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Commercial

Funded Class Actions Fill New Zealand’s Litigation Calendar in 2020

A bevy of funded class actions are making their way through New Zealand courts in 2020, sparking debate on issues such as opt-in/opt-out, and other procedural components of how the nascent class action regime should operate. As reported in the NZ Herald, one of the key cases to watch in 2020 is the Southern Response claim, where the Supreme Court issued a landmark ruling approving of opt-out status. Up to that point, class actions had been opt-in only. Opt-out benefits litigation funders and makes their financial projections easier, as it certifies that all potential plaintiffs are covered by the action unless they specifically opt-out. That eliminates the need for book-building which can be costly and time-consuming. But the opt-out status of the Southern Response claim isn't set in stone. The high court has asked the NZ Law Society and the NZ Bar Association for their feedback on the decision to certify the class as opt-out. Meanwhile, another big claim looms, as both LPF Group and IMF Bentham are battling to fund a class action against the now-defunct CBL Corporation. A court is expected to choose between the two funded claims, and many are curious as to how the civil case brought by the Financial Markets Authority will impact the selected claim, if at all. There is also an increase in both insolvency-related and construction-related disputes, as New Zealand's class action climate continues to surge, much akin to what neighboring Australia has been experiencing these past several years. The High Court Rules Committee is requesting feedback on procedural matters as relates to access to justice, and the Law Commission has confirmed it will make recommendations to the government by next year. On the table are a shortening of the High Court trial process, an investigative process for specific claims, and the streamlining of trial processes.
Commercial

Are Juris Capital’s Public Sector Union Lawsuits Motivated by Politics or Profit?

Jonathan Mitchell of Mitchell Law PLLC has filed 21 class actions against public sector unions over the past two years, which have been bankrolled by Chicago-based Juris Capital. Now some are questioning the motivation behind these lawsuits - if their intent is to turn a profit, or to squash public sector unions altogether. As reported in The Intercept, Mitchell filed nearly two-dozen lawsuits in various states prior to the Supreme Court ruling in Janus v. AFCSME. That ruling found that public sector unions may not collect fees from employees who do not wish to participate in the union. Previously, public sector unions charged agency fees, whereby workers were forced to pay for union representation, regardless of whether they wanted that representation or not. Mitchell's lawsuits are aimed at recouping hundreds of millions of dollars in public sector union dues paid by workers who did not wish to be represented in the first place. Thanks to the Northern District of California's mandate that all funding agreements in class actions be disclosed to the court, Mitchell was forced to disclose the fact that Juris Capital is his litigation funder. Juris is led by David Desser, and reportedly backed by a pair of hedge funds and other private investors. Thus far, public sector unions have won most of the early battles, with circuit courts finding that they acted in good faith and therefore need not repay workers for dues collected (some claims have been settled prior to a court ruling). However, the claims now move to the appellate stage, which many feel could be a stepping stone to the Supreme Court. With the lengthy time-to-conclusion, some are contending that the suits are part of an orchestrated campaign to crush public sector unions. Mitchell, however, insists that his lawsuits are part of no such campaign; that he brought them at his own behest. The extent of Juris' participation in a politically motivated anti-union campaign remains unclear, given that the firm is a litigation funder and therefore motivated by profit as opposed to politics. All of this aside, the real question here is: does it really matter? These claims are either meritorious or not, a decision which the Supreme Court will likely ultimately decide. In the meantime, public sector unions are complaining about the cost of the claims, which is a reasonable gripe. Perhaps someone should alert them to the rise in defense-side funding...
Commercial

Battle Over Common Fund Orders in Australia Highlights Changing Attitudes Towards Litigation Funding

