Trending Now

All Articles

3453 Articles

Can Litigation Funding Mitigate the ‘Death of the Billable Hour?’

The legal field has not escaped the financial uncertainty plaguing the rest of the world. Even before COVID-19 changed nearly everything, firms were already lamenting the ‘death of the billable hour.’ Some might say that billable hours, while low risk to firms, are not a good model for clients—especially those of average or modest means. Bloomberg Law details how the current financial conditions have encouraged firms to return to the billable hour. But is that tenable? Big business clients will probably expect better as the global spike in litigation continues to increase. Alternative fee agreements can be more attractive to clients, but carry higher risks for firms—leaving them to weigh the risks of sticking to billable hours versus losing big clients. Surely there’s a way to mitigate risk while keeping clients happy? Joining forces with a litigation funder can propel firms into better litigation outcomes while improving relationships with clients large and small. It’s a proactive move that reduces financial risk while allowing practices to grow despite the current economy. Unlike traditional lit fin where plaintiffs are provided capital to pursue a case, law firm funding works a bit differently. These funds can offer non-recourse capital to attorneys and firms, collateralized against a portfolio of cases. This is generally more affordable and timely for law firms that need money in a hurry. According to one survey, more than 60% of law firms broadened their use of alternative funding arrangements. Over 90% of these firms reveal that they are changing their billing structure in order to gain new clients or to better accommodate existing ones. Of course, Litigation Finance is typically reserved for those whose cases can survive careful vetting. Funders, lawyers, and plaintiffs all have a stake in the ruling—and thus a strong incentive to work together to seek a fair outcome.

Nanoco Signs Funding Deal in Case Against Samsung

Some continue to debate the need for Litigation Finance. Yet every day we see more examples of the practice working as it should, increasing access to justice for those who might not otherwise have it. One such case involves Nanoco, a business associated with Manchester University. The small business recently filed a patent infringement case against tech giant Samsung. The Business Desk reports that the case against Samsung was filed against multiple entities within the company. Nanoco designs and manufactures TV screens and computer monitors. They signed an agreement with a prominent US litigation finance firm. While the firm has not been named, reps from Nanoco have said that the funders have extensive experience in IP matters as related to tech. . The legal firm handling the case is Mintz, Levin, Cohn, Ferris, Glovsky, & Popeo, a Boston-based law firm. Local counsel includes a Longview, Texas firm. While the exact terms of the funding agreement are not known, it is presumed that Nanoco will retain the bulk of any award judgment or settlement amount.

Takeaways from the 2020 Litigation Finance Survey Report

Across the board, Litigation Finance has become a powerhouse industry—one that has shown remarkable growth since its inception just over a decade ago. Since 2017, the industry has seen at least a 10% annualized increase in requests for funding. This year, a 30% increase accompanies a greater acceptance of the practice in the legal world. Lake Whillans reports that in the last year at least 10% of lawyers surveyed had first-hand experience with lit fin. Of those who have worked with third-party funders, over 99% of them said they would do so again. That’s a stunning endorsement. How often do 99% of lawyers agree on anything? The efficacy of Litigation Funding is hardly news—last year more than 80% of respondents who had used litigation funding in a case said they would do so again. The survey, co-authored with Above the Law, featured 418 respondents in 53 cities. About ¾ of those surveyed said that Litigation Finance is now more relevant to their work than it was at this time last year. About 2/3 of respondents had first-hand experience working with a lit fin firm—way up from 41% last year. Survey results show that larger firms tend to have fewer staffers working directly with funders. Firms with between 50-100 staffers appeared to use funding with the greatest frequency. The industries that use third-party funding the most include telecommunications, technology, the automotive industry, energy, defense, healthcare, and entertainment. When asked, more than 88% of in-house counsel without lit fin experience claimed that budgetary shortfalls are a key reason they would seek funding. Meanwhile, nearly 75% of respondents say that litigation funding has become a bigger part of their practice since this time last year. Ultimately, the future of Litigation Finance looks bright. It’s a respected, well-funded industry that remains attractive to the legal community.

