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Commercial

How a Rise in ‘Nuclear Verdicts’ Impacts an Industry

Trucking-related lawsuits are on the rise, as are the potential awards. When a driver is negligent, the company pays the price. This has led to a comparable increase in insurance premiums and shipping costs, much of which is passed down to the consumer. What’s causing this? Some point the finger at Litigation Finance. Logistics Management details tips from the American Transportation Research Institute, which has some suggestions on how to mitigate litigation. Most of the suggestions are obvious—settlement is often better than a trial, make safety a paramount concern, avoid accidents. Trucking companies describe the current conditions as a free-for-all, where well-funded lawyers choose welcoming jurisdictions or use shady medical testimony to reap a big payout. In one recent case, a driver ignored a stop sign and caused two deaths. Is this simple driver error, or is the real culprit here a set of policies that leave drivers too exhausted to follow the rules of the road? In the last decade, the average dollar amount of awards was just over $3 million. Now they average around $7 million. The rate of increase in the awards outstrips inflation and is even more pronounced than the rise in healthcare costs. This has inspired some states to legislate ‘damage ceilings’ that limit total awards per incident. Is it fair to blame Litigation Finance for the current predicament of truckers? It’s true that third-party litigation funding has grown in popularity in recent years. It’s also true that ordinary citizens have better access to justice than ever before. It makes sense that trucking companies would long for the days when awards were small and most people couldn’t afford to take them to court. After all, the growth of an industry is a signal that their services are in demand.
Announcements Commercial

Pravati Capital Launches Fifth Specialized Litigation Finance Fund with $200 Million

PHOENIX, Aug. 11, 2020 /PRNewswire/ -- Pravati Capital, leading litigation finance pioneer and consulting firm, today announced the launch of its fifth specialized litigation finance investment fund with $200 million, following the success of its four previous funds launched since 2013. Pravati Investment Fund V (Fund V) will allow for the first time non-US and US-tax exempt international qualified investors the opportunity to invest in a specialized litigation finance alternative investment vehicle. Fund V, as its four predecessors, is structured using the proven methodology of stringent due diligence in selecting and structuring investments, while providing opportunities for law firms to restructure, regain financial footing and build their asset portfolios. The firm's focus remains to invest in non-correlated assets with limited risk independent of the economic cycles offered by the growing litigation finance sector. Pravati founder's 18 years of specialized experience in financial litigation has contributed to the launch of four successful funds, which together with the newly launched Fund V, will continue to provide breakthrough capital solutions that allow firms to restructure and emerge stronger in distressed markets throughout the United States. "We are pleased to offer Fund V as an alternative investment vehicle in the litigation finance sector. Given the current climate litigation financing has never been more critical. As a result, we have shifted the focus of this fund to meet those needs and the social impact we want to create. The present crisis has exacerbated the need for capital to continue operating or is the only solution to implement a restructuring process that allows smaller law firms to survive or explore the possibility to merge with others given the existent distressed environment," commented Alexander Chucri, Chief Executive Officer and Portfolio Manager of Pravati Capital. Mr. Chucri added, "The past few months have affected multiple sectors across the economy, and litigation finance has not been unscathed. Our mission remains as solid as ever, we believe we can have a positive impact by helping capitalize in need of resources firms, either to continue funding their operations or providing the necessary funding to implement changes that will allow them to persist in the current scenario or to restructure by merging with other firms and guarantee their relevance." Pravati Capital acts as the middle-market lender, merchant bank and advisor to mid-size law firms around the world and provides non-recourse, and recourse cash advances to law firms that are generally collateralized by underwriting a portfolio of cases. The company invests in a broad range of high probability, complex, plaintiff commercial disputes. Pravati Capital Fund V is expected to have short-term duration of 36-48 months. The fund aims to deploy funds in excess $200 million in the following 18 months. The fund's strategy will continue to build an international all-weather non-correlated alternative investment fund with a solid risk-reward profile that is not affected by economic cycle changes compared to traditional equities and fixed income funds. About Pravati Capital As a leader in the litigation financing field, Pravati Capital has changed how law firms envision their future. For more than a decade, we have been at the forefront of litigation financing solutions, creating innovative sources for bridge capital. It is our mission to provide innovative, efficient capital solutions for law firms, compassionate assistance to plaintiffs, and a secure alternative investment option for accredited investors. For more information, please visit our website at Pravati Capital or call 1.844.772.8284. You can also follow us on LinkedIn and Twitter.
Commercial

