Trending Now

All Articles

3313 Articles
Commercial

Burford Capital Capitalizes on Claims Monetization

Litigation Finance has been slowly growing since it first gained acceptance during the last financial crisis. In addition to a funding model that pairs funders with a single case, litigation funding can also come in the form of claims monetization. Bloomberg Law details that Burford Capital has made a pretty penny in claims monetization. One main draw in this type of funding is lawyers not being required to risk contingency returns. Within this model, investors buy a stake in a claim or judgment directly from clients.   Burford Capital made great use of this model, which brought in spectacular results. During the first half of 2020, portfolio investments of $145 million paid out nearly $425 million. Last week, Burford shares rose over 7%. Dai Wai Chin Feman, director of commercial litigation at Parabellum Capital, explains that claim monetization allows for more capital to be used for claims that have more value. Better still, this type of funding agreement is simple because legal fees and expenses do not have to be calculated or estimated beforehand. Currently, Burford’s value is more than 4x its nearest publicly traded-competitor. That gives it more financial wiggle room, allowing it to better weather the risks associated with larger claims. At the same time, single case litigation is still expected to be part of Burford’s core areas of focus. According to Christopher Bogart, Burford chief executive, what Burford is developing is a multi-product line approach to finance. By diversifying the types of funding provided, they increase their potential client base by offering services that fulfill a variety of needs. While the number of new cases has fallen, cash outlay is also lower due to COVID-related slowdowns in the courts.
Commercial

Canadian Insurers Sound Alarm over Litigation Finance

Litigation funding is growing in popularity all over the world. The practice of third parties funding cases in exchange for a share of the rewards is a lucrative business model. Better still, it increases access to justice for those who couldn’t otherwise afford it. So why are insurers in Canada speaking out against the practice? Canadian Underwriter explains that litigation funding is still in its infancy in Canada. The fear, according to insurer Bernard McNulty, is that social inflation might become a problem. But would it? Some might say that insurers dislike the practice because it empowers class actions with sizable payouts. It is true that some funded cases have come away with high rewards. As McNulty detailed, one traffic accident led to an $18 million verdict, while another auto-related case brought in $17 million. According to McNulty, verdicts of this size are a good reason to limit the use of litigation funding—even though these plaintiffs may have never had their day in court without it. The problem for insurers is that these large payouts have led to them raising their rates to offset costs. High rates mean clients may take their insurance needs elsewhere. One might think that rather than passing expenses down to consumers—that insurers might improve their underwriting and employ the kind of ethical business practices that don’t lead to lawsuits in the first place. Or they could just blame litigation funding...
Commercial

Burford Capital Profits Down—but Not Out

A new report from Burford Capital reveals that profits were down 15% during the first half of this year, as it reported to the London Stock Exchange. Much of this is due to fallout from Coronavirus, which led to group-wide commitments ending down a startling 74% to roughly GBP 152 million. Law Gazette reports that Burford remains confident that the funding landscape has stabilized. Chief executive Christopher Bogart stated the expectation that a spike in litigation claims spurred by the pandemic is coming. Sir Peter Middleton, Burford chair, explains that the current numbers showcase the earning power of the litigation portfolio. Next up for Burford, an impending listing on the NYSE.
The LFJ Podcast
Hosted By Erik Bomans |
Our guest today is Erik Bomans, CEO of Deminor Recovery Services. Deminor is an EU and Asia-focused litigation funder. The company has a presence in six countries and has supported claims in 13 jurisdictions, with an 81% positive outcome rate. Erik discusses issues relating to market awareness, regulatory environment and country-to-country differences across Europe with respect to the funding industry. He also dives into the collective action landscape, and whether Europe is headed down a similar road as Australia in terms of a regulatory backlash to the funding of large consumer claims. This podcast is a must-listen for any litigation funder with an eye towards the EU market! [podcast_episode episode="6490" content="title,player,details"]
Consumer Special Features