Legal-Bay Pre-Settlement Funding Announces Updates to Essure Lawsuits

PHILADELPHIAJuly 8, 2020 /PRNewswire/ -- Legal-Bay LLC, The Pre-Settlement Funding Company, announced their renewed commitment to assisting the many victims who've filed Essure Birth Control lawsuits, and are hoping for presettlement payouts despite court delays. The Essure brand birth control device is put out by Bayer, who is accused of knowingly distributing a faulty product. More than 32,000 plaintiffs have claimed serious pain and suffering from broken devices including device migration and perforated organs. In some instances, clients have resorted to surgical removal. After numerous delays, the first Bellwether jury trial was set to see the inside of an Alameda County, California courtroom earlier this month, but due to COVID-19, has been postponed yet again. Bayer continues to deny liability on their part for the popular birth control product, and intends to fight the cases in front of juries in California and Pennsylvania where most cases are filed.  Bayer has consistently denied any wrongdoing and stands by their safety standards in respect to Essure, even though they pulled their product from the shelves over two years ago. Chris Janish, CEO of Legal-Bay, commented, "Legal-Bay is discouraged to see further delays with Essure litigation, which is sure to drag out any resolution hopes.  While there are no imminent settlement amounts or potential Essure settlement values on the near horizon, we nevertheless remain committed to assisting plaintiffs with their cash advance needs." If you are involved in an Essure birth control lawsuit and are looking for a pre-settlement cash advance now, fill out an application HERE or call 877.571.0405 for more information. Legal-Bay assists plaintiffs in all types of product liability lawsuits, including medical malpractice, wrongful death, 3M, Hernia Mesh, IVC Filters, Roundup weed killer, personal injury, premise liability, car and truck accidents, and more. All of Legal-Bay funding programs are risk-free as you only repay the advance if your case is successful. The non-recourse advance is not a lawsuit loan, lawsuit loans, pre settlement loan, or presettlement loans. You can be approved for a cash advance in as little as 24-48 hours.

Litigation Finance is Cheaper Than You Might Think!

