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Key Takeaways from LFJs Q4 2020 Commercial Litigation Funding Roundup

On Thursday December 17th, Litigation Finance Journal hosted a special 1-hour panel discussion on the major events impacting the commercial litigation funding industry. Panelists included Omni Bridgeway CEO Andrew Saker (AS), Therium Co-Founder and CIO Neil Purslow (NP), and LCM CEO Patrick Moloney (PM). The panel was moderated by Ed Truant (ET), founder of Slingshot Capital. Below are some highlights from the discussion. ET: Why did each of you decide to pursue a global growth strategy as opposed to solely focusing on domestic markets? PM: We looked at things from a very practical perspective at LCM, we looked at where the most economic activity was happening. Where there’s more economic activity there’s more disputes. Therefore, we looked around the globe toward the larger economies than where we started back here in Australia. We were cautious and disciplined about moving into new jurisdictions. So very much driven economically and by opportunity. NP: When we started Therium about 12 years ago, we recognized the potential then that the industry would become a global industry. And from an early stage, we were seeing funding opportunities coming from other jurisdictions as well as the UK. Our global footprint reflects a view of the market that there are benefits to being bigger in funding. From a case point of view, it’s better to have more depth of financial resources. From an investor point of view, greater diversification is better. From an underwriting point of view, being able to draw on expertise across jurisdictions and to have the benefits of a global perspective is also helpful.  ET: What were some of the business challenges you faced when you entered new markets? AS: Most of our expansion was done through organic growth. It was where we perceived first-mover advantage. That required us to address a number of key risks, market awareness of the industry was perhaps first and foremost. There were some jurisdictionally specific issues in Canada where we needed to seek some insurance regulatory approvals. But otherwise, it was all about establishing boots on the ground, finding the right people which is more than half the problem. And ensuring that you’ve got access to the local contacts and networks that you need for establishing a successful business. ET: Other than lack of sleep, what are some of the other negative aspects of going global? AS: Lack of sleep is perhaps the biggest issue, but the benefits far outweigh any of the costs. Having such a global team, a global approach, different cultures that are being fully integrated, compensate for any of those downsides. But it’s an interesting dynamic market that’s continuing to grow. PM: I think that’s right. I think...there’s a necessity to become global. In the respect of at least publicly listed and traded. NP: The thing that’s interesting is, relatively speaking, how easy it is to operate across jurisdictions in this industry, and I think it’s because--to a very large extent--the skillset that you need is so transferrable. So it’s actually been very positive. ET: What’s the implication given COVID? Are you thinking differently about your organizations going forward in terms of travel and face-to-face meetings and that type of thing? AS: I think it’s an evolving thought process. Initially, at the front end of this crisis, we all saw the benefits of staying at home and working remotely and using technology to compensate. There was a great deal of enthusiasm and everyone bought in. As this has dragged on, there’s been different views about the merits of that and the efficacy of it all. To some extent, it does vary depending on your location. We’ve been very fortunate here in Australia to have a slightly different experience from our colleagues in Europe and the US.  ET: The next major topic I want to tackle was this concept of corporate social responsibility and litigation finance in environmental social governance, or ESG. CSR is becoming a pretty powerful trend in global investing, so I wanted to explore the implications for the litigation finance asset class. What are you hearing from your shareholder base about CSR and ESG in terms of their importance, and what pressures are those shareholders putting on public companies these days? PM: From LCM’s perspective, I suppose we have had two experiences. One, the public markets through the securities exchange here in Australia, and then more recently the London stock exchange, are probably two quite different experiences. So I think investors out of the UK and Europe have been far more focused and have an expectation far more than I recollect that we’ve had here in Australia, and that’s not to say that these issues are not present in Australia. It’s probably more of a timing thing, but we’re very conscious of it. What we need to wrestle with is, as a relatively small listed entity, is what capacity we have to wade into this. So we’re very conscious of it and we do have principles associated with that. AS: Definitely, it’s an increasingly important area of relevance to all our shareholders. What we have found as we’ve shifted from the ASX300 to ASX200 is that there are more ESG-specific type funds that are interested in a stock that’s compliant with ESG obligations, and as a consequence of that, we initiated our own process to have a formal ESG policy. It’s a work in progress and something that we’re developing with internal stakeholders and well as external stakeholders. It’s a value that resonates throughout the whole company. NP: ESG and CSR considerations are becoming increasingly important for privately funded investors as well. And we get quite a lot of questions from them about how we’re thinking about this. On the CSR side, the way we’re approaching it—we tend to think of litigation finance as ultimately about investing to facilitate access to justice. And for the most part, obviously, we’re doing that as an investment in the expectation of a return. But there is a wider need in society for access to justice and legal advice where those situations can’t be funded on a commercial basis. And we have felt that it’s important as an investor in the legal world that we play our part in that area too. It’s for that reason that we set up Therium Access 18 months ago. ET: Let’s move on to the third topic, industry growth, and implications for innovation. At a macro level, the industry arguably is growing in three main ways: growth in the number of jurisdictions allowing litigation finance, increasing penetration within existing markets, and then growth through product innovation. So let’s take a closer look at product innovation as a growth factor. Perhaps each of you can comment on what your business has done to innovate in the litigation finance market within the last 2-3 years.   PM: At LCM, we’ve tried to look at business development in a very different way to how the industry might have looked at this previously, so we look at the available market in two ways. One is those who use litigation finance for necessity, and those through choice, so I think the larger part of the market which remains sort of un-penetrated and unaddressed by our industry globally is providing it to large sophisticated well-capitalized corporates. And I think that’s a very interesting part of the market for us, I think it’s an interesting part of the market for the industry as a whole. I think that’s where a lot of our focus has been in the last 2-3 years. ET: Neil, how about you in terms of innovation at Therium? NP: Certainly we’ve seen a lot of innovation in the development of product. Or perhaps to put in another way, in deployment techniques. Our core business is built around an ability to assess and to price litigation risk. But the way in which that investment has been delivered and the way it’s been structured has become a lot more varied in recent years. We put a great deal of resources into developing those techniques, whether it’s portfolio funding of different types, corporate portfolios, law firm funding, or claim monetization. These aren’t new areas, we’ve been at this for a long time. But certainly, our level of sophistication in how we do them has increased dramatically in the last few years. I think also in terms of sophistication, we’re working with an AI firm called Solomonic, to bring a more data-driven approach to our investment process as well. I think that’s another theme. The last point on this: I think the market is in an interesting point now where funders are starting to drive certain parts of the litigation landscape. So instead of being passive recipients of cases from law firms, funders are now playing an important role in shaping litigation trends and what case types do and don’t develop.  AS: From a non-product perspective, I think the evolution of the fund management model is growing, it’s something that has had roots in the last five years, but is now being more warmly embraced by the litigation funders as well as PE investors.  Looking forward, as Neil mentioned, a more active role for litigation funders in the investments is something that I think will grow. We are looking to try to shift our focus from being an agent to being a principal and actually owning claims, judgments, and awards. There are various other strategies we’re looking at, including downside risk management, cracking the holy grail we all talk about of defense-side funding. And then potentially even moving into law firm ownership, to take advantage of this shift that seems to be evolving around the world.
Consumer

