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Announcements Consumer

Alliance for Responsible Consumer Legal Funding (ARC) Updates its Best Practices

On August 3, 2020 the American Bar Association House of Delegates passed resolution 111A by a vote of 366-10, regarding the “Best Practices for Third-Party Litigation Funding”. The Best Practices addressed Consumer Legal Funding, Commercial Litigation Finance and Attorney Funding. In reviewing the Best Practices for Consumer Legal Funding, ARC and its members made the decision to update the set of Best Practices our companies will follow. By following the guidance of the ABA, ARC and its members are setting a new high standard that others in the industry should follow. The updated Best Practices can be found on the ARC Website
  • Each member agrees the funding agreement will be in writing.
  • Each member agrees the written funding agreement will make clear the non-recourse nature of the investment the funder is making in the claim.
  • Each member agrees the funding agreement will state who is responsible for paying the funder, from what source (e., the recovery after trial or settlement), and when (g., after receipt by the attorney of judgment or settlement funds).
  • Each member agrees the funding agreement will be structured so that the consumer, not the funder, retains the right to control the conduct and litigation of their claim.
  • Each member agrees the funding agreement will state: the amount of funding to be provided to the consumer, the future amounts owed or method of calculating the amounts owed to the funder, and provide an independent dispute resolution process.
  • Each member agrees the funding agreement will include a recommendation that a consumer obtains legal advice before entering into the funding agreement.
  • Each member agrees that they will not intentionally provide the consumer funding in excess of the consumer’s needs at the time of such funding.
  • Each member agrees that they will not intentionally over-fund a case in relation to their perceived value of the case at the time of such funding.
  • Each member agrees that they will not advertise false or intentionally misleading information.
  • Each member agrees that they will not offer or pay commissions or referral fees to any attorney or employee of a law firm for referring a consumer to the member.
  • Each member will strive to achieve a rating of B or better with the Better Business Bureau.
On November 16th 2020, ARC will participate in a CLE Webinar with the ABA titled “Consumer Litigation Funding: The Basics, Current Regulatory, Ethical and Confidentiality Issues,” in which these Best Practices and other issues that affect the industry will be discussed. When consumers and their attorneys are dealing with Consumer Legal Funding companies, they should look for the ARC Logo and ensure they follow the Best Practices of the organization. Any questions on this or other issues regarding Consumer Legal Funding can be addressed to info@arclegalfunding.org
Announcements Commercial

UK leading litigation funder, Affiniti Finance, Has Agreed to a £10 Million Funding Line to Top 100 UK Law Firm Hugh James

The initiative will support Hugh James across all services with the initial launch focusing on their niche Military Personal Injury claims, including military deafness and cold related injuries.

Affiniti Finance, who recently announced a £250 million capital raise for litigation and dispute claims, will provide funding for a variety of claims. This deal will support access to justice for thousands of Hugh James clients, as the funding under this facility will be used to finance expenses incurred in pursuing their claims. 

The litigation funding market experienced an unprecedented rise in Firms seeking sustainable and innovative solutions that give claimants access to capital to pursue meritorious claims and allow law firms to fully support their clients.

Ian Cunningham, CEO commented ‘Affiniti Finance are delighted to have partnered with prestigious law firm Hugh James. I am extremely proud of my team and the team at Hugh James for successfully completing this deal during these challenging times. We look forward to strengthening this partnership further into the future and providing additional clients greater access to justice.’

Commercial

Got Tax Disputes? Litigation Funding to the Rescue

Tax disputes are common, yet notoriously difficult to complete. They’re also expensive, complex, can take years to fully resolve and even longer to complete structured payments. When large businesses and corporations are involved, existing rules make the situation even more complicated. Litigation Finance is commonly sought in class actions and other large litigation. But now some suggest that there’s a place for litigation funding in the world of tax disputes. The Northern Miner explains that as COVID impacts large industries like mining, the need for liquidity is of the essence. When a business with over $10 million in capital disputes its owed taxes, they’re required to pay half of the disputed amount upfront. In some instances, businesses will prepay the entire tax bill to avoid late fees and penalties should they lose the dispute. That, of course, can leave businesses cash poor. For funders, tax disputes are a pretty safe investment. There’s typically a monetary payout, and the defendant is always able to pay. Tax disputes are also less likely to endure setbacks like summary judgments and preliminary motions to dismiss. In Canada, successful litigants can be eligible for cost awards that cover most, or all, litigation costs. In the coming months, COVID-related economic response plans will come into effect in Canada. This will likely lead to more audits of businesses, and therefore an increase in tax disputes. With that in mind, Litigation Finance is expected to grow even more in the Canadian markets. That’s good news for anyone expecting a tax dispute, as third-party funding is well-poised to help manage the risks and potential cost of seeing tax disputes to completion.
Commercial

