LCM has been funding a class action against the Gladstone Ports Corporation (GPC) on behalf of local fisheries and fishermen, who claim that GPCs port expansion project led to the collapse of the fishing market there. GPC had been arguing that LCMs funding agreement is unenforceable on the basis of champerty and maintenance, but the court just upheld the agreement as not champertous. As reported in Mondaq, the plaintiffs applied for a declaration by the court that their funding agreement is enforceable. LCMs counsel went so far as to argue that maintenance and champerty are essentially obsolete, and requested 'a decent common law burial' for the pair of torts. Plaintiff's counsel was a bit less aggressive, arguing that even if maintenance and champerty are enforceable, they do not apply to the enforceability of a funding agreement in a class action regime, which essentially carries with it the understanding that litigation funding will be part and parcel of the action. Courts have upheld funding agreements on such grounds in the past, so GPC had an uphill battle to climb here. They argued that LCM's funding agreements ceded too much control to the funder, and was therefore contrary to public policy. The court ultimately found in LCMs favor, ruling that too much control was not ceded, and that ultimately the court maintains the authority to determine what percentage of a settlement a funder is to receive. This essentially negates any argument of control on LCMs part, despite that certain mandates in the funding agreement appear to give the funder some sway over decisions which are made during the case. In the end, the Gladstone claim will go down as yet another brick in the now formidable wall which supports litigation funding agreements as enforceable in regard to maintenance and champerty.
This past Wednesday and Thursday saw New York City play host to the 2nd annual LF Dealmakers Forum. Hosted by Wendy Chou, whose popular IP Dealmakers Forum served as a launchpad for a similar conference aimed at the litigation funding market, the sold out two-day event brought together industry experts and novices alike. Keynote Address The event kicked off with a keynote address from Stephen Susman, founding partner of Susman Godfrey, and one of most successful plaintiffs lawyers in US. Susman recounted his early days as essentially one of the first litigation funders, having formed his contingency-only plaintiff-side law firm in the late 70s, back when the notion of contingency-only raised more than a few eyebrows. Susman saw himself filling a need in the marketplace, and indeed by the end of the decade had grown so popular that in 1981 he landed the cover of American Lawyer, which itself founded the legal journalism market. In the process of running his contingency-fee practice, Susman learned how to construct fee agreements that provide the right incentives, how to handle cases efficiently, how to compensate associates and partners properly, and how to teach younger lawyers to be effective at their trade. These are all ideals that Susman continues to preach. The theme of Susman's speech was how contingency leads to efficiency. The more skin in the game that attorneys have, the more likely they are to question the efficacy of their discovery motions, and reconsider or reevaluate their overall case strategy with an eye towards efficiency over simply a 'more is better' approach. "Lawyers who are paid by the hour have no incentive to be efficient," Susman said. "Even if they give you a discount. It’s like buying a suit at Barney’s half price. It’s already been marked up four-times." To that end, Susman advocates funders adopt a 50/50 fee model with the law firms they partner with. He recommends funders insist that law firms also maintain skin in the game. Susman further encouraged the industry to play an active role in reducing the cost of litigation. He advocates for public jury trials, as opposed to private dispute resolution. Susman ended his address by suggesting that funders have a role to play in terms of advising their clients on how best to negotiate with their law firms. While acknowledging that this advice goes against his own best interests, Susman stated unequivocally that litigation funders - with their legal expertise, and the fact that they are no longer lawyers and are therefore operating as advisors - can guide clients on how best to negotiate with law firms on fee arrangements. This is an area where funders can provide value to the client, outside of pure financing. Panel Discussions Panels ranged from a broad overview of the funding industry, to coverage of specific sector topics. In the first panel of the day, which provided a bird's eye view on the state of the industry, panelists highlighted the industry's monumental growth, both in single-case and portfolio funding, and within boutique and AmLaw 200 law firms alike. Of course, as firms become more knowledgeable, they are becoming