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SPONSORED POST: Free Webinar Explaining the Latest NYC Bar Report, Hosted by Validity Finance

Understanding the Latest NYC Bar Report on Litigation Funding

Tuesday, March 31, 2020

1:00 pm to 2:00 pm

The NYC Bar Association's Working Group on Litigation Funding delivered a long-anticipated 90-page report concluding that funding agreements between lawyers and funders will benefit litigants, and recommending that the legal ethics rules explicitly permit such agreements. The report also rejected calls for mandatory disclosure of commercial litigation funding agreements in court proceedings. Join Validity's Chief Risk Officer, Dave Kerstein, Portfolio Counsel, Will Marra, along with litigation finance experts Brad Wendel, Ethics and Law Professor, Cornell Law School and Constantine Karides, Partner at Reed Smith for an upcoming webinar that will cover:
  • what does the NYC Bar report means to lawyers today;
  • what we can expect from other bar associations across the country; and
  • how lawyers can secure funding on behalf of clients during these uncertain economic times.
Register for this free webinar by clicking here.
Commercial Covid-19

How Applicable is Force Majeure in the Wake of COVID-19?

In less than two months, America has changed dramatically as we all pitch in to flatten the curve of COVID-19 infections. This has caused businesses to close or dramatically reduce hours, staff, and output. It has led to supply chain stoppage and the total disruption of life and business as usual. Schulte Roth & Zabel remind us that Force Majeure is an unforeseen event that's out of the control of parties, which prevents them from fulfilling a contractual obligation. Most contracts will contain some kind of Force Majeure clause, and some may mention pandemics specifically. Normally, a word like 'pandemic' would only warrant a glance in a standard contract. After all, how often do we actually have pandemics? But as of March 11, the world has been mired in the midst of a pandemic as declared by the World Health Organization. Is that enough to trigger a Force Majeure clause? If the clause specifies a pandemic specifically, then yes. If not, words like 'contagion' or 'epidemic' or 'viral outbreak' might be enough. Keep in mind that Force Majeure requires that the event in question objectively prevent parties from performing their duties. A researcher who works from home would not be excused from work over a shelter-in-place order.  But what if there is no Force Majeure clause? This situation is a little muddier, but not impossible to navigate. Because contracts also require parties to adhere to the law, orders to suspend business, or other public health orders, can activate Force Majeure even when it's not specifically outlined in a contract.
Commercial Covid-19

COVID-19 is Lengthening Time-to-Settlement, Which Impacts Litigation Funding

Court closures and the absence of many basic services have brought about a major slowdown in the way cases are settled or litigated. As we don't know how long COVID-19 isolation and quarantine will last, it's growing more and more difficult to assess the true cost of the increased time-to-settlement.   As Legal Examiner reports, it is vital to look at all relevant factors when determining how or when to develop a settlement. These should include attorney fees, the possibility of a qualified settlement account, litigation funding or pre-settlement funding, possible liens, and taxes as pertains to settlements. In particular, litigation funding and attorney fees can be the most relevant for clients. Because resolving cases takes more time than usual, the need for litigation funding is greater than ever. While funding rates may seem excessive to some, they're often needed to mitigate the risks inherent to funding individual cases or class actions. And with time-to-settlement growing, the risk to funders is compounding exponentially. Funders typically want to settle quickly and recoup their investment in as timely a manner as possible, which, thanks to the current COVID-19 crisis, is growing increasingly more difficult.  Another thing to consider is the involvement of third-parties, which is a typical aspect of many cases. This might include private or state-funded medical agencies, bankruptcy trustees, guardians, estate executors, lien holders and more.  Medical or other record companies, researchers, and others who are needed to settle or manage cases will be less available as they are needed on COVID-19 related matters.  It's been suggested that settlements will be fewer and further between in the coming months. As cases are delayed and trials postponed, reaching an agreement between parties grows less likely. With that in mind, the litigation funding industry may need to recalculate its investment parameters given the court delays and additional time-to-settlement.  
Commercial Covid-19 Special Features

