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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 Courts then had to determine whether to approve the settlement or allow funding to be withdrawn.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.
Commercial

A Liquidator’s Guide to Mitigating Risk

Liquidators are sometimes ordered to pay costs, which is not a situation any want to be in. Liquidators have a duty to examine what led up to the liquidation, and to bring and defend a legal case if applicable. But if they lose, costs can be awarded against them personally. LCM Finance details that normally, liquidators are indemnified from having to pay costs. But if the company is unable to do so, the liquidator can be held liable. This has happened in several noteworthy cases. In Lonnex Pty Lit, liquidators were required to pay costs after appeal. The court ruled that the costs incurred were unreasonable and that the liquidators should not be entitled to indemnity. In Australia’s Residential Builder Pty Ltd, a court found that the liquidator pursued an appeal for their own reasons, and not for the good of creditors. As such, the court determined that liquidators cannot hide behind an insolvent company. In Azmac Pty Lit, a court ruled that unreasonable and unnecessary conduct rife with self-interest should result in a liquidator personally paying the costs of proceedings it initiated. What should liquidators do to avoid a similar fate? LCM suggests starting by diligently investigating matters in a timely way. Next, seek out advice from counsel or another experienced professional, or the courts on the advisability of continuing a claim. In addition to full compliance with court rules—that will go a long way in helping liquidators avoid an order to pay costs. Of course, liquidators should estimate all costs and weigh them against the likelihood of recovery. Perhaps most importantly, liquidators should feel ready to settle the claim if it can be done in a reasonable way. Accepting reasonable offers, acknowledging valid disputes, and reasonably assessing assets can do the rest.
Commercial

Claimant Expresses Disappointment over PFAS Settlement

A settlement in a case over PFAS contamination has claimants enraged. In 2015, residents were told by a local newspaper article that their water supply had been tainted by PFAS. The chemical had been used in foam used to combat fires. Not unexpectedly, property values plummeted and local businesses suffered. SBS.com details that people throughout the Williamtown community had been experiencing a spate of health problems believed to be connected to the poisoning. These include increased instances of ovarian, testicular, and breast cancer. The community determined that collective action was the best way forward. Omni Bridgeway (formerly IMF Bentham) funded the case. Shortly after the Williamtown case was announced, similar class actions in Oakey, QLD, and Katherine NT were announced. The Williamtown case took years to reach a settlement. In February 2020, all three lawsuits were settled for $212 million. That may seem like an impressive figure, but only $86 million went to the claimants in the Williamtown case. Of the $86 million, lawyers were paid $9 million for their work. Omni Bridgeway, the case’s funders, received about $21 million. The remaining $55 million was shared among claimants, leaving one defendant, whose house and property are now worthless—$100K. That left some claimants upset and clamoring for legal protection. Others took a more optimistic stance, saying that 36% of something is better than 100% of nothing. It’s easy to understand why some claimants felt disappointed in such a low payout figure, yet it's important to keep in mind that the case never would have made it to court had it not been for the funds provided by a litigation funder.
Commercial

Third-Party Funding and Construction Claims

Third-party legal funding has been in use in the United States, the UK, and Australia for over a decade. Now we see it moving into the Middle East and Asia. This may be illustrated most clearly in the construction field, where cross-jurisdictional cases are now making use of the practice. LCM explains that in recent years, construction disputes have seen a 300% rise in registered cases—even before COVID led to reduced profit margins, late payments, and missed deadlines. Legal funding is making a mark in the construction industry—not just as a means to fund cases, but to turn legal departments into a profitable arm of their respective businesses. Portfolio funding agreements are on the rise in construction, which lowers costs while reducing risk. This type of funding arrangement allows businesses to take the financial risk out of pursuing a valid case by removing those costs from balance sheets, thus generating income with no financial outlay. Several factors are driving the push to expand the reach of legal funding. Singapore and Hong Kong have recently passed legislation that essentially welcomes the practice, while the Dubai International Financial Centre represents the expansion of the arbitration infrastructure. In India and the Middle East, awareness of Litigation Finance is growing. Increasingly, CEOs are using funding as a means of creating liquidity from seemingly dormant legal assets. As the use of portfolio funding agreements grows, some may wonder if single-case funding is on its way out. That seems unlikely. In construction alone, the number of high-value construction cases in the Middle East demonstrates that there will always be a market for funding individual cases. In the Middle East, joint ventures, insolvency, and bankruptcies are already spiking, owing to the impact of COVID. Demand for litigation funding has increased across all claimant types—and that trend is likely to continue.
Commercial

