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Grant Farrar, Founder of Arran Capital, Discusses Litigation Funding for Public Sector Entities

On a recent episode of the Litigation Finance Podcast, Grant Farrar of Arran Capital discussed his firm’s value proposition as the only litigation funder focused solely on public sector financing. Grant explains why public sector funding merits its own categorization, what the sticking points are in convincing politicians and others of litigation funding’s value, and what his expectations are for future growth in this rapidly-evolving space.

Below are key takeaways from the interview, which can be listened to in its entirety here.

LFJ: What makes litigation financing for public sector entities so unique? Why does this type of funding merit its own differentiated category?

GF: In terms of public sector affirmative litigation, one of the undeniable and very interesting trends that’s going on across the country with every shape and size and jurisdiction, is the uptrend in affirmative litigation. So, it really started off with, as you recall, the tobacco litigation in the late 90s and early 2000’s, and now has evolved into some different issues areas, so it can be a public nuisance, relative to environmental or other quality of life issues that affect constituents around the country. It could be the opioid litigation which everybody is very familiar with, a related offshoot of that would be the Juul litigation which is being maintained right now. And a whole host of other issues that relate to consumer fraud or antitrust. One of the things about public sector entities is they are the intersection of every piece of public policy and business.

As litigation continues to increase, certainly in the time of COVID-related budget strain and stress on entities across the country, the core issue of ‘okay, how do we find funding’ and ‘how do we pay for this legal representation’ is certainly at the forefront. And this is where Arran Capital comes in, with our value proposition that we’re real excited to talk about today.

LFJ: In terms of public sector financing more broadly, what are some of the key drivers of growth that this sector of the industry is facing?

GF: It really boils down to a concept which is being discussed in public sector circles with respect to rethinking revenue models and finding ways to generate revenue in different and creative ways that will assist public entities across the spectrum. So one of the drivers on that is chief financial officers in public sector organizations and their chief legal officers that work hand-in-hand with those who set the policies. They’re coming to the realization that it’s more than just across the board budget cuts or trying to lean operations. They’re trying to find different and creative ways to manage that revenue strain while also dealing with the growing expectation and the demand on behalf of their constituents and their public sector leaders for affirmative litigation to address the issues.

LFJ: ESG—this is a hot buzz word at the moment across the investment landscape and across Wall Street. It stands for Environmental, Social, and Governance, also known as Impact Investing. The idea is that investors are starting to look beyond just profit at how companies they invest in are impacting those various metrics. A lot of institutional players are starting to mandate ESG allocations from their partners. How could this trend impact public sector financing?

GF: Great question. I’m glad you asked that. Just this week we’ve seen the largest asset manager in the world speaking to the tectonic shift in the investment space with respect to funds flowing into ESG-related investments and ESG-related approaches. And at Arran Capital, we view ourselves as part of that component and part of that wave, because if you think about what ESG stands for, one of their core case matters or case areas that we seek to invest in is with respect to the environment; those public sector / public nuisance actions. So investing with our fund that can then invest in cases that address environmental issues, that’s part of our core focus and mission.

Going to social and governance, it’s also about investing in cases that promote access to justice for citizens across the country, and ensuring that citizens and their public servants have a role as constituents and representatives of government having a responsive investment approach and a responsive and good outcome on the litigation side. So we’re really excited about how we can tie into ESG, it’s one of the main drivers in our value proposition and one of the things we seek to focus on and execute.

Click here to listen to the full episode.