more sophisticated. Five years ago many law firms hadn't even heard of litigation funding, whereas now they are experts; some even holding auction processes for funding, and others entertaining offers from funders as a source of leverage for settlement negotiations. In the latter example, a law firm will receive an offer from a funder with no intention of accepting. They simply approach the counterparty in the claim and ask for a higher settlement figure than what the funder is willing to invest. Clearly, the marketplace is growing more sophisticated. What's more, law firms are negotiating better fee splits on their behalf. Years ago, a funder would receive 100-150% of their investment recouped on first-money back. Today, law firms are negotiating a chunk of that first money, and even integrating success fees (usually in the 20% range) to secure their spot at the front of the line. On a CIO-specific panel, the panelists discussed their preferences for types of cases to fund. Obviously, IP topped the list, given the lengthy time-to-settlements and high upfront costs. International arbitration was also mentioned, yet most funders broaden their scope to include any commercial litigation opportunities. To keynote speaker Susman's point, panelists did point out that they prefer to get law firms on board with fee sharing, via 50/50 splits, yet they noted how some law firms simply aren't comfortable with risk. Therefore, if a case is right, the funder will cover 100% of fees if necessary. When asked about the biggest threats to funding, panelists agreed that all of the overly optimistic or naïve capital coming into the space could lead to some negative outcomes, like funder misbehavior which may incur negative headlines. These could then be seized upon by regulators in a bid to exert broad industry oversight. Allison Chock of Bentham IMF noted that the Chamber of Commerce is now approaching state legislatures, and none of them know what litigation finance is or how it works. So they are ramming through legislation with people who don’t understand the industry. This is a cause for concern. And to the point of 'dumb money' in the space, Chock illustrated an example of how an influx of capital into a growing sector can lead to extremely bad decision-making. She told of receiving an email from a claimant in a case they had looked at that another funder had heard that Bentham was interested, so they simply threw money at the claimant. Chock's firm signed an NDA, but that didn't mean they were interested. They simply wanted to diligence the claim. Chock noted how this was the third such instance she heard about, where another funder jumped into a claim simply because her firm had been looking at it. “A fool and his money are soon parted," warned Chock. A Case Study Perhaps the most interesting panel of the day centered around a case study of how litigation finance literally saved a business' life. Business Logic (BL) had a trade secrets misappropriation and breach of contract claim against a subsidiary of Morningstar. At the time, BL was a 20-person firm with annual revenue of $4MM. All of its margin and savings were tied up in the litigation. The case had been in the works for a few years, and BL was so confident in their claim they committed much time and money to fighting it. Yet they reached a breaking point. The company was going to have to reduce its workforce to continue the claim, unless it found outside financing. They reached out to a trio of funders, and Lake Whillans responded. The funder provided fee coverage and even working capital to BL. Now, as the trial approached, law firm Yetter Coleman could find top experts and formulate a robust case. Suddenly, Morningstar got nervous. No longer could they threaten the small Business Logic by bleeding them dry pre-trial. The trial was approaching, and BL had a strong case, and was well-capitalized. The damages claim was for $65MM, and Morningstar was so concerned about a multiple of that number being rewarded, they settled for nearly the full value of the claim - $61MM. It was the 9th largest trade secrets settlement at the time, and to this day remains the largest in the state of Illinois. BL has since grown its business to 150 employees, and changed its name to NextCapital. The story illustrates the quintessential David v. Goliath dynamic that litigation funding facilitates, and highlights how funding can not only save a company from going under, but help it thrive well into the future. Final Thoughts Given the packed house, it's safe to say there will likely be a third annual conference next year. The growing popularity of conferences like LF Dealmakers underscores the mainstream acceptance of litigation finance. I personally noticed the diversity of attendees at this conference compared to the initial installment. There were more lawyers, in-house counsel and academics this time around, and I expect that will continue into next year and beyond.