Key Takeaways from Boeing Bankruptcy Discussion with Aerospace Experts

Boeing is one of the cornerstones of the global aerospace industry, yet the company is experiencing tumultuous times. The grounding of its 737 Max airplane in the wake of the Coronavirus outbreak caused the company to book over $20Bn in charges, and some are worried about liquidity issues, and even bankruptcy. On Thursday, LFJ hosted a panel discussion with a pair of experts on the Aerospace industry regarding the fate of Boeing, and the future of the industry. The experts included Scott Hamilton (SH), Managing Editor of Leeham News and Analysis, and Richard Aboulafia (RA), Vice President of Analysis at Teal Group. Both are experts in Aerospace, and frequently cited as Aviation experts by major media outlets. The panel was hosted by LFJ Founder, Jason Redlus (JR). Below are some key takeaways: JR: On a macro basis, what is your expectation regarding Boeing specifically, and the Aviation sector more generally?  RA: I think there is this impression that it's a bailout of Boeing, and I just don't see it as that. The overwhelming footprint in terms of jobs and even money for a jetliner are not in the supply chain. The question becomes 'do we keep that supply chain going or don't we, and face the consequences of mass layoffs and a real hit to the economy? If Boeing wants to save itself, it would take the expedient route by stopping all production." SH: I don't think Boeing will go into bankruptcy unless the capital markets completely dry up…which is what we saw to some degree after 9/11. The airlines just didn't have access to liquidity and that's why you had the Air Transportation Stabilization Bill created, which in its own right wound up picking winners and losers. My concern about the supply chain is deeper than my concern about Boeing at this point. I think that Boeing is probably correct that the supply chain is more at risk than Boeing is. RA: There is a liquidity crisis…but does this mean this is an instant bankruptcy? Far from it. It just means they have to watch themselves. The question of an aid package is whether terms and conditions can be applied that guarantee they'll keep paying people and suppliers...less about avoiding bankruptcy and more about avoiding an economic collapse in that sector.  JR: In the litigation finance community, who gets in trouble on something like this?  If the government just gives Boeing a check and lets them use it at their discretion, doesn't that create a kind of litigation through the supply chain? Where do you see litigation as the fallout from this crisis in the aviation industry? SH: Lawyers can find reasons to litigate about anything (laughter). Somebody somewhere would object to how the money is disbursed. Of course, we don't know what the bailout language would look like. How does the mom and pop supplier at risk of going out of business also get a piece of the pie? How do they afford a lawyer if they're already on the edge? How would Boeing determine who the winners and losers are? RA: How much litigation is needed depends upon how well the lawyers and legislators do their jobs upfront. If they construct an architecture to come up with something that lays out the framework for disbursing that aid, we probably won't have a litigation problem. The more likely scenario is that the money is provided to Boeing and a couple of others, and then they'll be in charge of letting that cash trickle down. Some suppliers will feel aggrieved. What do you do in the case where a vital Boeing supplier is based in France? Then you get people screaming that US funds are going abroad. In global businesses, will we be matched by a similar European program—so does this become a back door to subsidization? So let's make it targeted, equity should not be allowed. I absolutely believe that government help is justified...for the supply chain. But how do you distribute it and how does Boeing become the arbiter of that money? It's gonna be a real mess. JR: Where are you seeing points of stress or opportunity during this crisis? SH: I'd be looking for buying opportunities to strengthen my supply chain. Does it make sense for the government to give money to Boeing only to see that turn around; to spend $4.5 billion on a company with a market value of $1.2 billion? Is that deal in jeopardy? JR: Any final closing comments?  SH: Everything we've said in the last half hour will probably be out of date in five minutes (laughter).
The LFJ Podcast
Hosted By Justin Kuczmarski |
In this episode, we sit down with Justin Kuczmarski of NAV Valuation and Advisory. Justin discusses the value-add that an independent auditor and valuation expert provides, why litigation funders shouldn't necessarily rely on the plaintiff firm's valuation, and what quantitative and qualitative metrics he uses when determining a claim's valuation. [podcast_episode episode="5153" content="title,player,details"]
Commercial

Insiders Are Buying Shares at Burford Capital. What Does That Indicate?