India Clarifies Law on Readily Realizable Assets in Liquidation

Generally speaking, a corporate liquidation shouldn’t take longer than a year. Yet it often does. There are myriad reasons for this, but one of the most common is the existence of NRRAs, or Not Readily Realizable Assets. India Business Law Journal explains that the Insolvency and Bankruptcy Board of India is taking steps to address this. NRRAs can include disputed or contingent receivables, disputed assets, or anything deemed potentially undervalued, fraudulent, or extortionate as defined by law. What is a liquidator to do with a limited amount of time and multiple parties waiting for their share? The challenges faced by liquidators are being considered by IBBI, which has led to multiple proposals. One of which includes the use of third-party litigation funding to realize the full value of NRRAs. The current proposal is for liquidators to assign these assets to third-parties for a fee. These third-parties would then fund the court proceedings needed to gain their full value. The thinking is that third-parties could focus on one specific asset, cutting down the time it takes to bring legal action to completion. The goal then would be for assignees to recover a larger sum than they paid to gain the assignment of assets. This scheme would shorten liquidation processes while still allowing the full value of assets to be realized. Liquidators would be required to seek out maximum value for assets, and there would also be a provision for an early exit for those creditors in immediate need of liquidity. While stakeholders might benefit from this arrangement in the beginning, it’s possible that they’d lose out on larger payouts later on.
Commercial

Burford CEO Q&A: The Future of Litigation Funding

A trade group comprised of Litigation Finance entities was a long time coming. Over the last decade, the industry has evolved from a niche service used in very specific circumstances to a multi-billion-dollar industry spanning the globe. The formation of the International Legal Finance Association (ILFA) is a welcome addition to the litigation funding landscape.  Westlaw Today offers commentary from Christopher Bogart, CEO of Burford Capital—one of the founding members of the ILFA. He comments on where he sees the industry headed over the next few months, and what we can expect moving forward, through COVID and beyond. Bogart explains that the main focus of the ILFA is to advocate for industry-friendly legislation, and to educate lawmakers and the public about Litigation Finance. He points out that clients don’t always like to discuss litigation, making it less well-understood than other aspects of law or finance. Bogart details that getting into Litigation Finance requires extensive knowledge and a well-developed infrastructure that is best accomplished by experienced legal or financial professionals. In the future, Bogart predicts that funders will present themselves as financial service pros rather than members of an upstart industry. Further, the trend of corporate clients monetizing litigation and using it as capital, rather than simply to resolve disputes, will only accelerate. Bogart also points to how laws are changing around the world. In the US, some states are now allowing non-lawyers to own legal firms—a trend already growing in Europe. This opens the door to big changes and potential collaborations, not to mention expansion. As of this writing, Burford has an equity interest in multiple law firms throughout the UK.
Commercial

Singapore Legislation Welcoming Litigation Funders Goes into Effect

As the Litigation Finance industry has grown, some parts of the world have met the practice with suspicion. Some countries have suggested or enacted legislation designed to encumber and restrict the process of third-party funding in litigation. In the wake of COVID-19, however, the need for the practice has been affirmed. Omni Bridgeway explains that Singapore is one country whose newest legislation is welcoming to the practice of litigation funding, and cognizant of the good it can do. The Insolvency, Restructuring, and Dissolution Act was passed in 2018, and went into effect in July of this year. Provisions of the IRDA include consolidation of personal and corporate insolvency, as well as debt restructuring laws. It also expands the powers of judicial managers and liquidators as they relate to dispute funding. Judicial managers are a softer option than liquidators, in that the appointment of an external judicial manager will protect the company from legal proceedings during the process—at least temporarily. This gives the company a better chance to get its finances in order for a potential recovery. When action is taken against an insolvent business, a third-party funder may be used in several specific situations, such as fraudulent trading, unfair or undervalued trades, and damages against individual delinquent officers. That said, the new IRDA provisions are not intended to impact existing funding arrangements or laws regarding them. Class actions and other types of third-party funding against companies are still permissible. Singapore also enacted a Temporary Measures Act, which came into law in April of this year. It offers temporary financial relief for individuals and businesses—and will remain the law until October 2020. Some speculate that extensions may be granted, depending on the COVID situation at that time. The act increases the thresholds for bankruptcies, and extends the deadline for businesses and individuals to respond to demands from creditors.
Commercial