Involuntary Bankruptcy Petition on the Horizon in Tom Girardi Case

Creditors of the firm Girardi Keese, and Tom Girardi himself, plan to file an involuntary bankruptcy petition by the end of the week.   Law.com reports on a recent remote hearing to discuss the appointment of a trustee. Judge Thomas Durkin (Northern District of Ill) has previously frozen the assets of Girardi and his law firm, suspecting that they may have stolen settlement money from clients. Attorneys for one litigation finance firm explained that the involuntary bankruptcy petition would negate the need to appoint a trustee. California Attorney Lending has a judgment against Girardi of more than $6 million, though they remain defendants in an earlier lawsuit brought against Girardi Keese, alleging embezzlement of settlement monies owed to families impacted by the crash of Lion Air Flight 620. Judge Durkin opted not to appoint a trustee, though he did insist that the asset freeze stay. Jay Edelson is the acting co-counsel to several of Girardi’s clients. He recently expressed his concerns about the 8,000-10,000 clients Girardi represented in another class action—possibly involving a 2015 gas leak in Aliso Canyon near Los Angeles. In court, Edelson explained to the judge that his firm is concerned about the clients in question and wants them to be fairly compensated for their losses. Girardi is a prominent attorney whose wife, Erika Jayne, appears on the “Real Housewives of Beverly Hills.” The two ostensibly filed for divorce recently, though some have speculated that this is a ruse to protect or hide the couple’s assets. One lawyer, Boris Treyzon, informed a judge of Girardi’s request that he take over several Girardi Keese cases. Durkin declined this arrangement, saying he would not allow settlement or recovery to move forward without a trustee to supervise. Meanwhile, unnamed litigation funders have offered their assistance to Girardi. A judge has not precluded Girardi from receiving funds to pay for a forensic evaluation of his finances.
Commercial