California Bar Issues Formal Opinion on Third-Party Litigation Funding

This article was contributed by Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC). On October 1, 2020 the California Bar Association published Formal Opinion NO. 2020-204 on Third-Party Litigation Funding. The bar’s opinion states that attorney and consumer must be fully informed as to the terms and conditions of the contract. Additionally, the lawyer must ensure competence in advising on any litigation funding agreement, and is obligated to obtain a client’s permission before discussing any confidential information with the funding company. During the comment period of this opinion, the Alliance For Responsible Consumer Legal Funding (ARC) weighed in on the issue by submitting a letter to the review committee. In the letter ARC stated: “The Proposed Formal Opinion properly establishes that a lawyer is under an ethical obligation to decline to represent a client in legal funding negotiations if the lawyer does not have sufficient knowledge and expertise to help the client avoid being exploited in the legal funding relationship.” In addition, it was stated that this opinion will give consumers additional confidence in the industry: ”By requiring adequate representation in the legal funding negotiation, bad actors will be less likely to survive. As those bad actors are driven out, consumer confidence in legal funding services will rise and the resulting increase in demand for legal funding services will draw even more reputable funders into the market. This, in turn, will create stronger incentives for funders to cater to the price and quality preferences of individual plaintiffs.” The California Bar Association and the American Bar Association have each released a recent opinion on Litigation Funding. In both opinions, the bars acknowledge a need for the product, and propose best practices for how consumers and attorneys should work with companies that offer financial assistance to consumers in their time of need. ARC and its member companies continue to ensure that both consumers and their attorneys are fully-informed on the terms and conditions of the contract, and that the only parties that have a say in the prosecution of the case are consumers and their attorneys. These are enforced in the most recent set of Best Practices that ARC and its companies have released. ARC is very pleased the California Bar Association, the largest State Bar Association in the United States with over 242,000 members, has taken this position on the issue and put forward these important guidelines.
Commercial

Stonewood Case Stay of Proceedings Lifted

Questions about litigation funding led to a stay of proceedings during the liquidation of Stonewood Homes. That stay has been lifted by Associate Judge Owen Paulsen on September 25th. In August, a ruling stated that the liquidators, Rhys Cain and Rees Logan, could submit a request to lift the stay once concerns regarding the funding arrangement could be addressed. Otago Daily Times reports that Queenstown Mayor, Jim Boult, was the director of Stonewood Homes prior to February 2016. At that time, Stonewood was put into receivership as it owed money to unsecured creditors. According to the liquidators, Boult and another defendant allowed for trading while insolvent. Allegedly, this went on for nearly two years, during which time Stonewood lost even more money—to the tune of millions. Boult ostensibly took issue with the funding for the case, which was provided by developer Chris Meehan. Through his company, PLF Services, Meehan agreed to cover court costs, legal fees, investigator fees, and witnesses. Boult asserted that Meehan's funding was part of a vendetta intended to interfere with the coming mayoral election. Ultimately, Judge Paulsen determined that there was no satisfactory evidence of a vendetta. Part of this ruling was based on the fact that Meehan was approached about funding, as opposed to having sought it out.  A hearing for the case has not been announced but is expected soon.
Commercial

Insolvencies Lead to More Disputes—Says Litigation Capital Management

While COVID takes a toll on businesses around the globe, Litigation Finance is experiencing boom times. As the number of insolvencies increases, funders are readying for an influx of new requests. In preparation, Litigation Capital Management has created an asset management division. This is Money explains that LCM is on track to grow its global presence through the use of increased capital. As chief executive Patrick Moloney has stated, LCM has experienced major growth so far in 2020, and that’s expected to continue. Like many litigation funders, LCM is counter-cyclical. When businesses are in turmoil and markets are in flux, opportunities to fund cases abound. As Moloney explains, LCM anticipates ‘a huge volume of opportunity’ in the global marketplace. LCM relies on two basic funding models. Some disputes are funded directly from its balance sheet. Others go through a third-party fund managed by LCM. These funds are used to invest in individual cases, a portfolio of multiple cases, or to purchase claims in cases that have already been adjudicated. The current LCM share price suggests that investors are still cautious about the growth potential of the company. Moloney remains optimistic. He explains that LCM is not just focusing on current markets—but looking ahead to global opportunities for growth. Once the market grasps the full potential of LCMs portfolio funding model, the true value of the company will become readily apparent.
Commercial