The following was contributed by Matthew Pitchers, Head of Investment Valuation at Augusta Ventures I was in conversation the other day with a prospective user of our finance - a law firm who will remain nameless. The conversation was going well, very well in fact, until those seven words came up: “what is it going to cost me?”. I replied that our fee would be based on the higher of a multiple on the funds deployed or a set percentage of damages awarded. After a few seconds of silence which felt like an eternity, the response I got back was “that is very expensive, and I don’t think my client will go for it”. This left me bemused because whilst there is a general misconception that litigation funding is expensive, when compared to other sources of secured and unsecured funding available on the market, it is in fact very competitive and sometimes even cheap. This left me thinking about how best to explain this to the enquirer at the other end of the phone who would be left explaining all available options to his client. What is litigation funding? What I wanted to say was: Sir, in considering how expensive litigation funding is, one needs to first analyse what litigation funding is. This is easier to think about when considering what litigation isn’t. It isn’t a traditional debt product. There are no guaranteed cash flows. There is no obligation on the user of the debt to repay it. Any returns that the funder makes are payable from what the defendant pays if the claim is successful, not from the finance user. Furthermore, the entire financial risk of the case is transferred to the funder, and if a case loses, the risk of adverse costs falls to the funder and not the claimant. Therefore, an amount invested upfront in a legal case in order to share in the same risks and rewards as the claimant, feels more akin to a purchase of an equity participation in a start-up than a one-step-removed loan. To put it another way: If you were going on Dragon’s Den and your great idea was to ask the Dragons for an upfront investment in a legal case for a future share of any available returns which may or may not occur, how much of the case do you think the Dragons would want? What the market says In haggling over the value of your idea, the Dragons would probably consider the availability of unsecured loans, and the returns expected from venture capital start-up funding. If you, as an individual, were to go into the market today and look for an unsecured loan you might find APR’s that range from 10.3% per annum, for those people with excellent credit scores, up to 32.0% per annum for those with poor credit scores, and that is only on amounts up to £25,000. A good benchmark for the percentage of cases a litigation fund might win, despite all the due diligence that is performed, is around 70%. Loaning out money with only a 70% chance of getting any of it back is not similar to loaning money to a person with an excellent credit score, so litigation funders are firmly in poor credit score territory, where an APR could typically be between 28.5% and 32.0%. And remember, that is only on amounts up to £25,000, an investment in a legal case more-often-than-not, is many multiples of this size. A such, the IRR that the funder aims for is more akin to those expected by venture capitalists, who might typically look for 30-40% annual returns on a start-up investment. The tenor of investments A classical case tenor for litigation funding is usually two to four years. In the interim period the funder will have not received any payments. Their risk exposure goes up over time as more money is deployed as the legal case progresses, and there is limited availability to claw back any investment if the case looks like it isn’t going to win. It is, to all intents and purposes, an investment with a binary outcome and once invested there is no going back. An investment with an annualised return of 40% over three years would expect to achieve a 2.74X money multiple for the investor at the end of the life of the investment. Over four years the money multiple would be expected to be 3.84X. This would be at the upper end of what a litigation funder might achieve. A normal equity investment in a company has fewer downsides regarding the capital locked up, as covenants would be in place to claw back any investments if the company were mismanaged in the interim period. Summary In short, litigation funders are able to make worthwhile returns through rigorous diligence, investing in  cases that they expect to win and which meet their internal criteria, whilst building up a large enough portfolio that the effect of the unsystematic binary risk of losing an individual case is diluted. In return, a competent litigation funder should expect to achieve on their portfolio a rate of return that is better than a correlated investment, but lower than that achieved in the start-up markets. A claimant, in using litigation finance, should expect all their costs to be covered, and any risk of adverse costs to be transferred to the funder. In effect it becomes a risk-free investment for the claimant, whilst they still take the larger share of any return. This would be the dream scenario for any owner of a start-up company, selling a small stake in the company and removing all future down-side risk to themselves, whilst removing the burden of future costs. In summary Sir, this is a great opportunity for your client and it is highly competitive. Instead, I said to the man on the other end of the phone: ‘I’m sorry yes, it does sound expensive, let me see what we can do’.

Legalist Founder Explains Unique Funding Model

When we think of Litigation Finance, our impulse might be to envision well-capitalized funders assisting large companies. The founder and CEO of Legalist, Eva Shang, sees the business differently. Her model is one of David v. Goliaths—helping the little guys that other funders may overlook. Above the Law recently interviewed Shang about how she has achieved such incredible success. The Harvard dropout was one of Forbes Magazine’s 30 under 30 back in 2018. Inaugural funding for Legalist was just over $10 million. Two years later, Legalist boasted a fund of $100 million. Interestingly, Legalist began with no lawyers on staff managing funds. When they first started, Shang had never even drafted a Litigation Finance agreement. What’s more—they had no real connections in the legal world. The firm was literally built from the ground up. Shang credits other litigation funders who offered guidance when her company was just beginning. Legalist uses machine learning and AI to find cases and underwrite them. This tech gives Legalist an edge in finding small and medium-sized claims—the sort that larger funders tend to pass on. What many firms find too labor-intensive, Legalist seizes on to brilliant effect. These cases may only see awards of a few million dollars and require a few hundred thousand in investment. This model requires a lot more work, but is filling a much-needed niche in the industry while providing tidy profits. More importantly, Legalist does what Litigation Finance was always designed to do—increase access to justice for those who could not otherwise afford it.
The LFJ Podcast
Hosted By Robert Hanna |
On this episode, we sat down with Robert Hanna, co-founder of Augusta Ventures, the UK's largest litigation funder by case volume and overseas lead generation. Robert discussed developments in the UK market post-COVID. What is the current climate like, and what can we expect down the road? Will the emergence of more funders spell trouble for the industry's reputational risk? And how are industry participants managing issues like collectability risk and time-to-settlement concerns? [podcast_episode episode="5814" content="title,player,details"]

