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The LFJ Podcast
Hosted By Louise Trayhurn |
On this episode, we speak with Louise Trayhurn, Executive Director of Legis Finance. Louise discusses Legis' bespoke approach to managing client relationships, the various funding and insurance products the company offers, the growing trend of GCs and CFOs extracting more value out of their legal assets, and what trends she predicts for the future of the industry. [podcast_episode episode="7446" content="title,player,details"]
Commercial

Consequences vs Motivation in Litigation Funding for IP Cases

Despite Quibi’s failure to corner the short-form Netflix market, its IP dispute with Eko is still very much alive. Eko is being funded by Elliott Management—which has fought Quibi’s every attempt to get through the discovery process. In fact, Elliott tried to quash an SDNY subpoena investigating how much Elliott knows as the legal funder of the case.

Above the Law explains that this situation and its outcome should be of interest to litigation funders, as well as IP litigators and their clients. After all, the questions raised by Quibi’s opposition to Eko’s attempt to quash the subpoena could set precedent for future IP cases that are backed by third-party funding.

Some have speculated that Elliott’s decision to fund Eko was predicated on a romantic relationship involving a founder at Elliott. Others are focusing on Elliott’s unusual decision to allow Eko to run the case as if money were not an issue.

Quibi seems to suggest that Eko’s inability to demonstrate its assertions is reason enough to allow discovery into the funding agreement. The company also suggest that Eko’s claim for damages is ‘unusually aggressive’ to the point of suspicion. Earlier in the case, Quibi sought to deny that it was the giant in a David v Goliath situation. Now that Quibi had folded, the likelihood of Eko using that argument is slim.

Quibi has further suggested that Eko may be controlling litigation and settlement decisions, contrary to what ethical standards allow. Combined with accusations of Elliott’s disclosure of funding being intentionally belated, it’s a compelling argument for increased discovery.

Ultimately, Quibi asserts that Elliott’s relationship with Eko is business related, not legal in nature. How the court rules in this motion will no doubt impact discovery relating to litigation funders for some time to come.

Commercial

Freedom Foods Faces Second Class Action

Cereal and snack company Freedom Foods is still in voluntary suspension from ASX until its recapitalization is completed in April. Since then, the company sold to Arnott for $20 million. Dairy News Australia details that after a shareholder class action was filed in December, a second class action has now been served. This one, backed by legal funder Omni Bridgeway, alleges mishandling of expenses and inventory. This mishandling allegedly led to a mismanaged audit that negatively impacted investors.
Commercial

ASIC Changes Sunset Date to August 2025

The Australian Securities & Investments Commission (ASIC) has confirmed that it has changed the sunset date of the ASIC Corporations Instrument from October 2020 to August 2025. Lawyers Weekly details that the primary instrument offered exemptions from specific provisions of the Corporations Act of 2001. This was intended to give participants time to adjust to the implementation of the new regulatory rules for litigation funding schemes. This was done for several reasons. Primarily, to address overlap between the primary instrument and the conclusions of the parliamentary joint committee. As yet, the Australian government has not responded to those recommendations. The Senate standing committee also expressed concerns about the primary instrument.
Commercial

Arbitral Awards and Limitation Periods

Arbitral awards are widely enforceable, which is a bonus for the parties involved. However, this enforcement is finite. There are limitation periods which, once surpassed, can render an arbitral award unenforceable. Omni Bridgeway explains that award creditors disregard or underestimate the risk involved in failing to observe limitation periods. If a debtor is not inclined to make payment, local limitations can actually work to their advantage. Once the limit for the arbitral award passes, the award might become unenforceable in jurisdictions where available assets are located. To add even more complexity, there is no uniform regulation on time periods of arbitration awards. The time period varies from one jurisdiction to the next, and may differ based on other factors. In a 2010 case, the Canadian Supreme Court ruled that the laws on limitation periods for enforcement of an award from outside the country apply as “rules of procedure.” Differences in limitation periods between countries is substantial. In Canada, various provinces have time limitations of between 2-10 years. In the US, 3 years is standard. Russia is also 3 years, while China allows only 2. Common law jurisdictions like England and Wales state that awards cannot be enforced after 6 years from the time of the cause of action. Given these facts, a timely enforcement strategy is vital. This should include a thorough discovery process, detailing the attachable assets and a clear delineation of which limitation periods may apply. Blind enforcement is also an option, though the time consuming, complex, and comparatively expensive nature makes this an unattractive option in most situations. Surely, a creditor is free to wait for a debtor to negotiate a settlement or simply pay what they owe. But a savvy creditor will devise a strategy for enforcement and recovery in the event that a debtor does not pay up.
Commercial

