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Commercial

Ross v Southern Response Ruling May Foretell Increased Class Action Filings

Opt-out class actions will soon be the standard in New Zealand just as they are in Australia, thanks to a new Supreme Court ruling. A case involving Southern Response Earthquake Service Limited and a New Zealand couple has led to the ruling. The general legal thinking is that an opt-out standard improves access to justice. Law Fuel explains that the Supreme Court ruling affirms an earlier ruling from a lower court that had been appealed by Southern Response. Several prominent legal entities gave statements or submissions at the hearing, including the New Zealand Bar Association, New Zealand Law Society, and LPF Group—the largest litigation funder in New Zealand. In the original case, one couple—the Ross’s—sued Southern Response on the belief that they withheld information about repair and restoration costs in order to convince people to take a lower settlement. Part of the new ruling indicates that the Ross’s may accept or reject a settlement offer on behalf of other plaintiffs. Opt-out proceedings have been determined by the Supreme Court to be the best way to provide fast, fiscally sound access to justice. New Zealand courts may supervise settlements, and they are obligated to protect so-called absent plaintiffs—those participants who have not been active in the proceedings. According to the ruling, opt-out proceedings are most appropriate when it’s the approach preferred by the lead plaintiffs, in instances where most of the plaintiffs aren’t connected or part of a community, and in cases where all class members were equally impacted. Opt-out proceedings are predicted to encourage litigation funders to take on more cases. Removing the time-consuming step of recruiting plaintiffs and encouraging them to opt-in is a boon to funders. This is not expected to be the last refinement of class action laws in New Zealand. Steps are being taken to require registration and licensing for funders similar to what Australia requires.
Consumer

Tom Girardi and Wife Erika Jayne Sued for Embezzlement

Tom Girardi, the real-life Erin Brockovich lawyer, and his “Real Housewives of Beverly Hills” wife are being sued for embezzlement. They’re accused of misappropriating funds from the Lion Air crash settlement. Rather than giving the money to the victims, the couple is accused of using the funds in service of an “outrageous lifestyle.” Reuters details that Edleson, former counsel to the Girardis, learned from multiple conversations that the couple had not made good on payments to clients who had settled with Boeing. Instead, the funding went to creditors and litigation funders used by Girardi’s firm. The funders, California Attorney Lending, are codefendants in the suit, and deny that they received any money belonging to Girardi’s clients. The Girardi’s have recently announced plans to divorce, which some have asserted is an attempt to shield money from creditors. The lawsuit demands a full accounting of funds received from Boeing, and how that money was disbursed. The funds are to be paid out to clients, or failing that, put into a trust.
Commercial

Managing Revenue During Economic Downturn

More than ¾ of firm lawyers surveyed expressed concern about 4th quarter collections. More than half of firms have also stated a willingness to provide discounts in order to receive payments faster or to gain new clients. Meanwhile, realization rates are falling. Bloomberg Law details that there are steps firms can take to better manage cash flow. For most firms, hitting revenue targets is not optional. Legal funding provides non-traditional options by which funds can be raised to hit targets by year’s end. By selling client receivables in sets, that money can then be recorded as revenue. The financier who buys the claims then takes on the risk inherent in accounts receivable. The benefits of this type of arrangement are numerous. Using funders to provide immediate liquid allows firms to focus on growing their client base and on legal practice rather than on balance sheets. Finance providers also don’t interact with clients and therefore don’t conduct themselves as a debt collector would. It’s similar to traditional portfolio funding in that the risk is mitigated by the larger pool of accounts. This type of monetization is a legal sale, which means it can be reported as revenue. It can be put into the general fund or used to make partner payouts. The pricing will also improve all-around, as this kind of specialty finance provider generally offers more aggressive deals. Competition from new firms is cited as an ongoing challenge by more than 2/3 of lawyers. Simplifying the number of collections and incurring revenue by year’s end can create a certainty that’s sorely compromised due to the pandemic. The use of legal finance lends stability to firms while allowing for greater flexibility—which is especially useful in the current climate.
Commercial

Frydenberg Wins Fight to Maintain Litigation Funding Restrictions

Treasurer Josh Frydenberg is known for his zeal in regulating the litigation funding industry in Australia. He was instrumental in instituting new restrictions and mandates for those who engage in the practice, and for funders themselves—including a requirement that funders register as Managed Investment Schemes while holding AFSL’s. Financial Review explains that One Nation leader Senator Pauline Hanson plans to introduce new amendments in 2021. One expected change is that specific new rules should be negated provided that funders agree to give at least 70% of damages to plaintiffs. This led Shadow AG Mark Dreyfus to assert that Senator Hanson is in league with the government’s attempt to deny access to justice to Australians. The changes instituted by Frydenberg were ostensibly put into place so that funders would have similar accountability as banks. But admittedly, the government also wants to stop the rise in liability insurance rates and reduce the size and frequency of class action verdicts.
Commercial

Litigation Finance for Cases on Remand

We all know that civil litigation takes time. Some cases can take hundreds of thousands of dollars and years to reach completion. The average time for a civil case is on a steady rise, and COVID-related delays impact that even more. Omni Bridgeway details that they are typically approached about funding cases early in the process. But what happens when a case is remanded or goes dramatically over the allotted funds or time frame? That can stop even the most meritorious cases in their tracks. That’s when litigation funding can come to the rescue. When a dispute is remanded to a lower court, it’s an opportunity to employ litigation funding. Funders benefit from existing rulings, and the clarity added during the beginning of the legal process can only serve to benefit funders and clients. Sometimes a case that’s further along is more attractive to funders than a case that’s just getting off the ground. While many clients and even lawyers only consider funding from the outset of a case—there are steps along the way that could benefit from an influx of funding. When the merits are strong but the cash flow isn’t, litigation funding can make all the difference in who sees access to justice and who doesn’t.
Commercial

