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Commercial Covid-19

Australian Government Rallies to Protect Insolvent Businesses

Australia is being extremely proactive when it comes to mitigating the impact of the Coronavirus outbreak. In addition to swift self-quarantine protocols and shutdowns, Australia has enacted the COVID-19 Response Act, which passed both houses of parliament.  Lexblog reports that the goal of these laws is to protect existing businesses from insolvency.  The primary purpose is to provide businesses more time to meet their financial obligations to creditors—six months in most cases. It also shields some directors from being held personally liable for financial shortfalls in their companies. The main focus of the COVID-19 Response Act is to mitigate the impact that the pandemic is having on businesses across the spectrum. Australian government foresaw that directors will need to seek additional credit and inventory, raise equity, and take on new debt to keep businesses afloat. As many businesses are forced to employ remote workers, the need for tech and training must be addressed as well.  Not all the new regulations of the C19RA have been released to the public. But they appear to focus on reporting obligations, treatment of existing debt, and extensions of how much time must pass before non-payment on insolvency claims can be made. Directors should be aware that unless a provision is specifically stated in the act, their usual responsibilities remain the same. The responsibilities to employees and shareholders do not change, even during a pandemic.  Given how prevalent litigation funding has become in Australia, both funders and class action law firms should take note of the recent changes.
Commercial

Even Well-Heeled Clients Are Turning to Litigation Finance

We already know that litigation finance can provide opportunities to pursue bigger and more time consuming cases. We also know that funders help companies and clients who couldn't otherwise afford strong legal representation. But what about those who aren't strapped for capital? Why are they turning to litigation finance, when they don't appear to need to? Above the Law, in their series on litigation finance, explains that there are plenty of other reasons for lawyers or firms to team up with litigation funders. The most obvious being the mitigation of risk. Any company can be sued, meritoriously or not, and eventually, many large businesses find themselves in the position of having to sue. While this may not cause a financial crisis for the company, neither is it a cause to celebrate. A litigation funder can assume some risk by providing funding in exchange for a share of the recovery amount. This loosens up capital restrictions while allowing the company to pursue legal matters effectively.  Litigation funders may also provide a sound measure of the merits of a case. When a big funder like Omni Bridgeway, for example, decides to fund a case—it's a strong indicator that a case has value and is worthy of being pursued. Further, many funders have vast experience and connections with researchers and others who can support the case.   Litigation funding allows for the raising of capital, or the freeing of funds to be used for other purposes. Overall, this can reduce financial pressure and relax time constraints that might impact the pursuit of a claim. For plaintiff companies, funding enables them to exempt legal costs from their balance sheets, which provides increased solvency.  During these uncertain economic times, it should come as no surprise that even prosperous clients are turning to litigation funding.
Commercial

Even Strong Cases Benefit from Litigation Funding

When you have a strong case you feel great about, you're probably not thinking about litigation funding. But perhaps you should be. Aside from the inherent risks associated with all litigation, there are a host of reasons why funding should be considered—even when you're feeling confident.  IMF Bentham points out that while retaining a big judgement is desirable, retaining all the risk may not be. Arbiters and judges can make unexpected rulings, and even the most meritorious cases can go south. Litigation finance can reduce risk while ensuring that legal teams have the means to pursue cases effectively.   When an opponent has a huge financial war chest, they have more options at their disposal.  By securing comparable funds, lawyers, firms, and clients have a stronger fighting chance. Even when a company is flush with cash, a protracted legal battle can siphon resources from other areas of business. Balance sheets can be less balanced when cases drag on or blow past the planned budget. The costs associated with a case are sometimes mitigated by hiring attorneys or firms that work on contingency. The benefits vary, depending whom you ask. Many top firms will not accept cases on full contingency, but with a strong litigation funder like Omni Bridgeway, clients can hire the best representation without budgetary concerns. 
Commercial

Are Court Delays Better or Worse for Litigation Funders?