NZ Class Action Secures Funding in Mountain View Case

Residents of Mountain View complex in Mt Wellington, Auckland, are fed up. After a 10-year battle to get the owners to fix rampant leaks, a class action suit is being brought against building consultant Maynard Marks. Stuff explains that the 99-unit apartment complex is currently the largest claimant of the country’s leaky home assistance. They’ve been provided with over $41 million to fix the damages. Various inspections showed leaky cladding and roofs, issues with passive fire systems, and even balconies. Still, Mountain View was certified as being in compliance with existing codes. One man, Paul Running, bought a flat in 2007, but couldn’t live there due to the need for extensive repairs. He intended to rent out the place after repairs were done, but the repair work has been consistently shoddy and expensive. Now that repairs are finished, the corporate body is in conflict with the new owners of the construction company—with residents divided over the case against Maynard Marks. Leading the class action is Adina Thorn, who asserts that owners had paid roughly twice the value of their homes because of the shoddy repairs and unrealistic estimates. Marks suggested that repairs were a more cost-effective option than tearing down and rebuilding—a move that caused an initial $8.3 million estimate to surpass $41 million. The government program offered assistance to the tune of roughly 25% of the total costs—leaving residents stuck with the remainder of the bill. Court House Capital is backing the class action. The Australian litigation funder has not released details, but it’s expected that the funds will be used for experts and legal costs. This is yet another instance of ordinary people caught up in a situation beyond their control. Without the backing of Litigation Finance, the alleged victims would have no recourse to pursue justice. 
Commercial

Institutional Ownership at Burford Capital

There’s a lot you can learn about a Litigation Finance company by looking at at its investors. Insider investment is common in firms that are newer and smaller, while more established players boast large institutions as their major shareholders.   Yahoo Finance explains how this applies to a litigation funder like Burford Capital. Burford is a large funder with institutions as major backers—over 40% in fact. At the same time, the next smallest investor group is made up of ordinary citizens. This bodes well for Burford, since it implies that the company has earned the trust and respect of regular folks, while still being attractive to institutional investors. But what happens if there is a change in how more than one institution views the company? That could spell big trouble for share prices. Burford’s recent short-selling attack is evidence that opinion can alter abruptly.  Burford’s insider investment is significant at nearly 10%. It’s good to have affirmation that those who work for the company also believe in it. One might say that number should climb even higher in the future. Over 6% of Burford Capital is owned by hedge funds. Some say this is potentially problematic. Hedge funds are sometimes known to put pressure on management to make changes, specifically to increase shareholder value. Should this conflict with what’s best for Burford’s clients, trust from the general public might erode—impacting a much larger portion of investors. Meanwhile, just over 5% of Burford shares are owned by private companies. In theory, the same issues could develop. While it doesn't comprise the entire picture, looking at investors can tell you a lot about a company.
Commercial Covid-19

COVID Brings Tech-Savvy In-House Lawyers to the Forefront

Innovation and adaptability are key factors in every business trying to stay afloat during the current pandemic. Many law firm were quick to send workers home while finding remote working solutions to stave off loss of business. But as soon as some issues were managed, others cropped up. For example, the need for cybersecurity was heightened almost immediately. Financial Times explains that savvy lawyers backed away from putting out proverbial fires and started seeking opportunities to reach out to their customers. They began by identifying issues and using creative problem-solving. Solutions included expanding the use of digital signatures for those who couldn’t go out to banks or meetings, and amping up anti-fraud protections to make distance working safer. Legal teams aren’t just innovating, they’re creating as well. WeChat has allowed the development of apps that facilitate digital transactions in bulk, and even allow for price haggling. Westpac, an Australian bank, developed a digital boot camp and training program to better help lawyers analyze and draw conclusions from data. The new reliance on technology and digital problem solving puts the traditional firm model on notice. With rare exceptions, partners with decades of legal experience will not be up-to-date on modern digital solutions. In fact, they may find themselves relying on younger, greener lawyers to help them navigate this new remote working landscape. How will that impact the way firms operate going forward? It’s easy to see COVID as a temporary disruption, even as the months pass us by. But the likelihood is that the changes being implemented now are likely to last. Staffers may continue to want to split time between home and office, while clients may prefer fewer in-person meetings. As security and safety improve, there’s more reason to rely on tech solutions for business concerns. It’s just a matter of finding a balance.
Commercial

Will the ABA’s Litigation Funding Guidelines Do More Harm Than Good?

