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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.
Announcements Commercial

Light at the end of tunnel for ‘cash-starved businesses’ as legal funding options open up

With money tighter than ever, businesses across the UK are now able to benefit from a ‘lifeline’ legal funding option. Businesses around the world are continuing to grapple with the effects of the global pandemic and the resulting economic shock. The added pressure of litigation disputes, the issue of lack of resources to secure competent and expert representation is not one business managers should have to deal with. For businesses in the UK, profits have dramatically plummeted and this could cause a spike in commercial legal disputes. Considering this, Hallmark Solicitors, a commercial law firm based in Yorkshire have added Damage Based Agreements (DBA) to their roster of funding methods to help businesses through these unusual times. For more information about Hallmark Solicitors visit here to learn more. Uche Akali, Managing Director of Hallmark Solicitors is of the view that by adding a Damages Based Agreement to its toolkit, companies who would otherwise not be able to stand up to bigger and well-funded opponents, to the detriment of their long-term future, now have a fighting chance of being able to weather the down-turn brought about by COVID-19. Under this arrangement, Hallmark Solicitors, which is based in Hull and has offices in Leeds and London, will in effect take on half the risk of a litigation case. As a result, payment is required only on the success of a case. This puts an emphasis on the quality and effectiveness of representation a firm is able to provide. Matthew Amey, expert legal funding speaker and director of TheJudge, suggests how vital legal funding options could be in the months to come. “Cash-starved businesses will need a clear and workable regime for Damage Based Agreements more than ever before.” He continues: “Damage Based Agreements, litigation insurance and third party funding, whether separately or in combination, act as equalisers for SMEs in their pursuit of their claims.” Matthew states the future of DBAs “could be bright,” especially if the “Ministry of Justice decide to adopt the recommended changes to the DBA regulations put forward by Professor Rachel Mulheron and Nicholas Bacon QC.” Uche Akali concludes: “Although Damaged Based agreements have been in existence since the Damage Based Agreements Regulations 2013, law firms have been slow to take this up. However, as the COVID-19 Pandemic continues in the UK, I believe DBA’s could become a lifeline to those businesses who need it most in the current crisis." Damage Based Agreements have been used as a funding method in the US for many years and the UK is slowly starting to adopt this legal funding method. This will be helped by the potential reforms in the months and years to come. To find out more, the place to visit is here. About: Hallmark Solicitors is a commercial law firm based in the heart of the business quarter in Hull, with consulting offices in London and Leeds. The firm, which was founded in 2009, specialises in Corporate Legal Services, Commercial Litigation and Dispute Resolution. Hallmark Solicitors pride themselves on offering clients an unrivalled standard of service based on careful and accurate research of issues which then enables the solicitors to offer pragmatic and focused pro-active advice reflecting the reality of the situation. For more information regarding this, please contact enquiries@hallmarksolicitors.co.uk or call 0800 037 1305. TheJudge, which was established in 2000, is a well-known and trusted brand within the litigation insurance and litigation funding market. They have teams located around the world as they serve the needs of law firms and their clients globally. Matthew Amey became Director in 2005 and has since gained extensive experience within the field and was named as a Ranked Individual in the first rankings for Litigation Funding Brokers to be published by Chambers & Partners in 2020.
The LFJ Podcast
Hosted By Rob Cooper |
Our guest today is Rob Cooper, Group Chief Executive Officer at ME Group Holdings. ME Group is a UK-based LegalTech provider of litigation funding, insurance and legal representation for consumers facing complex legal problems. Rob explains his company's proprietary technology, their partnership with Forbes Ventures, and future plans on the horizon. [podcast_episode episode="6696" content="title,player,details"]