentage of interest in any award stemming from the case. Ava Labs' blockchain arm, Avalanche, is hosting the tokens. Litigation Finance is a rapidly growing industry that has demonstrated an unmatched capacity for innovation and adaptation to the needs of those using it. The crowdfunding aspect of the funding means that a new class of small investors can now access the impressive payouts that litigation funding can provide. These investors are generally less savvy and more risk averse. As such, the complexities of third-party legal funding may be untenable for inexperienced investors, but increasing access to this investment type can be a boon to those who take the time to learn the industry. Apothio LLC’s case is currently facing a motion to dismiss. If that motion is successful and the case ends, investors will be refunded 80% of their original investment. What happens when a defendant seeks disclosure regarding who is funding the case? Plenty of questions abound as to whether small blockchain investors could be seen as having influence over funded cases. Issues could also arise after the one-year period ends, in which purchased tokens become tradable. Depending on valuation, tokens could reveal information on a case.
Commercial

How Litigation Finance Can Address the Gender Pay Gap

Most industries report that women are still making less money than men, despite similar job performance. In American law firms, multiple studies affirm that male lawyers make more money than their female counterparts. A partner compensation survey from last year shows that male partners earned 44% more than female partners. Can third-party legal finance help address this? Validity Finance explains that while this 44% number seems discouraging, it’s actually a step up from 2018—when the pay gap was a maddening 53%. The data shows that the pay gap is emphatically not the outcome of women working fewer hours than their male counterparts, nor does it suggest that women are producing inferior work. Studies actually show that women work more efficiently than men, and that they tend to report higher annual billable hours than men. There are many factors that contribute to this, such as mothers choosing a non-equity partnership track, women being less likely to negotiate pay increases, and a dearth of women in leadership roles in their law firms. But many feel that the biggest hurdle to pay equity is origination credit. A study by the National Association of Women Lawyers showed that nearly half of the top 200 law firms do not have a woman in their top ten earners. According to another study, female partners reported only 67% of the origination credits of men. Third-party litigation funding can enable lawyers to offer an array of bespoke alternative fee arrangements. Sharing risk with clients and funders allows firms to take on more cases with less financial risk. It’s been suggested that women are penalized more severely when they take risks that don’t pan out. Litigation funding offers security for women to take those risks, without leaving their firms in a lurch. In short, legal funding is a proactive solution whose time has come.