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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.
Commercial

Mastercard Class Action Claims 46 Million Britons Overcharged

A class action against credit giant, Mastercard, could net UK claimants a cool GBP 300 apiece. The two-day Competition Appeal Tribunal hearing is scheduled for March 25th. As the case awaits certification, Mastercard maintains that it does not agree with the claim and that it intends to fight back. Reuters reports that the claim against Mastercard could reach GBP 19 billion. Whether or not the case is certified impacts more than just the UK consumers who stand to gain. The decision regarding certification will impact several other proposed class actions that are awaiting the results. The 2016 action alleges that Mastercard overcharged for interchange fees—which are paid by sellers to credit card companies in order to accept credit cards—and that stores raised prices to cover those fees, thus overcharging consumers. The case is expected to demonstrate that these fees were illegal. Innsworth Capital is funding the class action to the tune of GBP 60 million. This includes a payment of over 15 million pounds to cover Mastercard’s legal costs if the case is unsuccessful.
Commercial

The Value of Financial Transparency for Funders

Security for costs is still a contentious issue in the Litigation Finance community. An English Court of Appeal ruling was clear in its message that third-party litigation funders should be ready to provide evidence of their ability to cover an adverse costs order. Omni Bridgeway details that in Rowe & Ors v. Ingenious Media Holdings, defendants asked for security for costs from the litigation funder. The claimants, in turn, asked for a cross-undertaking to cover the cost of providing that security. Lord Justice Popplewell determined that while any funder should be properly capitalized to meet an adverse costs order, a properly run funder should almost never be required to put up security for costs. Popplewell’s observations should be welcomed by most funders. He explains that sophisticated claimants should already know to avoid funders who could, potentially, be required to put up security for costs. Generally, this only happens if the funder is undercapitalized, lacks transparency in financial matters, or fails to prove an ability to cover adverse costs. It could be argued that financial transparency is more important than ever for funders, as competition for cases grows. Multiple new entities are entering the legal funding landscape, owing to the potential for large awards and lack of correlation with the larger market. Publicly available financial statements can go a long way toward establishing funders as competent, honest, and well-collateralized, thus negating the need for a securities order. While regulation impacting funders varies depending on the jurisdiction, groups like the ALF and ILFA have worked diligently to develop ethical guidelines for the industry. While these are not legally binding, they do formalize what third-party funders and their clients deem to be the most important principles of their work. This includes being able to demonstrate an ability to meet all commitments involved in funding cases.
Commercial

Burford Numbers Show Best Year Ever for Recoveries

A report released by Burford Capital this week reveals that the funder has had its best year ever for recoveries. At the same time, profits shrank from the previous year. Burford suggests that the pandemic didn’t have the detrimental impact on business that was originally suspected. Bloomberg Law details that Burford’s largest case, revolving around an oil company in Argentina, has stalled. New business, the funders say, comes from striking deals directly with companies. This differs from the thinking during the earliest days of Litigation Finance when partnerships with Big Law were considered the path to growth for funders. David Perla, Burford’s co-COO, explains that 2020 numbers are strong—especially when factoring in the Petersen/Argentina case bringing in nothing. Perla affirms that the numbers are evidence that Burford knows how to choose winning cases. The Petersen investment has, in the past, returned nearly $250 million for Burford, though its claims are listed at $773 million. Similar cases yielded $425 million last year for the world's largest funder. Perla is also unconcerned by the reintroduction of a disclosure law. The bill, which failed to gain support previously, would mandate disclosure of third-party funders in any multi-jurisdictional litigation, or any federal class action.
Commercial

South African Third Party Funding is Still Largely Unregulated. What’s Next?