Legalist, the San Francisco-based AI-driven litigation funding platform, has landed a $100MM funding round. The firm will deploy the capital into 100-200 cases of at most $1MM each. As reported in TechCrunch, Legalist was founded in 2016 by a pair of 20-something Harvard dropouts, Eva Shang and Christian Haigh. The firm graduated from the prestigious Y Combinator school, and received financing from Peter Thiel, as part of its $10.2MM initial funding round. Legalist is an AI-driven funding platform that uses machine learning to source and diligence claims. The firm claims to have funded 38 cases thus far, of which half have resolved. 80% of those were successful. Because of the firm's leverage of AI, they are able to keep costs low and therefore fund smaller cases that much larger funders tend to eschew (Despite its reliance on AI, Legalst is an 11-person firm). The latest fundraise was sourced from non-profit endowments, family offices, and institutional investors, including an insurance company. Legalist is organized like a traditional private equity fund, with management fees and a carry structure. The total life of the fund is five years, but Shang expects to deploy all capital within two years, over 100-200 claims.
NEW YORK (September 18, 2019) – Litigation funder Validity Finance continues to build its U.S. investment team while expanding its capital base. The firm announced the arrival of Ronit Cohen, who joins Validity as portfolio counsel. A former trial lawyer who practiced at Simpson Thacher & Bartlett and O’Melveny, Ms. Cohen transitioned to litigation finance in 2012 and spent the past seven years as an investment professional at Bentham IMF. As dispute funding has gained acceptance in the U.S., Ms. Cohen has overseen investments in a wide span of commercial litigation matters, reviewing many hundreds of cases in the process. She’s helped clients secure funding in disputes involving breach of contract, fraud, insurance coverage disputes, patent infringement and large arbitrations. She’s also helped vet and manage investments in portfolios of cases for law firms. In coming to Validity, Ms. Cohen reunites with firm founder and CEO Ralph Sutton, who formerly was chief investment officer at Bentham and originally recruited Ms. Cohen. She is the third former Bentham manager to join Validity this year, following the arrivals of David Kerstein and Julia Gewolb. Mr. Kerstein now serves as Validity’s Chief Risk Officer; Ms. Gewolb is Director of Underwriting. Added to the firm’s other senior staff, Validity has built a team with the most tenured investment professionals focused on disputes in the U.S. “We could not be happier having Ronit join us and round out the team,” Mr. Sutton said. “She was one of our first hires out of Big Law at Bentham and her industry experience is almost unrivaled. Ronit conducted due diligence on hundreds of prospective cases and assisted in bringing dozens to strong conclusions. Her experience will be a great benefit to our current and growing roster of funding clients.” Validity launched in June 2018 with $250 million in committed capital and the backing of leading private equity investor TowerBrook Capital. The firm recently raised another $50 million in commitments from additional investors and has committed more than $50 million in its first year of operations to clients across a range of litigation matters and jurisdictions. The firm recently partnered with American Lawyer Media to survey 330 lawyers at law firms and businesses about their experience with litigation finance. Just under 100% of those surveyed who have used third-party funding said they planned to do so again. And 98% of respondents said that trusted relationships are the most important factor in choosing a funder. “It’s a great pleasure to be working again with Ralph, Dave Kerstein and Julia Gewolb, and to connect with the superb professionals that Validity has assembled in the past year,” Ms. Cohen said. “The firm has created a unique market position with its focus on client-centric service. Fortunately, there is zero learning curve for me in getting started and I’m excited to be part of a team dedicated to innovative dispute funding on a national scale.”
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About Validity: Validity is a commercial litigation finance company that provides businesses, law firms and individuals with non-recourse financing for a wide variety of commercial disputes. Founded in 2018 with $250 million in financing, Validity believes that capital and legal expertise combine to help solve legal problems on behalf of clients. Validity’s’ mission is to make a meaningful difference for clients by focusing on fairness, ethics, innovation, and clarity. For more, visitwww.validity-finance.com.
