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Commercial

Manolete Case Numbers Rise, Fueling Profits

UK Funder Manolete is showing a 49% profit increase in the six months ending September 30th of this year.  Shares magazine details that in the first half of this financial year, 52 cases were completed. This represents nearly three times the number of cases from last year. After-tax profits for Manolete were GBP5.2 million in the first half of this financial year. Profits from completed cases topped GBP4.2 million, an increase of 45%. As of Tuesday morning, Manolete share price was 305p
Commercial

Maximizing Litigation Funding Opportunities in Africa

Around the world, litigation funding is growing at a fast pace. The economic impacts of the pandemic are one of several contributing factors that also include recent legislation that’s increasingly inviting to the practice. Africa is the newest bastion of growth for the industry. As companies face pressure to conserve funds, legal departments scramble for new ways to manage budgets effectively. Lexology details that there are a few main points worth looking at when considering the relevance of litigation funding to Africa. Most notable is the lack of regulation in much of the continent. Third-party funding is welcome nearly everywhere, and legislation impacting the practice is minimal. African communities have been adversely impacted by COVID, pretty much across the board. The businesses that serve these communities recognize their obligation to keep doors open—and reducing costs through the use of litigation funding is a solid way to accomplish that. Also, litigation costs in much of Africa were already on the rise before the pandemic began. Litigation funding allows litigants to avoid contingency plans and find the best counsel available. As a business tool, litigation funding is in high demand. This is an area in which the expertise of funders comes into play, as funding entities utilize legal advisers, analytics, and career-long expertise to advise businesses on how and when to pursue litigation. Funders are more than sources of quick cash. They can serve as advisors who can recommend business solutions that make the most out of third-party legal funding. Africa is joining the ranks of Australia, Europe, the United States, and Singapore as desirable places for investments in litigation funding. The perception of their courts has risen in recent years next to an excellent record for enforcement. There’s every reason to believe this trend will continue.
Commercial

Sizable Damage Awards Have Investors Looking at Patents

Several large awards for damages levied against tech giants like Apple and Cisco are turning industry heads. Centripetal Networks was awarded nearly $2 billion by a Virginia district court, representing just one of several awards of over $100 million for patent infringement. An article in Bloomberg Law explains that investors, including litigation funders, are looking at these sizable awards as an impetus to invest in patents. Some have suggested that big tech companies have become complacent and overconfident in the likelihood of beating a patent-related action. This attitude can limit the ability of parties to meet at the negotiating table—necessitating a long and costly trial. Investing in patents, not unlike litigation funding itself, is recession-proof to a large degree, as it’s not correlated with the rest of the market. A 2019 survey of lit fin companies, in-house counsel, and law firms suggests tremendous interest in acquiring patents. Jack Lu is a chief economist at an intellectual property consultancy. He explains that willful patent infringement can realistically lead to triple damages. Lu sees the large verdicts as a message to patent owners, letting them know that the courts are serious about protecting their rights. That’s good news for tech companies, and for patent owners. The large awards coming down involve high-end tech, or in some cases, pharmaceutical patents. One reason the damages are so sizable is that they factor in the expected sales volume. In the history of the US, only nine cases have ever ended with a verdict of $1 billion or more. They’ve all happened since 2007, which would seem to indicate the intrinsic value of technology in society. Joshua Harris, VP at Burford Capital, expects that the kind of verdicts they’ve been seeing will continue to attract investors. Even if, Harris says, verdicts are lowered on appeal—an award in the multi-millions is still attractive to investors.
Commercial

Experience is the Path to Trust in Litigation Finance

Despite the widespread acceptance of third-party litigation funding, some remain skeptical. Accusations of promoting frivolous legal actions and unfair recoupments are common. Bloomberg Law details that while most of the legal world understands the value of Litigation Finance in increasing access to justice, not everyone is convinced. A new survey shows that opinions on the efficacy and trustworthiness of the practice are directly impacted by one’s own experience. In short—those who have used litigation funding were more likely to say that it’s helpful, while those who haven’t were more prone to view it with suspicion.
Announcements Commercial

Litigation funder Validity Finance adds former Kirkland Ellis lawyer in Houston; former federal judge joins firm’s investment committee