Keeping Corporations Honest with Class Actions

Unless you are new to the world at large, you know that corporate misconduct happens. And sadly, it’s not always appropriately consequenced. In Australia alone, over a billion dollars has been paid or offered to customers as part of awards or settlements for misconduct.   Omni Bridgeway explains that the numbers on corporate misconduct are staggering. Almost $900 million has been recovered for shareholders thanks to class actions that took place tween 1992-2019. This doesn’t seem like much when compared to the nearly $2 trillion in the ASX market. But when calculating the human portion of the equation—class actions can make a major difference in the impacts of corporate crimes. What can be done to hold banks and other institutions accountable before they can cheat ordinary citizens? The first line of defense is effective regulation that is reviewed often. Consumer protection laws are often lax, despite their importance. ASIC Commissioner Sean Hughes has stated that ASIC recognizes that it’s on them to inspire conduct that will restore public trust. He followed by affirming ASIC’s intention to be ‘strategic and forceful.’ Next is voter power within the organizations themselves. If shareholders can agree to put ethical values before profits, there wouldn’t be a need for the third option—class actions. Class actions are sometimes the only way regular people can seek redress when they’re wronged. Except that when someone has just undergone a financial disaster—loss of home or income, lost life savings, even death—they may not be able to afford to file a legal claim. That’s where Litigation Finance comes into play, and in many cases, saves the day. By providing the means for class actions to move forward, wronged citizens have access to the justice they deserve.
Commercial

Litigation Finance Valuation: An Antitrust Case Study

Understanding how to assess the value of claims is an essential part of Litigation Finance. Any reputable funder will have their own in-house team of analysts and experts in a variety of disciplines. One way to better understand the process, is with case studies. Burford Capital offers this case study to demonstrate its vetting and valuation process for potential cases. The antitrust case presented, involves price-fixing within the dairy industry. The action alleges a conspiracy to reduce the supply of milk to drive up prices. In antitrust cases, there are three main things to consider: overcharges, single damages, and potential settlement value. Overcharges are exactly what they sound like—how much extra buyers were forced to pay due to the alleged price-fixing. Market data is used to show patterns in pricing and elasticity (elasticity refers to how much a product’s pricing is impacted by supply and demand). In the case of dairy products, elasticity would be significant. Once the overcharge amount has been estimated, the single damages must then be calculated. This formula is basically the amount the buyer should have paid (or would have paid, but for the conspiracy to drive prices up,) subtracted from what they actually paid. In the US, federal antitrust laws require awards of three times the single damages amount. Settlement value refers to the amount—usually, a percentage—of the single damages claim that can likely be collected. This can be impacted by the stage of litigation when a settlement is proposed (before discovery, after a motion is denied, etc.). Whether the buyer is a direct or indirect purchaser might also impact settlement value, as would any related criminal proceedings. Settlements tend to be higher when there are criminal charges pending in connection with the case. As one can see, a funder's calculation doesn't conclude at whether or not the case is winnable. Settlement value is a key tenet of investment valuation.
Commercial

Interpreting ABA’s Best Practices Guidelines

As Litigation Finance has grown, so has industry suspicion over the practice. Some groups are obsessed with the idea that lit fin requires greater oversight and even reform. In August of this year, the ABA distributed its Best Practices for Third-Party Litigation guidelines. This document is the first time the ABA has formally addressed Litigation Finance since 2012. Above the Law details that the ABA document should be viewed as an exercise; a way to frame relevant issues so that conflicts of interest can be addressed before they negatively impact a case. The recommendations should not be viewed as inflexible rules with mandatory enforceability. The broad strokes of the document include documentation, disclosure, professional ethics, and privilege/work product. It’s recommended that there be added clarity between client-funder arrangements versus those between funders and firms. Yet in firm-funder situations, there must also be a clear delineation between individual case funding versus portfolio funding. Regardless of the type of funding, three suggestions made by the ABA document apply. First, all funding agreements should be in writing. The non-recourse nature of the funding, exact percentages promised, and provisions for withdrawal should all be clearly spelled out for the protection of all involved. Second, funders should have no decision-making role in the legal process unless invited by the client. Overall, clients should work with their legal representation to make decisions impacting the case. And lastly, disclosure can be tricky, since there’s still disagreement around the globe about who needs to know what, and when they should know it. Savvy lawyers should presume that the terms of a funding agreement will be examined by an outside party eventually. Overall, these guidelines aren’t encroaching on the use of Litigation Finance. Rather, they seem to be reminding legal professionals of their ethical obligations so the practice can be kept above board.