In this episode we speak with Paul Haskel of RK&O. Paul discusses establishing a litigation funding practice at his firm, how his background in distressed and high-yield debt investments overlaps with the funding sector, how he structures funding agreements for both claimants and law firms, and what the impact of Burford v. Muddy Waters is likely to be on the industry going forward. [podcast_episode episode="4450" content="title,player,details"]
Insurance Australia Group (IAG) is estimating that a class action being waged against it could be worth as much as $1B. Global funder Balance REV is financing the claim, which alleges that customers were sold 'add-on' insurance products that had little-to-no financial value. As reported in The Sydney Morning Herald, the Hayne Royal Commission recently conducted an investigation into IAG subsidiary Swann. That investigation uncovered 850,000 policies sold to customers for over $1B. Fewer than 10% of the customers who received those policies ever filed a claim. IAG has halted sales of the policy, and initiated a remediation program. Estimates are that hundreds of thousands of customers make up the claimant pool, which is operating under a common fund order agreement. That means that all claimants must pay a percentage of their payout to the litigation funder - in this case, Balance REV - regardless of whether they signed an agreement with the funder. That percentage has been capped at 25%. IAG moved to have Balance REV's fee changed to a 3x multiple of invested capital, given that the 25% figure could yield the funder as much as $250MM. But Justice Gleason found that the funder will be "appropriately and reasonably remunerated," without receiving a windfall. He noted that the upfront costs to this large claim are considerable. The trial is listed for July 2020, with a mediation scheduled for this November.
London, 12th September 2019.Augusta, the UK’s largest litigation and disputes funder by case volume today announces it has raised a further US $115m from a multi-billion-dollar US-based investment manager.
In 2018, Augusta secured £150m from a global investment fund, to finance business growth and investment in funding cases. In response to increasing demand from lawyers, this additional capital raising will boost Augusta’s existing capacity for dispute and litigation investments in markets including the UK, Europe, Middle-East, Australia, Canada and the US.
Augusta has recently announced £25m firm-wide case funding deals with international law firm Pinsent Masons and leading litigation law firm HFW. This additional investment increases capacity for the funding of individual cases, as well as the working capital requirements of law firms and firm-wide case facilities.
Of particular note is the innovative structure of this new capital. This facility will be used on a ‘co-investment’ basis - allowing both existing and new investors to participate in cases funded, across the full range of size and geography that Augusta supports. This provides both investors with the opportunity to gain exposure to Augusta’s growing case pipeline.
Louis Young, Managing Director at Augusta, said: “With the increase in demand from lawyers for our support, we are delighted to have added additional capacity to our business. Both our existing and new investors are keen to promote access to justice and appreciative of the returns Augusta’s model provides. This development is a strong endorsement of the litigation funding industry and in particular, our market-leading experienced team”.
Augusta has recently announced hirings into its senior team with the arrival of Proskauer Director Polly Bahl as Chief Operating Officer, Gowling WLG Partner James Foster as Head of International Arbitration and FTI Consulting Managing Director Leor Franks as Chief Marketing Officer. These additions reflect Augusta’s ongoing growth and increasing client demand for dispute and litigation funding.
About Augusta:
- Established in 2013, Augusta is the largest litigation and dispute funding institution in the UK by # cases with a team of 70 in London and 85 worldwide. Augusta’s scale enables us to make decisions in market-leading timeframes and fund cases of any size.
- Augusta is organised into a series of specialist practice groups: Arbitration, Class Action, Competition, Consumer, Intellectual Property and Litigation, and sectors including Financial Services and Construction & Energy.
- By the end of H12019, Augusta had funded 213 claims with a market-leading win ratio of over 80%.
- Augusta has offices in London, Sydney, Melbourne and Toronto.