Leading litigation funder Validity Finance has expanded its Texas bench with the addition of former Kirkland & Ellis Houston trial partner Sarah Williams. She joins as portfolio counsel in Houston, where she’ll advise on potential investments with particular focus on Texas and the Southwest. At Kirkland, Ms. Williams handled a wide span of litigation matters, including high-profile energy and bankruptcy cases, as well as disputes involving contract, fraud, professional liability, and employment claims. Along with her trial experience, she brings strong analytic skills for helping Validity assess funding opportunities with law firms and businesses across Texas and the region. The Texas legal market is the nation’s third largest and boasts one of the most active state court systems, and the fourth most active federal system. The latest annual report by the Texas Judiciary reported that the number of civil lawsuits filed in state district courts grew by 11% between 2018-19, and nearly 30% over a five-year period. As the state’s docket has grown, so has the backlog, creating more financial pressure on claimants trying to advance their cases. “We’ve seen a pronounced uptick this year in demand for funding support – including among companies and law firms constrained by Covid. Nationally, demand has grown around 50%,” said Validity’s Houston office head Laina Hammond. “In our two-and-a-half-year presence here, we’ve met with virtually all of the top trial practices in the state, including boutiques. This is a market that grasps the value proposition in partnering with strong funding providers to grow and sustain litigation pipelines.” Regarding Ms. Williams, Ms. Hammond added, “We had no doubt that Sarah was a strong fit with our team here. She brings outstanding trial experience and excellent relationships across the region, and her ability to size up the merits and worthiness of a case will make her invaluable for building our Texas portfolio. We are thrilled to have her with us and look forward to helping clients find innovative financing solutions to meet the unprecedented legal challenges they face.” Ms. Williams was partner at Kirkland from 2018-20, having previously been a litigation associate. She was formerly an associate at the Houston firm Diamond McCarthy as well as at Weil Gotshal. She served as judicial clerk for the Honorable Marcia Crone in the Eastern District of Texas from 2010-12. Before becoming a lawyer, Ms. Williams was an award-winning journalist, writing for various publications including The Houston Chronicle and Examiner Newspaper Group. “I am excited to join the Validity team and to help expand the company's portfolio in Texas and beyond,” Ms. Williams said. “As a trial lawyer, I'm keenly aware of the important role litigation finance can play in ensuring worthy cases reach the courtroom and look forward to partnering with our clients to develop innovative solutions to their funding needs.” Retired Magistrate Judge Henry Jones Joins Investment Committee Validity also announced a new member to its investment committee, former U.S. Magistrate Judge Henry Jones. He joins former federal Judge John Gleeson, retired Kirkland & Ellis partner Jim Schink, and Towerbrook General Counsel Glenn Miller on Validity’s investment committee. Judge Jones most recently served as a mediator, arbitrator and Special Master for The McCammon Group after retiring from more than 30 years as Magistrate Judge of the U.S. District Court of the Eastern District of Arkansas. A graduate of Yale University and the University of Michigan Law School, he enjoyed a broad civil litigation practice as a partner at Walker Hollingsworth & Jones in Little Rock, Ark., prior to his judicial career. Validity CEO Ralph Sutton stated, “Judge Jones and I have known each other for over 30 years. We both clerked for the Honorable G Thomas Eisele about 20 years apart. Judge Jones’ reputation for incisive, crisp and thoughtful decisions from the bench was always matched by his impartiality and respect for the dignity of every litigant who appeared before him. We know he will contribute meaningfully to the quality of our IC’s investment decisions.” About Validity: Validity is a commercial litigation finance company that provides non-recourse investments for a wide variety of commercial disputes. Validity’s mission is to make a meaningful difference in our clients’ experience of the legal system. We focus on fairness, innovation, and clarity. For more, visit www.validity-finance.com.
Commercial