This week, the ABA’s House of Delegates approved new best practices guidelines for litigation funders. The ABA’s inclusion of third-party funding in their guidelines is a necessary step, given the increasing popularity of the practice. Some say, however, that these new guidelines are not an accurate reflection of how Litigation Finance works.   Burford Capital details proposed revisions to the policy, which they claim will add clarity and context. Still, it’s important to keep in mind that ABA guidelines are merely that - a set of guidelines. They aren’t meant to be the basis for disciplining firms or individual attorneys. According to Burford, context should be added. It should be noted that third-party funding is widely accepted and endorsed by legal communities all over the world. Next, commercial litigation and consumer litigation should be addressed separately. It’s not logical to apply the same guidelines to two such different practices. The same applies to lawyer-directed funding versus that directed by the client. The ABA guidelines do begin by pointing out that these are separate practices with their own issues, yet they don’t seem to recognize common exceptions to this—such as what occurs when an entire portfolio of cases is funded. There’s also a suggestion that paragraphs should be devoted to the NYCBA Committee on Professional Ethics. This is a non-binding opinion from 2018, which was released without an opportunity for public comment. It has widely criticized by legal professionals, and is best left out of new guidelines. Finally, Burford suggests removing or editing any recommendations that do not practically serve clients or attorneys. In particular, amending the idea that funders having oversight of litigation is tantamount to undue influence.
Commercial

Taking a Look at Security for Costs

Over the last 10 years, provisional measures such as security for costs have been requested in progressively higher numbers. In fact, of all the provisional measures asked for, roughly 20% have included security for costs. These requests are rarely granted, however. As it stands, most courts feel that requests for security for costs can only be granted under unusual and specific circumstances.  Burford Capital explains that courts have determined that simply receiving third-party funding does not demonstrate a need for security for costs. That may be even more true now that it’s established that Litigation Finance isn’t just for those in financial peril. Funding is now commonplace, even among well-capitalized firms, since it provides financial flexibility and enables investments in growth. A case from 2019 sheds light on this, as a tribunal rejected a request by the Republic of Panama to secure costs in a funded claim. In their rejection, the tribunal questioned whether or not Panama even had the right to make such an ask. A survey conducted by the ICSID addressed compliance with cost awards, and found that most awards in favor of states were indeed paid. Of those that weren’t, the state tended not to enforce payment orders. The evidence suggests that security for costs requires that the filing party show need, timeliness, and unusual circumstances. In reality, though, many cases funded by third parties automatically request security for costs. Those applications are typically rejected. According to Burford’s 2019 Legal Finance Report, 67% of in-house counsel agree that litigation funding is a good way to reduce the impact of litigation costs. 72% see value in the practice of litigation funding overall. Where once third-party funding was a market of financial instability, it is now indicative of strategic planning and savvy money management.
Commercial Covid-19

What’s Causing the Rise in Trade Secret Litigation?

Intellectual property can become a valuable asset, especially during an economic downturn. That may be why new patent lawsuits have increased over 15% in recent months. Trade secret litigation is likely to follow—which may be encouraged by the overwhelming availability of third-party litigation funding. Therium details that the five most prominent patent litigation plaintiffs in 2020 are non-practicing. Many take this to mean that these companies are using their patent portfolios to finance their claims. When budgets are tight, patent and other types of IP litigation may be pursued, and meritorious claims that might otherwise be discarded can in fact see the light of day.  Experts suggest that several specific factors are driving the increase in trade secret actions. The Defend Trade Secrets Act, signed by President Obama in 2016, makes trade secret law more favorable to plaintiffs. The definition of ‘trade secrets’ has become broader in recent years, and some sizable awards have been issued as a result. Companies are also avoiding the patent process in favor of listing innovations as trade secrets instead. The shift to work-from-home and widespread employee furloughs may cause an increase in trade secret cases—simply because they make trade secret violations more likely. People who are out of work and desperate may be more likely to use an employer’s trade secrets for their own gain. Remote working can also lead to unsecure video chats, while important documents being left unsecured in communal work or living spaces, and a lack of proper encryption, can all lead to a loss of IP. Security overall is down during COVID, as the emphasis is placed on the safety of workers and slowing/negating virus transmission. Anyone pursuing a case involving trade secrets should move quickly. Urgency is of the essence, especially since the loss of IP can be lead to swift and crippling impacts. Trade secret litigation can lead to monetary damages or injunctive relief, either of which would be welcome during these uncertain times.
Consumer

How Did a $440K Law Firm Loan Balloon to $18MM?

Sean Callagy's law firm, Callagy Law, has been involved in several contentious lawsuits in recent months, in part due to defaulting on loans from Legal Capital Group. The LCG agreement was made with George Prussin, an old friend of Callagy. Their friendship fell apart after several professional differences that became litigious. Legal Newsline reports that Callagy borrowed nearly $600,000 to pursue routine medical malpractice claims, and other cases. One case in particular descended into legal chaos when Callagy sued his co-counsel. Another case involved international litigation for the proceeds of the lawsuit in a 2006 plane crash that killed more than a hundred people. That case was the stuff of tabloid news—also involving a Mexican firm owned by a non-lawyer, legal legend Benton Musselwhite, and the IRS. Callagy now claims he owes $18MM to LCG, with an effective interest rate of 90% per year. LCG has taken legal action against Callagy.  While regulations regarding litigation funding can vary from state-to-state, on the federal level, funding is treated differently than loans. The main difference is that funding is non-recourse, and therefore only repaid when the case yields a payout.