Managing the Workflow of Legal Departments

There’s an economic crisis afoot, which means managing costs and workflow is more vital than ever. Instead of telling in-house legal teams to ‘do more with less’, savvy businesses are investing in their legal departments. This allows them to better manage workflow, reduce spending, and optimize the company’s bottom line. Thomson Reuters Legal details that making a case for investment at this time may fall on deaf ears. It suggests that rather than explaining why investing is a good idea—detail instead why not investing can cause significant damage. Poor workflow, for example, is often the result of a lack of prioritization or an uneven distribution of assignments. Enhanced optimization can be a key way to address this. By streamlining, employing consistent practices, using trackable management, and filing regular reports with management, the benefits reveal themselves in short order. Automation via specialty software can connect with existing software to create a new level of efficiency. When a business is reticent to make the necessary investments, third-party legal finance is an option worth considering. Funds can be used to shore up in-house legal departments without adversely impacting balance sheets. Legal funding is a versatile, effective way to keep budgets in line while continuing to make improvements and handle pending matters effectively. Beware the cries of ‘that’s how we’ve always done this,’ when advocating for investment in and updating of in-house legal departments. Innovation is the path to a better future. Corporate legal departments have changed a lot in recent years—moving from a cost-burden to a kind of hub for communication, collaboration, and information centralized for easy access. This can be enhanced by modern tech like live updating of documents for faster contract creation and negotiation, or with software that leads to greater transparency and better communication between staff, clients, and management.
Commercial

Key Takeaways from the IP Dealmakers Forum

Week two of the IP Dealmaker’s Forum included a variety of panels and events revolving around three main points of discussion. These included diligence, licensing, and venue. The forum also expounded on the importance of litigation funding in an array of IP matters. Above the Law details that litigation funding is a modernization of the traditional contingency model. In many types of patent litigation, diligence is key. Litigation funders can help with this, as their experience in varied IP-related matters will provide valuable insight. Litigation funders are well-versed in IP litigation and routinely invest in their diligence capabilities. In addition, the Litigation Finance industry is well-monied and standing by to help. It’s vital that litigants be proactive in the diligence process. This includes giving funders all the relevant information, allowing them to fully vet the risks of a specific investment. Also advised is a willingness to discuss these risks fully with their funders. These aspects of diligence benefit all involved. Firms get a no-cost opinion from experienced funders while funders are able to protect their (and their investor’s) capital from risk. Patent owners can obtain an informed and experienced analysis of their case to decide how best to proceed. Venue is also a vital consideration and another aspect that may be best discussed with litigation funders early on in the process. Some might suggest that, theoretically, it shouldn’t matter where a case is filed. But that’s simply not the reality. Licensing was the third major consideration discussed at the forum. Much IP licensing is based on potential damages from infringement. Large verdicts have become increasingly common in the IP landscape, even outside the business world with university researchers and non-practicing entities gaining huge settlements or awards. Part of the frustration with licensing stems from tech companies failing to look seriously at their licensing until a lawsuit is on the horizon.
Commercial

Did the Recent Mastercard Case Open the Floodgates?

The case of Mastercard Inc et al v Merricks has captured considerable attention. Lawyers, funders, claimants in cases that have been stayed pending this decision—and at least 46 million claimants all awaited the Supreme Court’s ruling. Omni Bridgeway explains that collective proceedings in England became opt-out in 2015 as part of a bid to find more equitable solutions. This led to worry that, as some say has happened, commercial firms might fund cases strictly for profit. That was of particular concern in this case, given the high number of claimants as well as the size of the potential award. In the Mastercard v Merricks case, claimants are made up of those who made purchases with Mastercard over the 16-year-period covered by the action. Also involved are the 800,000 or so businesses that accepted the payments. All told, the class action seeks GBP 14 billion. Merricks, the representative plaintiff, has a meritorious cause of action. Specifically, the case here follows a finding of liability as the European Commission already declared that Mastercard breached its duty when they set their fees. But how can Merricks establish everyone’s individual losses on every mundane transaction over 16 years? In truth, he doesn’t have to. Seeking an aggregate award would only require data and methodology that affirms an appropriate amount of damage. At the same time, it may seem impossible to find a methodology that is fair to everyone. The Supreme Court ultimately held that defendants should not be let off the hook because proving exact damages is a herculean task. They also affirmed that collective actions are permissible even if they’re made up of claimants who could have filed their cases individually. Some have claimed that this ruling opens the floodgates to a bevy of new collective actions. It is true that class actions may have an easier path, but that only increases access to justice for ordinary people.
Commercial