Compared to the rest of the continent, South African laws regarding third party litigation funding are advanced. Compared to the rest of the developed world, however, the country is lagging behind. Legislation is minimal, and court decisions are decided on the basis of precedent rather than law. Could that be changing? Pinsent Masons details that a 2004 Supreme Court of Appeals case went a long way toward developing law on TPF in South Africa. The decision acknowledged that funding is sometimes necessary to gain access to justice. It also held that third party funders should never be allowed to abuse the legal process by funding frivolous, retaliatory, or abusive claims. Clear, unambiguous contracts are an essential component of what’s expected from South African funders. A 2020 case in the High Court laid the groundwork for what constitutes a fair and reasonable TPF arrangement. These included:
  • Funders may not interfere with lawyers or their duties to their clients.
  • Clients (not funders) must control litigation decisions.
  • The agreement is necessary to provide meaningful access to justice.
  • Funders may not be overcompensated for assumed risk.
  • TPFs should protect the interests of clients.
Courts also considered how and when funders should be allowed to terminate a funding agreement. It was determined that funders could lawfully end an agreement—but that the choice to do so shouldn’t be made without input from the client’s legal team. Clients need not disclose to courts that their case is being funded by third party funding. But, if there’s an accusation of unfair treatment, courts may require that the funding agreement be made available for scrutiny. Communications between clients and funders are still privileged. Finally, the court determined that a third party funder could be held liable for costs. This is particularly true if they become co-litigants.
The LFJ Podcast
Hosted By Elena Rey |
In this episode, Elena Rey of Brown Rudnick discusses her effort to introduce model documentation to the litigation funding industry. Elena explains the motivations behind model documentation, what the specific benefits are, how it will impact the industry going forward, and she elaborates on Brown Rudnick's formation 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. [podcast_episode episode="7620" content="title,player,details"]
Commercial

Podcast: Akiva Katz & Bow Street

Bow Street has a unique take on Litigation Finance. Instead of funding cases from the outset, Bow Street finds and buys litigation assets in cases where guilt has already been adjudicated. That means the main focus is on the damages. As reported in Livemarkets, Akiva Katz and Howard Shainker created a hedge fund poised to earn in any economic environment by combining a research-driven approach with an eye for impactful events. The goal is to earn returns between 25% and 40% annually. Below are some highlights from the podcast interview:  AK: It’s tough to find in today’s market opportunities that others have not found before you. Where are those inefficiencies? One is inactive engagement. It’s actually in getting your hands dirty—which isn’t that scalable. That’s why we only do three to five investments a year. Another is complexity. Investors swim to what is simple. Complexity scares folks. To the extent that people in my seat are willing to dig in—there’s real reward there. The litigation claims business basically met those two criteria. AK: The litigation market in the US is tepid, low level in terms of reward. To the best of our understanding, the European markets were dominated by lawyers. That means lots of guys running around making the ambulance chaser proposition. We take 20% of the upside and bear the cost of taking your case. That always seemed wrong to us as investors, since we’re in the business of pricing risk. Our view was, we could increase our exposure by coming in with a balance sheet. That would be appealing to clients at the other end who don’t want to be involved in a year’s long protracted legal process. DC: What makes a better claim versus a claim that’s less attractive? AK: The single most important differentiating factor that we exercise has everything to do with attention to detail and documentation. The single place we take risks is on documentation. We’re not going to lose a case, because there’s been a guilty plea. But there’s risk if we don’t submit our entire documentation package and the court finds a technicality on which to award the case to the defendant. That risk is amplified by the fact that we pay full price for claims. We are cash out of pocket the day the claim comes to court. DC: Can you talk about insurance underpinning the capital? I can’t understand how that works. AK: It’s important to remember that it works as a function of the asset value. The way it works is like any other insurance policy. We’re taking out a nine-year policy  to cover all our capital. No matter what judgment comes down, that insurance company covers the value of our claims and cost. So why don’t we do that always? We can’t, or we would. That option being available to us is a function of the value we created. All that insurance policy tells you is that we’ve created something that’s worth multiples of what we’ve paid for it.
Commercial

Therium Funds COVID-Related Claim Against Insurers

Therium, a global leader in Litigation Finance, is funding a legal action against insurers who failed to honor business interruption policies. The funding arrangement means that businesses may join the claim at no upfront cost. London Loves Business details that Provenio Litigation has filed the class action on behalf of policyholders seeking claims for COVID-related business interruption. While insurers asserted that business interruption policies didn’t apply to global occurrences, the UK Supreme Court disagreed. In January 2021, the court came down on the side of policyholders. Mark Goodwin of Provenio Litigation affirmed that the Supreme Court decision provides the necessary clarity to right the wrongs perpetrated by insurers.