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Commercial

Pioneering Litigation Funder Now in Legal Battle in TARS Scandal

Timothy Scrantom was once considered a pioneer in the litigation funding community. These days, the chatter is less flattering. Scrantom, as well as Kenneth Elder and others, are ensconced in a legal battle to prevent them from seizing control of Total Asset Recovery Service. Legal Newsline reports that Ferraro Law Firm believes Scrantom and Elder are in league with Huddleston Capital VIII, a firm that recently pursued action to gain control over the existing TARS cases. The case itself suggests that life insurance companies failed to hand over unclaimed policies to the state—as dictated by abandoned property laws. What followed was a convoluted series of events involving failed qui tam litigation led by Elder and litigated by Ferraro Law, and the formation of TARS in 2009 for the purpose of pursuing escheat and insurance litigation. TARS ultimately hired Scrantom as a consultant at the behest of Elder, but not before relationships soured between both men and Ferraro Law. Now, Ferraro Law suspects that Elder and Scrantom are in league with Huddleston Capital—and states as much in their lawsuit. Though these are mere allegations at this point, Huddleston reps have sent default notices and collection letters to TARS.  Elder and Scrantom have thus far not responded to the lawsuit. And it remains unclear what evidence Ferraro has at its disposal, though given the complex nature of events, this case is likely to drag on for some time.
Commercial

Therium Funds Kazakhstan Oil Claim

A recent shareholder update from Victoria Oil & Gas PLC brought new details about the claim, which included steps taken after a small COVID outbreak, and a vetting process for the West Medvezhye license. Victoria Oil & Gas PLC also offered updates on its decade-long legal skirmish with the Republic of Kazakhstan. The dispute itself stems from alleged actions and omitted facts that were withheld by the Kazakhstan government. Ultimately, this led to the loss of the investment in an Atyrau Oblast oil field—Kemerkol Field. Near the end of last year, VOG informed the Kazakhstan government of its intention to move forward with a legal claim. This, after good-faith attempts were made by VOG to reach what they term a fair and amicable settlement. VOG now intends to pursue investment arbitration under the terms of the Energy Charter Treaty. Noted third-party funder Therium is fully funding VOG in this action. That could make for a sizable payday, given that VOG is seeking damages for monies invested, assets seized on-site, as well as the revenue VOG expected from the project.
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.