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Commercial

Insolvency 2020: Takeaways from Burford Capital Webcast

Legal finance products may seem daunting to those who lack experience with them. However, understanding the negotiation, documentation, and disclosure processes can be as simple as listening to the experts. Burford Capital managing directors Emily Slater and Greg McPolin demystify the process at the ABI Insolvency 2020 Virtual Summit. The pair detail the two main types of structures by which cases are financed, as well as the basics of litigation funding. By better understanding the options, clients and firms can develop an arrangement that meets the needs of lawyers and clients. Understanding the difference between the structures is a vital part of the process. Third-party litigation funding is provided on a non-recourse basis. That means high risk for the investor and security for plaintiffs and their legal team. “Fees and expenses” refers to the costs of pursuing the case. This might include legal fees, court filing costs, expert testimony, research, or enforcement of terms. “Claims and award monetization” is a way to bring in capital based on the promise of a share of future awards or recovery. To understand the impact of litigation funding in insolvency cases, we need only to look at General Motors. During the bankruptcy, when money was short, GM secured $15 million in non-recourse funding from Burford. Ultimately, this funding allowed for a settlement of $231 million, ending almost a decade of litigation. In another instance, a Fortune 100 company was faced with an opt-out class action alleging price-fixing by directors. If the conspiracy was proven true, potential damages would be enormous. Burford stepped in with $75 million in capital that clients could access long before the resolution of the case. Non-recourse funding can provide a complement to an existing contingency arrangement, providing liquidity long before the resolution of a case. This allows companies to pursue high-value litigation even when funds are short.
Commercial

Investment Review 2020: Yieldstreet

Yieldstreet is touted as a Financial Tech company that leverages the power of the internet to make a unique contribution to investment. Its focus on alternative investments includes placements in Litigation Finance, marine vessel acquisition, deconstruction, and real estate, among others.     Photo Credit: https://www.bptrends.com/ Kake details that Yieldstreet only worked with accredited investors initially. But with the Yieldstreet Prism Fund, anyone can invest in a variety of asset classes with a minimum investment of $5,000. These include commercial, consumer, legal, art, and real estate. Keep in mind, however, that these illiquid investments are not appropriate for anyone looking for a quick return. Noted strengths of Yieldstreet as an investment company include ease, convenience, and high yields. Investments are always backed by collateral, which offers more safety. If a loan goes bad, it’s standard for Yieldstreet to take steps to recoup the principle and interest, even if the recoupment requires legal action. YieldStreet also offers access to unique financial opportunities that other investors cannot access. Downsides to using Yieldstreet include management fees of up to 2%, which is significant. Then there are ongoing fees for every investment, which can add up for retail investors. Also, once invested, funds are illiquid until the project is completed.  That being said, Yieldstreet boasts a very impressive annual return of over 12%. Investments are held in a way that, even if the company went bankrupt, new fund managers could still be appointed. Investments in real estate or litigation balance high risk with high returns, taking into account long timeframes and unpredictable outcomes. Smaller investors and those hoping for a fast return are probably not good candidates for Yieldstreet, but those looking to reap the benefits of a strong risk/reward profile are unlikely to find a simpler, more efficient way to invest. Photo Credit: https://www.bptrends.com/
Commercial

Banker Accused of Illegally Sharing Confidential Files with Russian Oligarch’s Ex

Ross Henderson, formerly at Goldman Sachs, has been accused of handing over confidential financial documents to Tatiana Akhmedova, the former wife of a Russian oligarch, and her litigation funders: Burford Capital. He is now facing a criminal investigation led by the Swiss police. The Daily Mail reports that Henderson, who is from Britain, began a business relationship with the late Mr. Akhmedov in 2014. A year later, Henderson was fired by Akhmedov. A year after that, the Akhmedov divorce ended in Mrs. Akhmedova being awarded one of the largest divorce settlements in English history. As of last year, an English high court confirmed that Henderson gave hundreds of confidential files including bank statements, records of privileged conversations, and confidential emails to Akhmedova and Burford. While this was determined to be a breach of confidentiality, a justice argued that the information was still admissible in English High Court. As the former Mrs. Akhmedova has still not received the court-ordered settlement, speculation remains that the Henderson investigation is connected to recovery efforts led by Burford Capital. The funding agreement between Burford and Akhmedova gives Burford up to 30% of the GBP453 million settlement. All this comes months after a Dubai court ordered a contested super yacht be grounded, so it could not be recovered by Akhmedova. Burford is now utilizing the services of Arcanum Global to recover assets.
Commercial

Potential Conflicts of Interest in Litigation Funding

Conflicts of interest are a concern if law firms find themselves entwined with litigation funders, according to one former president of the Irish Law Society. The potential exists for lawyers to feel torn between third-party funders and the clients they are sworn to serve. This is especially true in the UK, where funders and lawyers become “close.” Law Gazette explains that this may be why litigation funders are not permitted to fund cases in the Republic of Ireland. This is contrary to the rest of the world, who have largely welcomed the practice. Some have even adjusted their laws in a way that ensures transparency while welcoming litigation funding. This past June, noted funder Burford Capital announced it was buying shares in a dispute resolution firm based in London, sparking further debate about conflicts of interest. 
Commercial