It's no secret that insiders will buy up shares of companies they anticipate will outperform. It's also no secret that the economic havoc being wreaked on the global economy by COVID-19 is bound to have legal (and litigation funding) repercussions. Could Burford's insider share purchases foretell positive times ahead for the world's largest litigation funder?  According to Simply Wall St, Jonathan Molot, CIO of Burford, bought nearly GBP 3MM in shares.  He also bought them for well over the current price. While it's not advisable to buy shares based solely on what insiders are doing—it makes sense to think Burford is a great investment when an informed insider (the term insider here referring to someone who reports their stock transactions to regulators) makes a purchase of that size. Meanwhile, no Burford insiders were known to sell shares last year.  But does insider share buying at Burford align with that at other companies? Insiders own less than 10% of Burford shares, which is nowhere near as high as some other publicly-traded firms. Yet given the fact that insiders have made large investments above current pricing, it seems safe to say that Burford insiders are predicting a stock price increase. 
Commercial Covid-19

COVID-19 Fuels Legal Boom Times

The Coronavirus is having an impact on lawyers around the world. Right now, employers need advice on the best ways to react to employees who have contracted the virus, or those desperately trying to avoid it. From remote assignments to office closures, lawyers are needed to help companies navigate the uncharted waters of a modern pandemic.  As ABA Journal reports, firms are placing emphasis on risk management and flexibility to find ways to continue serving clients. This includes assembling crisis management teams to mitigate any potential fallout, as one prominent NY firm did after a partner tested positive for Coronavirus. Cloud-based tech is also of greater importance than ever as teams work remotely to avoid the spread of the virus. Aside from mitigating current virus-related woes, lawyers are looking ahead to the coming economic downturn. A full-on recession is possible as closures, event cancellations, and a spike in insurance claims impact industries across the board. Litigation funders are also prepping for a flurry of litigation disputes brought on by the impact of COVID-19.  One California lawyer, Kent Schmidt of Dorsey & Whitney, predicts a flood of new cases to emerge in the coming months. He has already heard from companies seeking advice on whether COVID-19 precautions are suitable grounds to void contractual obligations.   Alison Chock, CIO for Omni Bridgeway, predicts an uptick in insurance related cases, as agreements are scrutinized and payouts are questioned. Bankruptcies and insolvency cases are also likely to spike, given the economic downturn expected to continue even after the virus is contained. Chock goes on to explain that when the economy gets worse, legal cases become more plentiful. A rise in cases requiring arbitration or litigation is expected—which means lit fin firms will soon have more opportunities to fund cases and ensure access to justice for everyone. 
Announcements Commercial

LCM is pleased to announce its interim (HY20) results for the six-month period ending 31 December 2019.

Litigation Capital Management Limited (AIM:LIT), a leading international provider of disputes financing solutions, announces its interim results for the six months ended 31 December 2019 (“HY20”). Highlights
  • Delivering sustained growth across a diversified portfolio by investment activity and geography
  • First close of a new third-party fund of US$150 million (post-period)
  • Cumulative 139% ROIC and 79% IRR over the last 8.5 years*
  •  Total cash generated of A$18.9 million (post-period cash receipt totalling A$9.7 million)
  • Four single-case investments in APAC generated a combined revenue of approximately A$14.9 million and contribution to gross profit of approximately A$7.8 million
  • Significant traction in key growth area of corporate portfolio funding:
  • Construction portfolio: resolved two disputes out of seven matters; generated revenue of A$8.6 million and provided a contribution to gross profit of A$4.3 million
  •  First matter resolution in the aviation portfolio; generated revenue of A$0.6 million and provided a contribution to gross profit of A$0.2 million
  • Strategic Alliance with international law firm delivered material opportunities and over 30 applications, including both single case and corporate portfolio. Second Alliance initiated with an international law firm which has already generated corporate portfolio applications
*FY12 to HY20, including losses. The Company reports performance over the last 8.5 years since FY12 as the Board deems it the period most representative of the current business Summary of financials
Figures in A$ million unless otherwise statedSix months ended 31 December 2019Six months ended 31 December 2018
Gross revenue24.111.7
Gross profit12.25.7
Adjusted profit before tax6.92.7
Adjusted basic EPS (cents per share)6.614.31
Statutory profit before tax6.71.0
Net cash34.752.6
Capital deployed on litigation investments18.412.8
Litigation investments34.020.7
Total equity80.470.3
Cash receipts from the completion of litigation investments9.211.0
Post-period events
  • First close of US$150 million LCM Global Alternative Returns Fund (the Fund) – US$140 million committed investments from global blue-chip investors with balance of US$10 million which LCM expects to be subscribed in the near term
  • Fund will supplement the deployment of capital from LCM’s balance sheet, significantly increasing the Group’s ability to invest in new opportunities.
  • Transitions LCM into an alternate asset manager specialising in investments relating to the global disputes market
  • Post period cash received on projects resolved – A$9.7 million, as a result of resolutions occurring close to the end of the financial period
Current trading and outlook LCM moves forward as an alternate asset manager specialising in investments relating to the global disputes market with two complementary business models: direct investment from the Company’s balance sheet and asset management following the first close of the US$150m fund. In the second half, we will continue to execute our strategy of growing and diversifying our portfolio by investment activity and geography, taking advantage of the numerous and exciting growthopportunities available to us in a measured and disciplined way. With a burgeoning global infrastructure in place, an increasingly diversified portfolio and a strong pipeline supported by a robust balance sheet, third-party funds and growing pool of the best talent in the industry, while the nature of LCM’s business model means that returns will not always result in a linear growth pattern, the Board is confident the Company will continue to grow and deliver strong returns. Patrick Moloney, CEO of LCM, commented: “In the first half, LCM has continued to strengthen its market position in all of the geographies we operate. The development of our corporate portfolio strategy is gaining significant traction and already paying dividends in an area where we are a global leader in the provision of portfolio financing to corporate clients. With the first close of LCM’s US$150 million fund we are well placed to significantly increase the portfolio of investments under management, enabling LCM to expand its business in all of the geographies in which we operate. The launch of the fund in parallel with direct balance sheet investments signals the transition of the business into a global alternate asset manager.” Nick Rowles-Davies, Executive Vice Chairman of LCM, added: “Momentum in corporate portfolio opportunities has increased in the first half with the Fund now enabling LCM to invest in larger corporate portfolio transactions which have previously been beyond the capacity of our balance sheet. This provides an important catalyst for the ongoing development of LCM’s corporate portfolio strategy.” LCM Contact Angela Bilbow Global Head of Communications abilbow@lcmfinance.com +44 (0)20 3955 5271
Announcements Commercial