Advice from a Litigator Turned Litigation Finance Executive

The most successful Litigation Finance firms are those that act as partners, not merely funders. Funders can join a team at any point in the case and still make a positive impact. John Garda has recently made the move from full-time litigator to assessing funding opportunities for Longford Capital. Above the Law conducted a three-part interview with Garda. Part two discusses how clients can best avail themselves of the opportunities that litigation funding has to offer—particularly in the time of COVID and beyond. Corporate clients may find themselves in need of relief during these financially trying times. Traditional litigation funding can cover attorney fees and existing expenses for a claim. Lump-sum payments may also be available to cover expenses incurred previously. It’s not unusual to find even the most successful businesses in need of working capital on occasion. Third-party funding can provide financial wiggle room so that legal claims can still be pursued effectively, without impacting other areas of the business. Intellectual Property is another area in which litigation funding can pose a benefit. Before approaching funders, an IP lawyer is expected to prepare a whitepaper detailing key facts of the case, and a proposed budget for pursuing the claim. The likelihood is that it will be up to the IP lawyer handling the case to explain it fully to any potential funders. This includes a full analysis of damages caused by the infringement—something many cases fail to outline clearly. Litigation funders will often take a ‘damages first’ approach to evaluating a case for potential funding. Obviously, the merits of the case are important, but if the object is to pursue financial damages, those damages must be verifiable and clearly defined. Ultimately, Garda confirmed that litigation funding is a solid option for corporate clients and IP cases. The increase in requests for litigation funding, however, means attorneys may find themselves competing for attention.

Delta Capital Partners Management Expands its Global Marketing Team

CHICAGO, Illinois, July 1, 2020 -- Delta Capital Partners Management LLC, a global private equity firm specializing in litigation and legal finance, today announced the hiring of a Chief Marketing Officer and a Marketing Associate.

Kim Fine has been hired as Chief Marketing Officer to closely work with Delta’s Chief Executive Officer and senior management to advance Delta’s strategic marketing and business development objectives and further develop Delta’s brand.

Prior to joining Delta, Ms. Fine was a Managing Director at ALM, formerly American Lawyer Media, where she worked closely with the editors for The American LawyerCorporate Counsel magazine, IP Law & Business, and Law Firm Inc. to create events to grow their brands and materially enhance their editorial content. In addition, Ms. Fine has served as a Project Manager at Marsh FINPRO and was a Senior Vice President of Executive Liability for Beecher Carlson. Prior to her role at Marsh, Ms. Fine co-founded Fulcrum Information Services, which produced over 300 conferences annually.

Christopher DeLise, Delta's Founder, CEO and CO-CIO, stated, “We are excited to have someone with Kim’s experience and enthusiasm joining Delta’s team. Her background in marketing within the legal and financial services industries will enhance Delta’s efforts to market to prospective claimants, law firms, professional service providers, and other end-users of litigation and legal finance.”

Additionally, Megan Bradley has been hired as a Marketing Associate to assist Ms. Fine and other members of Delta’s marketing department. Ms. Bradley is a recent graduate of the University of Illinois Urbana-Champaign, where she was a President’s Award Program Honors Scholar and obtained a bachelor’s degree in Global Studies.

Mses. Fine and Bradley join Delta as the firm continues to its global expansion efforts to meet the evolving needs of law firms, businesses, private investment funds, and individual claimants.

About Delta

Delta Capital Partners Management LLC is a US-based, global private equity firm specializing in litigation and legal finance, judgment or award enforcement, and/or asset or collateral recovery.  Delta works with law firms and other professional service firms, private investment funds, businesses and individual claimants involved in litigation, arbitration or recoveries across the globe.