There's a debate currently underway in the legal world: Will work stoppages brought about by the COVID-19 pandemic be better for litigation funders, or worse? Will it enhance earnings by increasing demand, or lead to lower settlements and fewer payouts? Can an influx of new cases bolster the legal field, or will it merely increase competition to land lit fin deals? As Bloomberg reports, we don't yet know for sure. Generally speaking, funders bring in excess revenue when cases take longer to resolve, as a spokesperson for Omni Bridgeway (formerly Bentham IMF) explained. Burford Capital also stated that delays tend to benefit them economically, provided the courts remain largely up and running.   A recent case involving an investment by Omni Bridgeway of $1MM illustrates how time plays a part in funder earnings. The contract stated that if the case was resolved within 6 months, Bentham would recoup more than 1 ½ times their investment. If the case took a year, that amount would double. If the case really dragged on, Bentham could have made as much as $4MM. Based on those terms, it's hard to imagine funders weeping at the prospect of long court delays. That said, court delays caused by pandemics are generally not part of existing lit fin contracts. However, Force Majeure may apply in some cases. Contracts are becoming more precise and competitive, as firms spar for funding. Lawyers and clients are now in the process of negotiating what needs to happen during the various shutdowns and delays caused by COVID-19.  But why should lawyers or firms accept a lower percentage when they weren't responsible for delays?  Negotiating these situations is new territory for the parties involved. Should we expect litigation funders to accept lower returns as competition for cases ramps up? Given how long this crisis is expected to last, we're sure to find out eventually. 
Commercial

Litigation Finance Can Perk Up a Down Economy

When the economy takes a downturn, a spike in litigation can follow. Desperate financial times can turn even the most non-confrontational towards dispute—as assets dwindle and every penny counts.  But in an economy beset by losses, slow growth, layoffs, and shutdowns, how are people supposed to fund cases? Enter: Litigation Finance.  As Bloomberg reports, lit funding allows financially strapped clients an opportunity for top-notch legal representation, the best research, and all of the resources needed to reach a satisfactory resolution. This makes lit fin a net gain for firms, clients, lawyers, and anyone who is a fan of access to justice. The practice has also been called a 'force multiplier,' which enhances litigation hedge. Litigation finance can be a vital part of "countercyclical" planning. That is to say, that lit fin provides a way for existing cases to continue, and new cases to be taken on, in spite of bad economic times. This is true of several legal specialties—bankruptcy law, for example.  Macro-economic pressure can spur clients into being more adamant about recouping damages, and make them less interested in compromise or settlements. Litigation funding levels the playing field between the AmLaw firms and those of lesser means. Funding also lowers overall risk to firms, and may therefore allow them to take on riskier cases. By providing non-recourse capital, third party funders remove strain from individual investors, as well as clients and the litigators who serve them. While providing opportunities for low-risk profit, lit fin investors are increasing access to justice and aiding those with meritorious claims. 
Announcements Commercial

Balance Legal Capital Raises New US $100MM Litigation Fund

LONDON, 25 MARCH 2020 - BALANCE LEGAL CAPITAL LLP, a London-based provider of litigation and arbitration finance, today announced it has raised a further US$100 million from 8 institutional investors in a new UK fund for deployment in the UK, Australia and other common law jurisdictions. The investors in the new fund include Balance’s anchor investor, which is increasing its commitment, and 7 further global institutional investors, located across the UK, US, Switzerland and Australia.  They include a university endowment fund, a European asset manager, and a global investment bank.  As with Balance’s prior funding vehicle, Balance continues to have complete delegated authority over its litigation investment decisions.  In addition to the discretionary capital pool, Balance has direct access to significant further co-investment capital from its investors. Balance will use the new funds to invest in commercial litigation and arbitration proceedings with a continued focus on disputes in common law jurisdictions, particularly the UK and Australia.  Balance will continue to invest across all sectors and commercial claim types including contract, tort, shareholder disputes, joint venture disputes, competition, intellectual property, class actions and more. Robert Rothkopf, Managing Partner of Balance Legal Capital, said “These are difficult times but we feel it is nevertheless important to publicise important milestones – being the launch of our new fund, and the next step in the firm’s growth.  The interest we’ve had from investors is testament to the success of the business so far, the calibre of our team, and our ability to provide a great service to litigants and law firms.”  Balance Legal Capital LLP was advised on the establishment of its new fund by Herbert Smith Freehills LLP, London. About Balance Legal Capital Balance Legal Capital was founded in 2015. It is led by a highly experienced team of litigators formerly of Herbert Smith Freehills and Freshfields. Its investment committee includes Lord David Gold (former global senior partner of Herbert Smith and head of its disputes division) and Ian Terry (former managing partner of Freshfields and global head of disputes).  Fraser Shepherd (former litigation partner at Gilbert + Tobin, Sydney) and Nick Gardner (former head of Intellectual Property Litigation at Herbert Smith) are senior advisers to the investment committee. Balance Legal Capital LLP is a member of the Association of Litigation Funders of England and Wales (ALF) where Robert Rothkopf is also a board member.  Balance Legal Capital LLP is also a founder member of the Association of Litigation Funders of Australia (ALFA).  Balance Legal Capital LLP is authorised and regulated by the Financial Conduct Authority. https://www.balancelegalcapital.com
Announcements Commercial Special Features