Asia-Based Companies Have Their Eye on US IP Litigation

Litigation regarding intellectual property is undergoing a transformation. Judicial and legislative reform has led to changes that have made IP cases more complex and time-consuming, and therefore even more expensive to see to completion. Interestingly, companies based in Asia are looking toward US monetization strategies despite the inherent challenges of doing so. Burford Capital explains that for some, the potential rewards inherent to US patent litigation outweigh the potential risks. Huawei, for example, has been on the affirmative side of IP cases irrespective of the significant expenses involved. Nichia and Sharp are also among those with active IP cases in US courts. Since the beginning of last year, US patent cases led to at least half a dozen litigation awards of more than $200 million. These cases include companies like Cirba Inc, KAIST, and Motorola. There was also the notable Caltech verdict in its case against Broadcom and Apple—where Caltech was awarded more than a billion dollars. Even after a verdict is given, it may still take months before the award money is actually seen. Moreover, large awards can lead to bankruptcy and insolvency, which means recovery can take even longer. That aside, these award amounts suggest that the murky waters of US IP litigation may well be worth wading into. Since early last year, Asia-based tech companies have filed several dozen IP infringement complaints in US courts, including Maxell, LG, Epson, Seiko, and more. While Asia-based plaintiffs in American courts is not new, the size and scope of the cases suggest that innovation in tech is bringing change to Asia’s economy. In fact, Chinese startups currently attract almost 30% of venture capital around the globe, so it's likely this is a trend that will continue well into the future. 
Announcements Commercial

LexShares Further Expands Investments Team with Strategic Hiring of Kenneth Harmon

LexShares, a leading commercial litigation finance firm, today announced the addition of Kenneth Harmon as Director of Risk & Deputy General Counsel. Drawing on a 28-year background prosecuting white-collar criminal matters and whistleblower-related litigation for the federal government, Mr. Harmon will be evaluating and servicing a growing pipeline of legal claim investment opportunities as a member of the firm’s Investments Group. Prior to joining LexShares, Mr. Harmon served as an Assistant U.S. Attorney in the District of Colorado for 19 years and in the Southern District of Florida for nine years, primarily leading investigations into tax and accounting fraud, insider trading, and counterfeit pharmaceuticals trafficking. He has also practiced at Denver-based litigation firm Springer & Steinberg, focusing on a wide range of commercial and white-collar criminal matters. Mr. Harmon began his career as a litigation associate with Paul Weiss and holds a Juris Doctor from Harvard Law School. “Ken’s impressive track record and diverse skill set make him a tremendous asset to our firm,” said Max Volsky, LexShares’ Co-Founder and Chief Investment Officer. “Investing in our underwriting and servicing team is critical. We are confident Ken will bolster our efforts to provide an efficient funding process to an expanding network of attorneys and plaintiffs.” “As a close observer of the litigation finance market, I have long admired LexShares’ approach to investing in legal claims and relished the opportunity to work alongside such a dynamic, experienced team,” added Mr. Harmon. “Mastering new and complex subjects fueled me throughout my career as a federal prosecutor. I find myself similarly energized joining a rapidly-growing firm that provides a critical product to the legal industry.” The hiring of Mr. Harmon marks the latest milestone in a significant year of expansion for LexShares. He joins an investment team that has collectively underwritten $3 billion in funding opportunities to date, including $921 million in the past year alone. Powered by the firm’s proprietary Diamond Mine origination technology, alongside veteran legal underwriters, LexShares’ average investment size has grown 60% year-over-year as of Aug. 31, 2020, to $1.63 million. To support this growth, shortly after its 100th investment, the firm launched its second dedicated litigation finance fund. With a $100 million target size, LexShares Marketplace Fund II opened on June 10. About LexShares LexShares is a leading litigation finance firm, with an innovative approach to originating and financing high-value commercial legal claims. LexShares funds litigation-related matters, primarily originated by its proprietary Diamond Mine software, through both its online marketplace and dedicated litigation finance fund. Founded in 2014, the company is privately owned with principal offices in Boston and New York City. For more information, visit www.lexshares.com. This release may contain “forward looking statements” which are not guaranteed. Investment opportunities posted on LexShares are offered by WealthForge Securities, LLC, a registered broker-dealer and member FINRA / SIPC. LexShares and WealthForge are separate entities. Investment opportunities offered by LexShares are “private placements'' of securities that are not publicly traded, are not able to be voluntarily redeemed or sold, and are intended for investors who do not need a liquid investment. Investments in legal claims are speculative, carry a high degree of risk and may result in loss of entire investment.