Commercial

London Court of Appeals Clarifies DBA Laws

In this post-Brexit world, London has long positioned itself as a global destination for disputes. A new Court of Appeal judgment clarifying laws relating to Damages Based Agreements helps support that goal. The recent ruling affirms the importance of DBAs, allowing greater access to justice. Burford Capital explains that a DBA is an agreement between client and attorney to share in litigation risk in return for a share of any award. DBAs were introduced in 2013. This is similar to a contingency agreement, with a few sticking points:
  • Could a solicitor recover funds if the DBA is terminated before the case ends?
  • If a partial payment is made, such as in a hybrid agreement, could the DBA then become unenforceable?
The court determined in Zuberi v Lexlaw that hybrid fee arrangements do not negate DBAs according to 2013 regulations. That’s great news all around. Contingency arrangements increase access to justice and allow meritorious cases to move forward even when plaintiffs lack the ability to pay costs. Combined with the accessibility of third-party legal funding, DBAs will no doubt explode in popularity in the coming years.
Commercial

Capitalized Funders and Adverse Costs

Now that Litigation Finance has established itself as a viable industry, laws are being written to clarify finer points and add consistency to laws across jurisdictions. One area of focus is how costs are handled, both in terms of the UK adverse costs regime, and in possible new requirements for third-party funders wishing to obtain securities for cost. DLA Piper explains that a strong example of this clarification comes by way of Rowe & ors v Ingenious Media Holdings. The case involved multiple finance schemes that were challenged by HMRC. More than 500 investors brought claims. Defendants applied for security for costs against the funder—Therium. The claimants then said that if security for costs was ordered, courts should require defendants to provide a cross-undertaking to cover any loss suffered due to that order. Ultimately, security for costs was granted, but not the cross-undertaking. The reasoning was that rather than a loss, what happened was an allocation of recovery. During the appeal, the court affirmed that regardless of third-party funding, claimants are not typically insulated from costs when pursuing claims. The appeals court determined that cross-undertaking for damages in return for security costs should not be presumed. In fact, it should only be used in ‘rare and exceptional cases.’ There are three main takeaways here:
  • That costs covered by third-party legal funding should be treated the same across the board.
  • Security for costs is typical and funders should factor this in when calculating expected costs.
  • Funders should be fiscally prepared to weather an adverse costs order.
This means that claimants and funders need to be more cognizant of the possibility of adverse costs orders, and should discuss these eventualities early on in the process.
The LFJ Podcast
Hosted By Grant Farrar |
On this episode, Grant Farrar of Arran Capital discusses his firm's value proposition as the only litigation funder focused solely on public sector financing. Grant explains why public sector funding merits its own categorization, what the sticking points are in convincing politicians and others of litigation funding's value, and what his expectations are for future growth in this rapidly-evolving space. For a more in-depth look at public sector legal funding, check out this contribution from Grant and Ed Truant, founder of Slingshot Capital, which explores the various drivers of the public sector legal funding market. [podcast_episode episode="7237" content="title,player,details"]
Commercial

Omni Bridgeway Expands into Latin American Markets

Omni Bridgeway has been a leader in Litigation Finance for over 30 years. In that time, they’ve made a name for themselves in the US, Canada, the Middle East, Asia, and Australia. Now, the company is making a move to Brazil, Chile, Peru, Mexico, and Argentina with the formation of the Omni Bridgeway Latin America Group. Omni Bridgeway details that the group includes Senior Investment Managers Oliver Gayner and Tim DeSieno, Associate Investment Manager Cheng-Yee Khong, Legal Counsels Dana MacGrath, Nilufar Hossain, Dr. Gian Marco Solas, and managing Director Wieger Wielinga. The focus will be on bringing Omni Bridgeway’s services to new populations. This will include financing for commercial arbitration and litigation, award enforcement, insolvency and other distressed debt matters. The expansion is sure to be a boon to new clients and investors alike.
Commercial Covid-19