New Law Brings Litigation Finance to Cayman Islands

This past Monday, Cayman Islands Parliament passed the Private Funding of Legal Services Bill 2020. The bill provides a legal framework for conditional legal fees akin to what happens in the United Kingdom, as well as US-style contingency fees and litigation funding. Cayman Compass reports that unlike UK and US litigation finance agreements, under the new law, fees will be capped. Unless there’s a Grand Court application from the client and lawyer, success fees may not be higher than 100% more than the normal fee. Further, contingency fees cannot exceed 40% of the total recovery or award. The law is a welcome one. The attorney general stated that the new provisions are expected to level the legal playing field. Without funding options, the party with the most money is generally the winner. Ultimately, the result will be greater access to justice. That’s why the Opposition Members of Parliament supported the bill. The new law does not apply to criminal cases.
Commercial

Avalanche Blockchain Offers ILO: Initial Litigation Offering

An ILO (Initial Litigation Offering) was recently launched on the Avalanche blockchain. This is, in essence, a token that provides investors with a percentage of payouts from various funded lawsuits. The December 14th announcement detailed the perks of litigation funding as an investment. Coinspeaker reports that the ILO is a first, and is estimated to generate more than $10 billion in the cryptocurrency landscape. Kevin Sekniqi of Ava Labs, explains that this ILO is a boon to investors as well as those who seek legal redress but lack the resources. Litigation finance is uncorrelated with the larger market and therefore an attractive investment in unpredictable times. While the Avalanche ILO is the first of its kind, it’s expected to be far from the last. The first noteworthy case involves a California hemp farm that was wrongfully destroyed by the Kern County Sheriff’s Office. The farm was worth roughly $1 billion. ILO investors will now be able to invest and share in any future recovery.
Commercial

Litigation Funders Move Toward Indian Market

Litigation Finance is already booming in the United States, UK, Australia, and elsewhere. India has yet to really take advantage of the practice. But that may be about to change. Reuters explains that several top funders including Omni Bridgeway, the second-largest litigation funder, are setting up operations in India. According to Omni Bridgeway CIO Tom Glasgow, the firm is already speaking to potential clients. Glasgow didn’t reveal who, but talks about de-risking and monetization are underway. The expectation is that funders will focus on international arbitration due to the short resolution time compared to other types of cases. Once funders are well-versed in local issues, it’s likely that funding for local cases in India will follow. Also on the horizon is an Indian Association for Litigation Finance, which will include input from Marsh, Omni Bridgeway, and Phoenix Advisors among others. Like the ILFA, the group plans to advocate for the industry and create a means for self-regulation of litigation funding.
Announcements Commercial

Therium’s Financial Commitments To Access To Justice Causes Surpass £1.7m

Jersey, 15th December 2020: Therium Access, the not-for-profit arm of global litigation funder Therium Capital Management, has announced the recipients of its latest grant round. The Autumn 2020 grants have been awarded to six organisations and brings the total number of organisations receiving grants to 32 with over £1.7m committed since its inception in 2019.

The Autumn 2020 grant round remained focused on the issues exacerbated by the Covid-19 pandemic, with a focus on supporting work which is difficult to find funding for elsewhere, scalable delivery models, preservation of legal specialisation and work of strategic importance. Areas of law such as employment and housing were focussed on as these services face a huge surge in demand. Issues facing vulnerable young people were also prioritised.

As the Covid-19 pandemic continues into 2021, these organisations will continue to serve as a lifeline to the most vulnerable and marginalised in society. Additional grants have been awarded to two current grantees.

The recipients of the Therium Access Autumn 2020 grant round are:

  • Bristol Law Centre: The grant will increase capacity in employment and housing, enabling Bristol Law Centre to deliver a full service including complex advice and casework, in a wider geographical area without the limitations of Legal Aid work.
  • Child Poverty Action Group: The grant is for the continuation of funding for a solicitor in the charity’s strategic litigation team and other various costs as it continues to promote and protect the rights of children and families and maximise family incomes.
  • Legal Action Group: The grant is for a new Housing Possession Duty Desk: a practical guide. The Guide will provide a practical, accessible and affordable source of information for advisers at Housing Possession Court Duty Schemes.
  • Project for the Registration of Children as British Citizens: The grant is towards PRCBC’s core costs to support delivery of their pro bono strategic casework that ensures young people are aware of and able to exercise their rights to British citizenship.
  • South West London Law Centre: This grant will fund a Housing Court Crisis Navigator who will give practical help and support to deal with the underlying issues of people seen by their housing and debt teams in Croydon.
  • Youth Legal: The grant is for the salary and associated costs of a part-time Development worker to support Youth Legal’s vital work and to reach out to their communities, develop strong networks, and coordinate projects.

Jeunesse Mensier, Grant Programme Director at Therium Access, said: “Our Autumn 2020 grant round has again shown us the excellent and necessary work that organisations and individuals provide across the country in facilitating access to justice. We are so pleased to be supporting these six impressive and inspiring organisations which help some of the most vulnerable in our society in the areas of citizenship, employment and housing.”