With over 600 class actions filed in Australia since the regime was first allowed 27 years ago, litigation funders are finding the class action sector to be a wellspring of potential investment. Yet the rise and subsequent fall of common fund orders underscores the backlash that is growing against the sector. According to The Sydney Morning Herald, funders got a boost in 2016 when Australia introduced common fund orders. A common fund order mandates that all claim members pay out a share of their earnings to the funder of the claim, regardless of whether they signed on with the funder. The logic being that all claimants are benefitting from that funder’s participation. Common fund orders meant that funders no longer had to book-build, or sign up vast numbers of claimants. However, the Supreme Court of Australia has just recently ruled that the Federal Court and NSW Supreme Court cannot issue common fund orders. The ruling comes on the heels of heavy grumblings about the rise of funded class actions in Australia. Many are pointing to the excess profits earned by funders, with some taking as much as 80% per year on their invested capital. Even though the court ultimately decides the size of the funders cut, some argue judges are ill-equipped to make an informed decision, and often pull numbers out of thin air. Funders disagree, of course, citing the high level of risk their investments carry. Andrew Watson of Maurice Blackburn points out how funders were taking as much as 40% prior to the common fund order introduction in 2016, but that number has dipped to below 25%, in some cases as low as 10 or 12%. He argues that without common fund orders in place, funder rates are likely to rise. Meanwhile, there are calls for further investigations into the funding sector, with the Victoria Law Reform Commission considering whether to allow law firms to work on contingency. That would change the game entirely, as it would provide law firms many of the same tools that funders now utilize, and would likely shift most class actions to Victoria. There are certainly a lot of moving parts when it comes to litigation funding in Australia. Only time will tell how all of this plays out.
Announcements Commercial

Affiniti Finance Announces £10MM Funding Line to Royds Withy King

We are delighted to announce we have established a funding facility with major law firm, Royds Withy King. This £10 million pound innovative funding facility will allow the law firm to offer clients a competitive edge in the litigation arena where the costs of pursuing claims to trial can be prohibitively expensive. The funding will enable clients to unlock claims which they might otherwise find difficult to bring or where they wish to structure their own finances to the benefit of their business interests rather than the litigation. Funding under the facility will spread the risk for claimants and, very importantly, is provided on a ‘non-recourse’ basis which means that if, unexpectedly, the claim fails, then there is no comeback for the claimant. The facility has been tailored to support a variety of practice areas and sectors both in the UK and internationally, including Arbitration and Contentious Probate. Jamie Lester, Dispute Resolution Partner in Royds Withy King’s City Office, who has overseen the project, said: “Legal disputes are unfortunately a fact of life and the higher the stakes, the more damaging and costly they can be to parties who will not only have to shoulder legal expenses as part of their existing budgets but also suffer the opportunity costs of diverted resources.” “After extensive research of the funding market, we are extremely excited about the facility with Affiniti Finance whom we recognise as bringing a fresh and transparent approach to the market and whose proposition we believe will be of real and tangible benefit to our clients. The facility is designed to provide them with a tool to hedge risk, eliminate budget constraints and monetise pending claims to free up capital for other business needs. It also resets the bargaining position against deep pocket defendants. The facility can also be accessed within a matter of days rather than the customary lead time of two-three months.” Our CEO, Ian Cunningham, said: “Affiniti Finance is delighted to provide the funding facility to Royds Withy King, a leader in the UK and international litigation markets. Our facility will enable Royds Withy King clients further access to justice and forge a formidable relationship for both parties.” Stewart Wilkinson, London Head of Dispute Resolution at Royds Withy King, said: “We have always prided ourselves in offering our clients innovative pricing options and structures for pursuing litigation in the UK and overseas. The facility with Affiniti Finance is the logical next step in this process and forms part of a series of innovative initiatives that we are bringing to the market to assist clients in a rapidly changing environment.” About Affiniti Finance Affiniti Finance was founded in 2014 and specialises in providing financial support to individuals or companies who are pursuing meritorious legal claims. The company covers several areas of legal funding including Financial Mis-selling, Civil Litigation, Personal Injury and across the commercial spectrum. Affiniti Finance helps claimants manage the risk of litigation and empowers them to pursue claims that might not otherwise be possible. For further information, visit www.affinitifinance.co.uk or follow us on Twitter @affinitifinance.
Commercial

Game Changes for Litigation Funders as Australian Supreme Court Revokes Courts’ Power to Initiate Common Fund Orders