Australian Insurers Unified in Denying Policy Claims for COVID

There’s no apparent end in sight to the legal battles between insurers and policyholders with regard to business interruption and COVID. At least five law firms are looking at potential class actions against insurers denying that their business interruption policies do not cover pandemics. ABC details that business interruption policies exist to help companies when the unforeseen happens. This might include natural disasters or fires. Most reasonable people would agree that a pandemic is exactly the sort of calamity business interruption insurance was meant to cover. Insurers disagree, however. An early test case relied on a single sentence to make a determination. Whether or not to cover losses for disease depends on whether the disease itself is ‘quarantinable under the Quarantine Act 1908 and subsequent amendments’. But this act was repealed and replaced in 2016 with the Biosecurity Act. The issue now comes down to whether ‘subsequent amendments’ includes the Biosecurity Act. Not surprisingly, a consensus is yet to be reached. Litigation funder John Walker of Investor Claim Partner stated that on some level, he feels bad for insurers who may not have intended to pay out in the event of a pandemic. But that, he says, does not relieve them of their ethical, legal, and moral obligations to their policyholders. In the year since the pandemic began, very few claims have been paid. Walker finds this unacceptable. It’s unclear how insurers can make a claim that payouts for pandemics are not normally covered. Obviously, pandemics are not a normal occurrence, so insurers, courts, and policyholders are all treading in uncharted territory. Further test cases are expected soon. The sad truth is, these cases could drag on for years, leaving business owners without the protection they paid for.
Commercial Covid-19

Turning Litigation into an Advantage in the Wake of COVID

Most business owners are feeling the pressures of COVID. Startups and established brands alike are finding new challenges to overcome as they negotiate lower sales figures, supply chain hassles, and budget shortfalls. But solutions are available if you know where to look. Real Business UK explains that while some companies are relying on high-interest emergency loans, there are better options out there. Litigation might be the key to financial solvency during trying economic times. How? Pending litigation doesn’t have to be a drain on time and resources. In fact, with proper planning and backing from an experienced legal funder—litigation can become its own revenue stream. Often, financial pressures mean not following up on viable litigation. When the markets are down, it may feel like there’s just not enough revenue to go around. In fact, the Litigation Finance industry is not correlated to the rest of the market. Even during COVID, funders are flush with investable cash, and in search of meritorious cases to fund on a non-recourse basis. By sharing risk with funders, companies can pursue litigation without adding additional legal fees to the budget. In the UK and around the world, insolvencies and business closures keep coming. Third-party legal funding, now an increasingly viable asset class, can help companies pursue legal action, and even help with enforcement of awards or managing insolvencies.
Commercial

Remote Legal Tech Leads to Increased Competition

With remote work now mainstream, it’s become the norm for Legal Tech firms to hire well outside their physical location. While this opens up new opportunities to recruit talent, it also increases competition for job seekers, and companies looking to hire. What might this mean for Litigation Finance? Law.com details that physical offices are not a thing of the past just yet—but that day may be coming. Remote work, flexible office time, and teleconferencing are all being normalized thanks to a pandemic that’s still raging one year on. The talent pool for many firms has gone from local, to state-wide, to national, and even global. This applies not just to tech professionals, but to legal teams and those who specialize in legal finance. Some legal tech companies were already hiring remote workers before COVID hit. But many are still hiring with the expectation of filling their office spaces eventually. The level of training and expertise expected from remote workers may not need to expand, as some had predicted. Because staffers work remotely on a part-time or as-needed basis, it’s less essential to gain many skill sets with a single hire. That means that while competition is growing, so is the number of available positions. Ultimately, the expansion and growth of legal tech is good news for attorneys, clients, and the litigation funding industry on the whole. This ecosystem of coexistent entities will continue to adapt to support the goals of the industry.
Commercial

Law Firm Declares that Vauxhall Owners Will Not Pay for Legal Action

Millberg London has stated that, along with the assistance of third-party litigation funders, they will assume all upfront charges in order to begin legal action against Vauxhall. This will ensure that class participants will not bear any costs associated with the case, minimizing their personal liability. Express reports that clients will not be charged if the case is unsuccessful, and that insurance has been taken out to cover costs if there is no award. The case itself revolves around ‘defeat devices’ installed in a car’s engine management system in order to falsify emissions readings. According to the complaint, drivers were told they’d receive an environmentally safe car with a level of performance that’s literally impossible under normal conditions. Vauxhall maintains that they do not use defeat devices, and stresses that their vehicles comply with existing regulations.