Lord Falconer, Chairman of Therium Access Advisory Committee said: “During such a difficult time, legal advice has never been more important. It’s so brilliant to see Therium Access lead the way and provide much-needed financial support to such worthy organisations that provide free legal advice to strive and reduce the ever-increasing justice gap. We look forward to seeing other funders follow suit.”

Solange Valdez-Symonds, Solicitor and Director of Project for the Registration of Children as British Citizens said: “PRCBC’s core activity is assisting, including by litigation, children and young people to secure their rights to British citizenship. This grant from Therium Access is vital for our continued ability to deliver on this - and not only to directly assist more children and young people. It enables us to bring our expertise and experience to bear in challenging the several injustices in policy and practice that deprive so many more children and young people of the security and recognition that is theirs by right through registration of citizenship. Thank you Therium Access.”

Louisa McGeehan, Director of Policy at Child Poverty Action Group said: “Funding from Therium Access Fund for a further year will enable us to continue our award-winning work in ensuring low-income families have access to justice.  The need is greater than ever given the unprecedented number of families claiming universal credit as a result of the Covid-19 pandemic. renewed funding will help us in our ongoing work of ensuring that laws relating to social security entitlement are made and applied in compliance with fundamental rule of law requirements and that ordinary individuals will be able to hold the government to account when this is not the case.”

Applications for the Spring 2021 grant round will close on 15th April 2021 with priorities being confirmed in early 2021.

About Therium Access:

Therium Access is the primary expression of Therium’s corporate and social responsibility programme. Therium Access dispenses with the criteria of funding for profit and has the sole purpose of facilitating access to justice.  Therium Access is a mark of Therium’s wider commitment to the pursuit of justice and the rule of law.

Therium Access accepts applications from charities and other entities whose services and projects facilitate access to justice or from those seeking assistance to obtain legal representation on cases (including defence) which have strategic importance. The applicant’s need and the impact of the grant will be important factors in our review process. The deadline for the submission of the next round of grant applications is 15 April 2021. In addition, urgent applications may be considered on an ad hoc basis. Applications need to be made by legal representatives or the entity seeking a grant.  The board of Therium Access is assisted by an Advisory Committee which is chaired by Lord Falconer, former Lord Chancellor, Secretary of State for Constitutional Affairs and Secretary of State for Justice.

Therium Access aims to support access to justice in the broadest terms and considers applications that further the following causes (in no particular order):

  • The right to legal representation or due process;
  • The proper and efficient administration of justice;
  • The advancement of human rights;
  • The promotion of equality of rights and diversity;
  • The protection of children, the elderly, the disabled, minorities, asylum seekers and other vulnerable or disadvantaged groups;
  • The advancement of environmental protection or improvement;
  • The promotion of legal education that furthers the causes listed above; and
  • Any other case or project in which a person, group, or entity will not have access to justice without financial assistance.

Therium Access is intended to be a global initiative. Its initial focus is on the UK and it will be rolled out in other jurisdictions in a number of planned phases.

About Therium Capital Management:

Therium is a leading provider of investment capital to the legal industry and one of the largest, having raised over $1 bn since 2009.  With investment teams in the UK, USA, Australia, Germany and Norway, Therium has funded litigation and arbitration claims exceeding $40 billion including many of the largest and most high profile funded cases in the UK and internationally, including arbitrations under rules of the LCIA, ICC, UNCITRAL, LMAA, AAA, CIETAC, ICSID, Stockholm Chamber of Commerce and the Energy Charter Treaty.  Therium has been Top Ranked by Chambers and Partners and Leaders League with investment officers across the UK, Europe, USA and Asia Pac recognised as leading individuals in litigation finance.

Last year to mark the firm’s tenth anniversary, Therium Access was launched as a not-for-profit venture to fund a wide range of access to justice projects and cases – supporting the most vulnerable in our society and helping to bridge the widening justice gap. With its own board composed of eminent figures from the legal community and a dedicated grants officer, Therium Access has made over £1.7 m in financial commitments over the last 22 months to over 32 different organisations. As the first initiative of its kind, Therium has been shortlisted for several awards for launching this ground-breaking initiative, including the FT Innovative Lawyer Awards 2019, the Lexis Nexis Awards 2020 and The Lawyer Awards 2020.

Therium also invests in AI and software projects to accelerate the advancement of the industry. As a founding member of both the ALF, ILFA and the Litigation Funding Working Group, Therium is also committed to shaping the future of legal finance and setting high standards for the industry.