Oligarch Accused of Hiding Assets Following Divorce Settlement

Complaining that she has only received $7 million and an ill-kept helicopter, divorcee Tatiana Akhmedova was due to face her son Temur in court in an effort to gain the rest of her $600 million divorce settlement. This time, the asset in question is a $40 million London apartment. The Daily Beast explains that Akhmedova is accusing her son of helping his father hide assets after the divorce settlement. He in turn claims that the apartment was a birthday gift and that such gifts are not out of the ordinary in his family. Akhmedova’s legal team, funded by Burford Capital, was recently granted leave to search Akhmedov’s apartment for evidence of hidden assets. Temur Akhmedov claims he doesn’t want to “sound spoiled,” but is adamant that there’s nothing unusual about the expensive apartment or large cash transfers to him. He later complained about a court order restricting his weekly spending at around $4,000. Temur Akhmedov speaks well of his mother generally. But here, he has stated that she is bitter due to him taking his father’s side in the divorce. The elder Akhmedov claimed that he and his wife divorced in Russia more than two decades ago. His ex-wife claims that they reconciled, and a new divorce was filed later in London, leading to the record-setting settlement. Previous asset freezes are in place, including a super yacht. If the recovery is successful, Burford Capital will receive a portion of the recovery per their funding agreement with Ms. Akhmedova.
Announcements Commercial

KBRA Assigns Preliminary Rating to PEAR 2020-1

Kroll Bond Rating Agency (KBRA) assigns a preliminary rating to one class of notes from PEAR 2020-1, LLC, an $80 million litigation finance ABS transaction serviced by Golden Pear Funding OpCo, LLC (“Golden Pear”). The PEAR 2020-1, LLC transaction represents Golden Pear’s first ABS collateralized by litigation finance receivables. Golden Pear is a litigation finance company that conducts business throughout the US but is concentrated primarily in the New York area. As of June 30, 2020, the company has funded over $626 million in aggregate advances dating back to 2008. The portfolio securing the transaction has an aggregate discounted receivable balance (“ADPB”), including assumed prefunding, of approximately $108 million as of the October 30, 2020 cutoff date. The ADPB is the aggregate discounted cash flows of the collections associated with the PEAR 2020-1, LLC portfolio’s litigation funding receivables. The discount rate used to calculate the ADPB is a percentage equal to the sum of the assumed interest rate on the notes, the servicing fee rate of 1.00%, and an additional 0.10%. As of the cutoff date, the receivables comprise pre-settlement litigation funding receivables with an average advance to expected settlement case value of approximately 13%. No post-settlement advances or medical lien receivables are included in the pool. The notes benefit from credit enhancement in the form of overcollateralization, a cash reserve account and a capitalized interest account. The transaction also features a $15 million prefunding account that may be used to purchase additional receivables during the three months after closing, subject to certain eligibility criteria. Click here to view the report. To access ratings and relevant documents, click here. Disclosures Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above. A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here. Information on the meaning of each rating category can be located here. Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com. About KBRA KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.
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Commercial

Vocation Class Action Reaches Settlement of $50MM

Shareholders of Vocation Limited, a now-defunct training company, have settled a class action for a reported $50 million. Vocation had been listed on the ASX as of November 2013, and enjoyed a reputation as Australia’s premier provider of education and vocational training services. Slater and Gordon facilitated the settlement, funded by Omni Bridgeway. Mirage News explains that within a year after the ASX listing, Vocation LTD was required to return nearly $20 million in government funding. This came after a review of its services. Not long after, the company began voluntary liquidation. Allegations against Vocation included making misleading statements in IPO documents, and more deceptive statements after the listing was live. The $50 million settlement is subject to court approval.
Commercial

Funders Ponder Hedge Fund Claim vs Rio Tinto

Mining company Rio Tinto finds itself under threat of legal action from a US hedge fund. Pentwater Capital Management is threatening an oppression order to gain an extension of debt in order to expand the Oyu Tolgoi mine project into the Gobi desert. The expansion is controversial, in that it requires the destruction of a sacred Aboriginal site. Financial Times details that the minority owners, Pentwater, feel they’re being treated as pawns, not partners. This provides an option for litigation funders to fund the claim by Pentwater, or even Rio Tinto’s defense, should the struggling corporate require support. After all, the mine itself is expected to produce billions in gold and copper for decades to come; this could provide funders with the possibility of remuneration for defense-side funding--through a percentage of future mining profits.  It’s been suggested that Rio Tinto would do well to refinance the entire Oyu Tolgoi project—their largest and most potentially profitable project. This expansion is currently over a year behind schedule and a billion dollars over budget. Oyu Tolgoi LLC is funding an independent review at the behest of the Mongolian government—which owns a minority share in the project as well.  Rio Tinto stated they wouldn’t allow TRQ (Turquoise Hill Resources) to take on more than half a billion dollars more in debt, suggesting that they raise equity themselves. Meanwhile, Rio Tinto is seeking a new chief executive.