Longford Capital Adds Andrew A. Stulce as Vice President

CHICAGO – March 16, 2020 – Longford Capital today announced that Andrew A. Stulce joined the firm as Vice President. Mr. Stulce will assist with investment sourcing, due diligence, and monitoring of portfolio investments.

 Mr. Stulce was a member of the litigation department at some of the most prestigious law firms in the country. Prior to joining Longford Capital, Mr. Stulce was with McGuireWoods LLP; prior to McGuireWoods, he was with Hunton & Williams LLP (now Hunton Andrews Kurth LLP).

 

Mr. Stulce has significant experience litigating complex antitrust and insurance recovery cases. He has also represented corporate clients in a range of commercial litigation matters, including fraud, breach of contract, and breach of fiduciary duty matters.

 

Before entering private practice, Mr. Stulce clerked for the Honorable Charles A. Pannell, Jr., of the United States District Court for the Northern District of Georgia.

 

“Andrew has joined our team of experienced litigators and trial lawyers to assist in addressing the growing demand for litigation finance from leading law firms and corporate claimants,” said William P. Farrell, Jr., Managing Director and General Counsel of Longford Capital. “Andrew is an experienced litigator and trial lawyer. His work at two fine law firms and experience clerking in the federal trial court has prepared him to make an important contribution to Longford Capital. We are excited to welcome Andrew to the firm.”

 

Mr. Stulce is a member of the state bars of Illinois, Georgia, and Tennessee. He is admitted to practice before the United States District Court for the Northern District of Illinois, the United States District Court for the Northern District of Georgia, the United States District Court for the Middle District of Georgia, the United States District Court for the Eastern District of Tennessee, the United States District Court for the Eastern District of Texas, the United States Court of Appeals for the Eleventh Circuit, and the United States Court of Appeals for the Federal Circuit.

 

He graduated, cum laude, from the University of Georgia School of Law and earned a Bachelor of Science degree in Business Administration and Romance Languages from the University of North Carolina at Chapel Hill.

 

About Longford Capital

Longford Capital is a leading private investment company that provides capital to leading law firms, public and private companies, universities, government agencies, and other entities involved in large-scale, commercial legal disputes.  Typically, Longford Capital funds attorneys' fees and other costs necessary to pursue meritorious legal claims in return for a share of a favorable settlement or award. The firm manages a diversified portfolio, and considers investments in subject matter areas where it has developed considerable expertise, including, business-to-business contract claims, antitrust and trade regulation claims, intellectual property claims (including patent, trademark, copyright, and trade secret), fiduciary duty claims, fraud claims, claims in bankruptcy and liquidation, domestic and international arbitrations, and a variety of others. For additional information about Longford Capital, please visit www.longfordcapital.com.