Chris Young, General Counsel for Omni Bridgeway, Talks Risk

What’s the key to success in a field beset by risk? According to Omni Bridgeway General Counsel Chris Young, it's patience. He explains that litigation is highly speculative, and each case requires multiple layers of investigation and research. Omni Bridgeway is a firm that invests rather than lends funds to litigants—because they only see a payout when the funded case is successful. Vanguard explains that the expertise of the investment team is essential to Omni Bridgeway’s success. The company has grown by leaps and bounds of late. Since Chris Young joined in 2017, the size of deals considered has been raised to $150 million. Omni Bridgeway funds individual cases, class actions, and diverse legal portfolios. Young, who holds a BA from Yale and an LLM from New York University School of Law, calls himself a “deal lawyer” who goes after large payouts. Of course, risks are higher the larger the deal—and some companies looking for funding are already in financial turmoil. Omni Bridgeway must then assess whether a client may file for bankruptcy, undergo major restructuring, or liquidate. All of that becomes part of a larger risk assessment. Insurers are now underwriting litigation funding risk, which is a major step forward for the industry. Insurers will also conduct due diligence research, sometimes using their own outside counsel. This leads to safer deals that lessen at-risk capital. At the same time, insurance for litigation funding investments requires fastidious research and detailed underwriting. Chris Young affirms that the investors he works with flock to Litigation Finance because of the high potential returns—and the fact that litigation funding is not tied to the larger markets. He describes his team as ‘creative, responsive, and focused on clients.’
Commercial

COVID Related Class Actions—How to Prepare

As the coming tide of COVID-related class action suits looms, many countries are adapting and growing the legal processes by which these cases are governed. The US and Canada have seen filings for class actions skyrocket, with Australia, Germany, the UK and China all expected to follow suit. And where there are class actions, there are litigation funders. ICLG details that industries hardest hit by class actions include retailers, tech companies, event and ticketing companies, manufacturers, and financial institutions. In Canada, negligence-related cases involving nursing homes and transportation providers, and insurance cases are most prominent. Australia is overwhelmed with class actions and has enacted new laws to stem the tide of litigation funders helping citizens who have been wronged by governments or big business. Specific types of class action litigation are expected to intensify in size and number. Consumer cases regarding overpricing, scheduled subscription payments, and breach of contract will no doubt be common. As will commercial litigation over force majeure, warranties, and indemnification. Securities litigation will likely also rise, as well as insurance claim denial cases. Employment liability with be another huge litigation type as safety and privacy issues come to light. Preparedness and discrimination suits are expected to rise, as will whistleblower and retaliation claims. Privacy litigation may also grow as more and more people are working remotely or taking online classes. Data breaches and cyber insecurity are already fueling class action filings. Those looking to minimizing risks would do well to perform a risk analysis that includes reviewing agreements and public disclosures. Communicate with employees, vendors, and shareholders if applicable. Plan and implement safety procedures at every level, including increasing options to work from home. Some recommend that you stave off lawsuits by implementing a class action waiver. Your legal team can advise on this. Taking precautions now can save millions in time and legal fees down the road.
The LFJ Podcast
Hosted By Dan Bush |
Our guest today is Dan Bush, Chief Investment Officer and Director of Innovation at Law Finance Group. Dan discusses Law Finance Group's latest law firm funding product, AR Now, including why his firm is targeting accounts receivable, what the selection and approval process for lawyers is like, how AR Now can help facilitate alternative fee arrangements, and how the product fits into the company's suite of offerings. [podcast_episode episode="6804" content="title,player,details"]
Commercial

2020 Canadian Readers’ Choice Awards: Litigation Funders

Who do Canadians think is tops in their respective legal fields? The 2020 Canadian Readers’ Choice Awards answer that very question. The list of suppliers, vendors, and legal-adjacent businesses was voted on by nearly two-thousand readers who revealed their favorites in 38 separate categories. Canadian Lawyer reveals the top three litigation funding organizations used by Canadian legal professionals. They include BridgePoint Financial and Nudorra Capital Inc—both located in Toronto, and Omni Bridgeway in Montreal. BridgePoint Financial has been in the litigation finance market since the early 2000s. It boasts a strong commitment to client needs and has been involved in precedent-setting cases. BridgePoint is involved in education initiatives and prides itself on offering value-added funding solutions. These include funding for law firms, settlement and inheritance loans, and class action cases. Nudorra Capital offers litigation loans that are fast, easy, and offer competitive rates and an application process that doesn’t require a law degree to understand. Nudorra offers legal loans for insurance claims, personal injury claims, family law divorce cases, and several types of insurance claims. It has offices all over Canada. Omni Bridgeway is a world-renowned leader in litigation finance, covering an array of legal specialties. Dispute resolution finance is Omni Bridgeway’s claim to fame. It has proven expertise in enforcement and recovery, common law, and civil matters. One of the longest-running litigation funding entities, Omni Bridgeway has been around since the 80s, which means this is the second global financial crisis it has navigated.
Commercial

Directors Accused Under Insolvency Act Lose Dismissal Attempt

Two former directors of a now-dissolved company lost an attempt at the dismissal of their case. The directors had sought for the cases against them to dismissed, on the grounds that a litigation funder should not benefit financially from the claim.   Pinsent Masons explains that the court looked at the actual wording as well as the presumed intention of the agreement between the litigation funders who bought an interest in the recovery, and the liquidator who sold the rights. The court has affirmed that litigation funders who buy claims against directors or insolvent companies have the right to benefit financially. This decision comes after an earlier one that the statutory rights of an action conferred to an officeholder—such as a liquidator—could not be assigned. This 2015 law was implemented at a time when directors of insolvent companies rarely saw cases taken to fruition because of the time and expense needed to do so. Litigation funding has changed that landscape significantly. The directors in this action asserted that their case should be dismissed or stayed owing to the fact that the company is no longer in existence—saying if funds could not go back into the company and then to creditors, the claims should not move forward. Courts were unimpressed, saying that the wording of the law in question negates the argument that the actions can be included. They also noted that the company does not have to be directly involved in order for money to move to creditors or those who bought a stake in the payout. This was largely an expected decision by the High Court. But it’s one that is sure to please creditors and litigation funders alike. It’s also a wake-up call to unscrupulous directors, reminding them that a lack of company funds will not protect them from legal action.