Nanoco Group Optimistic in IP Action Against Samsung

Manchester tech company Nanoco Group has expressed confidence in its legal action against Samsung. The tech business is pursuing a case for IP infringement against the electronics leader. Nanoco has also revealed signing a litigation funding agreement with an as-yet-unnamed American litigation funder. The Business Desk explains that a Markman hearing, also called a claim construction hearing, was held on March 26th. In it, the court was tasked with determining legal definitions of five patents that Nanoco accuses Samsung of infringing. A written report on the hearing is expected to be released prior to June 1st. The Patent Trial and Appeal Board’s anticipated ruling on Samsung’s request for IPR’s is expected next month. This process, which runs parallel to the infringement case, will vet the validity of the patents in question and can take a year if initiated.   A trial date has been set for October of this year.
Commercial

Largest Ever Capital Pricing by Burford

Burford Capital, an AIM-traded litigation funder, priced its PPO of $400 million on Monday. The fundraise is planned for use in the general fund, and is to include repayment of existing debt. Sharecast details that the $400 million pricing was increased by $50 million from what was announced earlier, a change that enables more versatility for investors. CEO Christopher Bogart affirms that this is the largest capital raising in Burford Capital’s history. Notes are being guaranteed on an unsecured basis by subsidiaries Burford Capital plc and Burford Capital Finance LLC. The offering is expected to close on April 5th.
Commercial

Key Takeaways from LFJs Podcast with Elena Rey of Brown Rudnick

Earlier this week, LFJ released its latest podcast episode, featuring Elena Rey of Brown Rudnick. Elena discussed her effort to introduce model documentation to the litigation funding industry, including the founding of the Litigation Funding Working Group, which brings together litigation funders, insurers, legal experts and others to help formulate model documentation for use in the UK, EU and elsewhere. Below are some key takeaways from the podcast: JF: Can you highlight the specific benefits of model documentation? How do you see this impacting the industry going forward? ER: I think the big benefit of model documentation is that it will speed up the development of the secondary market. On a practical level, the Working Group has become a platform where issues facing the market can be discussed such as the relevance of consumer credit legislation, DBA arrangements, and funder fees. JF: With regard to the Working Group, how will this documentation be originated? Who’s on the working group, what will the process be for taking suggestions—and also, how do you expect this documentation to come into widespread use in the industry? ER: The group consists of professional funders, both the core members of our fund and others, like Harbor, Therium, LCM, etc., as well as private equity funds, distressed debt funds, and other litigation funders. Also insurance providers and a number of leading law firms and barristers. The drafting process is based on our experience. The draft is revised as everyone provides feedback and that is worked through. The goal is to provide a balanced draft that reflects feedback from the whole market. That is really important to us.  JF: How much room for flexibility is there in model documentation? It seems like funding arrangements can be so bespoke. ER: Any funding opportunity is bespoke. The idea is to provide a solid and helpful boilerplate provision, which has been tested by discussion in the Working Group, reviewed by lawyers and counsel, and players in the market from different angles. Parties can use it in their negotiation process so they can focus on the finer points. It streamlines the negotiation process and allows the deal to be closed. JF: Which aspect of funding do you see this having a bigger impact on—financial terms or the legal side, in terms of communication between parties? ER: I think it’s both. We’re obviously targeting to improve the legal terms. But hopefully this will benefit the negotiation process. The boilerplate language can be used to address commercial issues. When the parties know they’re protected, the negotiation goes more smoothly. We think it’s important to streamline the negotiation process because deadlines are often tight. JF: How far along in the process are you? What has the response been from the Working Group? What’s the ETA for when this documentation will be complete? ER: The response has been amazing! We launched in October with 15 core members. We now have about 80 Emails on my recipient list. The first set of provisions will focus on insurance. The first draft of the Working Group should be finalized in the next few weeks and could be available to the market by the end of the year. For the full podcast interview, visit this link.