Burford Capital Roundtable: Industry Research

A recent roundtable of law firm leaders featured Jason Peltz of Bartlit Beck, Frank Ryan of DLA Piper, and Jason Leckerman of Ballard Spahr. They discussed industry trends, the ongoing impact of COVID, and how to best educate the public about legal funding. Burford Capital Director Christine Azar led the discussion, beginning with the high number of law firm mergers. The panel did not agree with the notion that ‘bigger is better’ when it comes to firm size. Leckerman states that it can be more advantageous to focus on core areas that clients already want and need. It’s likely that firms will focus on attracting those clients who need their specialized expertise, rather than trying to be all things to all people. Certainly, firms will want to focus on factors other than size. The ESG initiatives being adopted are likely to attract new clients who share those values. This includes more than just donating time and money; it involves joining forces with groups that get things done. That said, attracting talent can be challenging regardless of firm size—and finding strong lawyers is vital to client growth and retention. More than 65% of lawyers assert that their firms are considering risk-based practices. Peltz notes that institutional constraints may impede the shift from billable hours to risk-based models. For the panel, it seemed unlikely that big firms are willing or able to develop risk-based practices, even though alternative fee arrangements are becoming increasingly common. Ultimately, the growth of third-party litigation funding depends on clients understanding its value. Helping clients consider this option realistically and accurately is of vital importance—especially when funding is an ideal way to meet the goals of clients.  
Commercial

UK Insurer Launches $1 Billion Litigation Finance Firm

Thomas Miller, UK Insurer, has recently acquired the litigation insurance business—TheJudge Group. This merger has launched Erso Capital, a litigation finance firm with a staggering $1 billion in capital, housed within discretionary funds, single managed accounts, and co-investment funds.  Bloomberg Law details that the litigation finance arm will be led by founders from TheJudge Group, including James Blick, Matthew Amey, and James Delaney. It is expected to provide funding in single cases as well as portfolios, and will engage in claims monetization. The Judge Group is known for offering litigation insurance as an alternative to traditional litigation finance. Litigation insurance is often used to cover lawyer fees in losing cases. CEO of Thomas Miller Group, Bruce Kesterson, explains that TheJudge is a respected entity in this industry, and has a top-notch management team.
Announcements

KBRA Assigns Preliminary Rating to Oasis 2021-1

Kroll Bond Rating Agency (KBRA) assigns a preliminary rating to one class of notes issued by Oasis 2021-1 LLC ("Oasis 2021-1"). The notes are newly issued asset backed securities (ABS) backed by litigation finance receivables. Oasis 2021-1 represents the third ABS collateralized by litigation finance receivables to be sponsored by Oasis Intermediate Holdco, LLC ("Oasis") and the first to include Oasis’ MedPort-branded ("MedPort") medical lien receivables. The previous transaction, Oasis 2020-2 LLC, closed on June 2, 2020. Oasis, through its operating subsidiaries, has a long history as an originator, underwriter and servicer of litigation finance receivables. Oasis is a wholly-owned subsidiary of Oasis Parent, L.P. which is majority owned by Parthenon Investors IV, L.P. The MedPort receivables are originated by various originators with operating histories dating back to 2003. Oasis acquired the various MedPort originators on January 5, 2021. The portfolio securing the notes has an aggregate discounted receivable balance ("ADPB") of approximately $139 million as of the statistical cutoff date. The ADPB is the aggregate discounted collections associated with the Oasis 2021-1 portfolio’s litigation funding receivables, litigation loan receivables, medical funding receivables and medical loan receivables. The discount rate used to calculate the ADPB is a percentage equal to the sum of the anticipated interest rate on the notes, the servicing fee rate of 1.50%, and an additional 0.10%. As of the statistical cutoff date, litigation receivables, Medport medical receivables and Key Health medical receivables comprise approximately 36%, 58% and 6% of the aggregate funded amount of the Oasis 2021-1 pool and have average advance to expected case settlement values of 9.5%, 31.6% and 29.5%, respectively. Disclosures Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above. A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here. Information on the meaning of each rating category can be located here. Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com. About KBRA Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.
Commercial

Is the Shell Ruling a Harbinger of More Large Class Actions?

Some say that Britain is in the midst of a third wave of class actions. After the US and Australian markets embraced the practice of collective actions against big businesses and governments, class actions—especially those backed by third-party legal funders—have gained popularity around the globe.

City A.M. explains that some see the combination of claimant firms and litigation funders as having created an exploitative market where businesses find themselves at the mercy of class action claimants. Perhaps what those people really fear is increased access to justice and a fair fight on behalf of those who would previously be steamrolled by huge corporations with limitless resources. A prime example of this is when Shell Oil had to compensate Nigerian farmers for damage resulting from two oil spills.

Fears of large class actions are amplified by COVID, and by the outcry from insurers who assert that they can’t possibly honor all of their policies in the wake of a global pandemic. Complications stemming from Brexit may also bring with them a spate of class actions involving logistical issues. It’s possible that companies will rally together to file a collective claim addressing the impact on their businesses.

Chris Bushell, partner at HFS, warns that a wave of new class actions could be coming. At the same time, others at HFS assert that it’s unlikely that US trends in class actions will repeat themselves in the UK. One main difference between these jurisdictions is ‘opt-out’ (where every impacted class member is considered a claimant unless they specifically ask not to be) and ‘opt-in’ (where claimants must register to become part of the case).