Key Points on Building Contingency Practices

A recent legal finance report suggests that nearly ¾ of lawyers anticipate that their firms will look into building contingency practices in the coming years, and that almost 90% say their firms will begin to increase options for alternative fee arrangements. How should contingency practices be implemented? Burford Capital’s recent conversation with Aviva Will and Peter Zeughauser outlined factors to consider when building a risk-based practice. Knowing the trends exacerbating the need for alternative fee arrangements is a vital first step. These include competition from firms both established and new, and the fact that client expectations are higher than they’ve ever been. The leverage model is on its way out, and the legal services market has become unbalanced and polarized as top talent is poached by larger firms. Legal finance will no doubt play a role in the formation of a contingency practice. Risk-sharing and gaining more control over budget and cash flow is a major benefit of third-party funding. Litigation funding experts will also be helpful when vetting new cases and assessing risk, in addition to helping to educate stakeholders on the many benefits of litigation funding. Interestingly, some firms are offering risk-based terms on one aspect of a case, rather than the case as a whole. This is an innovative way to reduce risk while still maintaining a viable client relationship. An open dialogue with clients is essential to assess their need for alternatives to traditional fee structures. Working with partners to focus on pricing is also important. This includes the formation of a pricing department, which may including hiring for that purpose. Forming a pricing department may also necessitate an investment in educating lawyers and staffers. Incentivizing creative pricing models is another solid way to encourage innovation.
Commercial

Are Whistleblower Cases Appropriate for Litigation Funding?

A recent Medicare False Claims Act suit involving an outside funding agreement has caught the attention of the legal community. Specifically, the case calls into question the FCA’s current public disclosure provisions, and the authority of the government to dismiss FCA actions. An article in Bloomberg Law reveals that debate about third-party litigation funding is still rampant in the legal and financial worlds. This is especially true in cases involving the False Claims Act, where plaintiffs/relators pursue very large claims while acting on behalf of the federal government. One case in particular, Ruckh v Salus Rehabilitation LLC, is one of the first cases to address this controversial practice. In the decision, a qui tam action against nursing homes led to an award of nearly $350 million. In the appeal, the defendants appealed the verdict, asserting that the relator’s litigation funding contract negated the relator’s standing to pursue the claim. In the agreement, the relator offered a 4% payout of the potential recovery in exchange for funding upfront. The ruling suggested that the size of the funder’s cut impacted the standing of the relator. More importantly, though, it recognized that there was no conflict of interest because the funders had no control over the litigation or case outcome.   The receipt of public information is unclear in FCA cases involving funders—since funders will want detailed information about the case while vetting it. This would essentially make non-public information public, contrary to the standard that a relator must possess non-public facts. Also, third-party funding partially reassigns rights to the funders—which is not permitted by the dictates of the FCA.
Commercial

Are Standardized Documents for Litigation Funding en Route?

A working group has been formed to develop model contracts for litigation funders. Chaired by Elana Rey of London-based firm, Brown Rudnick, the working group also includes funders Omni Bridgeway, LCM, Augusta Ventures, Therium, and several insurers and asset recovery professionals. Global Legal Post details that the intention of the working group is to generate litigation funding documents that can be used as models in European and UK markets. This plan is similar to one enacted by the Loan Market Association, which recently developed documents for debt finance transactions. The group’s goals are viewed as a largely positive step by the legal community at large. The working group will also accept input from institutional claimants, which would reduce the possibility of developing standard terms that automatically favor funders or insurers. Most see the adoption of common wording as helpful in establishing litigation funding as credible.
Commercial

How Large Firms are Widening the Power Gap

It’s no secret that big law firms are enjoying growing revenue during the COVID pandemic. The top 50 firms have grown by more than 7% during the first half of 2020, while the next 50 biggest firms have grown roughly half that. Larger firms are handing out bonuses and hunting for new talent in numbers that pandemics would normally preclude. How is this possible? An article in Bloomberg Law explains that a very small group of powerhouse firms focus on areas of law that are now in high demand. Working with litigation funders widens this gap even further, due to the many benefits funders provide. Whether clients are raising capital or declaring bankruptcy, their legal teams have been busy. Record levels of debt are also being issued in part due to changes in Fed policy, and low-interest rates. This kind of debt issuance isn’t glamorous work, but it can lead to massive profits. US Companies raised over $110 billion through October of 2020. That’s almost 80% more than was raised in all of 2019. Through September of 2020, over 50 bankruptcies were filed by companies that hold over $100 million in assets. Bankruptcy numbers haven’t been this high since the last financial crisis in 2009. Given that the last financial crisis led to a rise in the prominence and acceptance of litigation funding, it makes sense that the practice has been so influential during the current pandemic. The extra income these firms are making will lead to upgrades, hiring, and tech advancements that drive the industry forward.