SPONSORED POST: Free Webinar Explaining the Latest NYC Bar Report, Hosted by Validity Finance

Understanding the Latest NYC Bar Report on Litigation Funding

Tuesday, March 31, 2020

1:00 pm to 2:00 pm

The NYC Bar Association's Working Group on Litigation Funding delivered a long-anticipated 90-page report concluding that funding agreements between lawyers and funders will benefit litigants, and recommending that the legal ethics rules explicitly permit such agreements. The report also rejected calls for mandatory disclosure of commercial litigation funding agreements in court proceedings. Join Validity's Chief Risk Officer, Dave Kerstein, Portfolio Counsel, Will Marra, along with litigation finance experts Brad Wendel, Ethics and Law Professor, Cornell Law School and Constantine Karides, Partner at Reed Smith for an upcoming webinar that will cover:
  • what does the NYC Bar report means to lawyers today;
  • what we can expect from other bar associations across the country; and
  • how lawyers can secure funding on behalf of clients during these uncertain economic times.
Register for this free webinar by clicking here.
Commercial Covid-19

How Applicable is Force Majeure in the Wake of COVID-19?

In less than two months, America has changed dramatically as we all pitch in to flatten the curve of COVID-19 infections. This has caused businesses to close or dramatically reduce hours, staff, and output. It has led to supply chain stoppage and the total disruption of life and business as usual. Schulte Roth & Zabel remind us that Force Majeure is an unforeseen event that's out of the control of parties, which prevents them from fulfilling a contractual obligation. Most contracts will contain some kind of Force Majeure clause, and some may mention pandemics specifically. Normally, a word like 'pandemic' would only warrant a glance in a standard contract. After all, how often do we actually have pandemics? But as of March 11, the world has been mired in the midst of a pandemic as declared by the World Health Organization. Is that enough to trigger a Force Majeure clause? If the clause specifies a pandemic specifically, then yes. If not, words like 'contagion' or 'epidemic' or 'viral outbreak' might be enough. Keep in mind that Force Majeure requires that the event in question objectively prevent parties from performing their duties. A researcher who works from home would not be excused from work over a shelter-in-place order.  But what if there is no Force Majeure clause? This situation is a little muddier, but not impossible to navigate. Because contracts also require parties to adhere to the law, orders to suspend business, or other public health orders, can activate Force Majeure even when it's not specifically outlined in a contract.
Commercial Covid-19

COVID-19 is Lengthening Time-to-Settlement, Which Impacts Litigation Funding

Court closures and the absence of many basic services have brought about a major slowdown in the way cases are settled or litigated. As we don't know how long COVID-19 isolation and quarantine will last, it's growing more and more difficult to assess the true cost of the increased time-to-settlement.   As Legal Examiner reports, it is vital to look at all relevant factors when determining how or when to develop a settlement. These should include attorney fees, the possibility of a qualified settlement account, litigation funding or pre-settlement funding, possible liens, and taxes as pertains to settlements. In particular, litigation funding and attorney fees can be the most relevant for clients. Because resolving cases takes more time than usual, the need for litigation funding is greater than ever. While funding rates may seem excessive to some, they're often needed to mitigate the risks inherent to funding individual cases or class actions. And with time-to-settlement growing, the risk to funders is compounding exponentially. Funders typically want to settle quickly and recoup their investment in as timely a manner as possible, which, thanks to the current COVID-19 crisis, is growing increasingly more difficult.  Another thing to consider is the involvement of third-parties, which is a typical aspect of many cases. This might include private or state-funded medical agencies, bankruptcy trustees, guardians, estate executors, lien holders and more.  Medical or other record companies, researchers, and others who are needed to settle or manage cases will be less available as they are needed on COVID-19 related matters.  It's been suggested that settlements will be fewer and further between in the coming months. As cases are delayed and trials postponed, reaching an agreement between parties grows less likely. With that in mind, the litigation funding industry may need to recalculate its investment parameters given the court delays and additional time-to-settlement.