- #litigation #legalservices #investment #privateequity
NEW YORK, Sept. 10, 2019 (GLOBE NEWSWIRE) -- Rosen Law Firm, a global investor rights law firm, reminds purchasers of the securities of Burford Capital Limited (OTC: BRFRF, BRFRY) from March 18, 2015 through August 7, 2019, inclusive (the “Class Period”) of the important October 21, 2019 lead plaintiff deadline in the securities class action commenced by the firm. The lawsuit seeks to recover damages for Burford investors under the federal securities laws.
NO CLASS HAS YET BEEN CERTIFIED IN THE ABOVE ACTION. UNTIL A CLASS IS CERTIFIED, YOU ARE NOT REPRESENTED BY COUNSEL UNLESS YOU RETAIN ONE. YOU MAY RETAIN COUNSEL OF YOUR CHOICE. YOU MAY ALSO REMAIN AN ABSENT CLASS MEMBER AND DO NOTHING AT THIS POINT. AN INVESTOR’S ABILITY TO SHARE IN ANY POTENTIAL FUTURE RECOVERY IS NOT DEPENDENT UPON SERVING AS LEAD PLAINTIFF.
According to the lawsuit, defendants throughout the Class Period made false and/or misleading statements and/or failed to disclose that: (1) Burford has been manipulating its metrics, including ROIC and IRR, to create a misleading picture of investment returns to investors; (2) these manipulations hid the fact that the Company is at high risk for a liquidity crunch and is already arguably insolvent; and (3) as a result of the aforementioned misconduct, Defendants’ statements about Burford’s business, operations, and prospects were materially false and/or misleading and/or lacked a reasonable basis at all relevant times. When the true details entered the market, the lawsuit claims that investors suffered damages.
A class action lawsuit has already been filed. If you wish to serve as lead plaintiff, you must move the Court no later than October 21, 2019. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation. If you wish to join the litigation, go to http://www.rosenlegal.com/cases-register-1647.html or to discuss your rights or interests regarding this class action, please contact Phillip Kim, Esq. of Rosen Law Firm toll free at 866-767-3653 or via e-mail at pkim@rosenlegal.com or cases@rosenlegal.com.
Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation. Rosen Law Firm was Ranked No. 1 by ISS Securities Class Action Services for number of securities class action settlements in 2017. The firm has been ranked in the top 3 each year since 2013. Rosen Law Firm has secured hundreds of millions of dollars for investors. Attorney advertising. Prior results do not guarantee a similar outcome.
The hits just keep on coming for Burford Capital. First there was the Muddy Waters short, then accusations of a sex tape swap, and now allegations the world's largest litigation funder spent loads of money on its four non-executive directors (whose responsibility is to keep management in check). As reported in The Evening Standard, one of Muddy Waters' principal arguments against Burford was concerns over governance. Burford subsequently demoted CFO Elizabeth O'Connell to CSO. O'Connell is married to Burford CEO Christopher Bogart. The firm also made several other governance adjustments in order to assuage investor anxiety. But the latest revelations speak to that very governance culture. Burford is being criticized for holding board meetings in luxury locations like Barbados, Cape Town and the Four Seasons Mexico City. The funder is said to have invited its four non-executive directors on all-expenses paid jaunts, including expensive food, travel and lodging for them and their wives. Directors stayed upwards of two weeks at certain spots. And while it is standard for a board meeting's travel and lodging expenses to be covered by the company, typically they are held in the city where the company is headquartered or has a strong presence. Burford is a London-based company with offices in major cities around the globe. But those major cities don't include Barbados, Cape Town or Mexico City. A whistleblowing employee claims that the trips were designed to appeal to the non-executives, and reduce the likelihood of their speaking out against the company. Burford is countering that spending extended time with the directors allowed CEO Bogart to maximize the benefits of their expertise. Both Burford and the non-executives insist they remained critical of the firm and asked many substantial questions on the trips. Burford further claimed that as a Guernsey-based company, it cannot hold board meetings in London or New York for tax reasons. Additionally, the firm claims it has been eyeing potential business in Cape Town, Mumbai and Germany, where it held some of its jaunts.
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