In a bid to reduce the number of class actions in Australia, the Aussie Supreme Court has struck down common fund orders, which allow courts to order that all members of a class pay a portion of their settlement or payout to the litigation funder, regardless of whether they signed an agreement with that funder. The ruling changes the game for class action funding in Australia. As reported in Law.com, common fund orders were first granted in 2016, and viewed as a means of getting around the costly and time-consuming book-building process. With common fund orders, funders need not worry about signing up all class members, they simply partnered with a law firm and funded the action, and could expect a percentage of the entire settlement or payout. However, with the Supreme Court's latest decision, those days are officially over. The court based its decision on a pair of class actions - the BMW claim alleging the company installed faulty Takata airbags (funded by Regency Funding), and Westpac claim alleging the bank breached its fiduciary responsibility in pushing certain insurance policies to customers (funded by JustKapital). Subsequent to the court's ruling, funders will have to go back to book-building to collect on payments to a class. While most funders down under aren't too keen on the decision, IMF Bentham is pleased by the court's ruling. The funder is one of the only ones large enough to actually book-build, and had been doing so successfully prior to the 2016 ruling which allowed common fund orders. The elimination of common fund orders actually reduces competition in the class action market for IMF. Other large firms that regularly operate in Australia such as LCM and Augusta will likely see a benefit to the recent decision. Australia has experienced a ballooning of its class action industry, thanks to the influx of litigation funding which has sparked numerous shareholder and investor claims - so much so that the cost of D&O insurance has soared. The courts are clearly making an effort to stem the tide of class actions nationwide. Yet not all jurisdictions are on board. The state of Victoria recently introduced a bill to allow law firms to work on contingency (currently prohibited in Australia), and the bill would make the contingency apply to all class members, regardless of whether they signed a contingency agreement with the law firm. That bill is viewed by many as 'a backdoor to common fund orders.' Its passage could result in Victoria experiencing an uptick in class actions.
The LFJ Podcast
Hosted By Charles Agee |
In this week's episode, we sat down with Charles Agee of Westfleet Advisors. Westfleet just released their inaugural Litigation Finance Buyer's Guide, the most comprehensive study of the U.S. commercial litigation finance industry. Charles discusses the study's methodology, the controversial findings that there is deployment pressure on funders and that only 30% of funder commitments are allocated to the AmLaw 200, and what the benefits are of a study such as this one for the industry as a whole. [podcast_episode episode="4800" content="title,player,details"]
Commercial

LawCoin to Tokenize Litigation Finance

LawCoin, a company that bills itself as the first platform for investing in litigation finance on the blockchain, has announced plans to tokenize its litigation finance portfolio investment vehicle, LawCoin Investments. As reported in Leader Insights, LawCoin is working with ConsenSys Codefi, a tokenization company that turns assets into digital tokens available on the Ethereum blockchain. The investment opportunity will be available to institutional and accredited investors, and the company is looking to further tokenize individual litigation finance deals. Founders Marc Goldich and Noah Axler cite tokenization's transparency as a benefit to traditional securitization. Goldich also points out that since most documents in a case are publicly filed, investors will receive an additional layer of detail that can't be mirrored with traditional securitized investments. LawCoin will also post updates and provide further documents as the cases progress. It will be interesting to see if LawCoin's tokenization brings new investors into the litigation finance space, and if that translates into increased liquidity for the sector.
Announcements Commercial

Allianz Identifies Five Risk Trends for Directors and Officers in 2020

NEW YORK--(BUSINESS WIRE)--The range of risks facing company executives or directors and officers (D&Os) – as well as resulting insurance claims scenarios – has increased significantly in recent years. With corporate management under the spotlight like never before, a new report by insurer Allianz Global Corporate & Specialty (AGCS) highlights five mega trends that will have significant risk implications for senior management in 2020 and beyond. The report, “Directors And Officers Insurance Insights 2020”, also examines some of the factors which are driving recent changes in the D&O insurance market after a period of sustained large loss activity. 1. More litigation coming from “bad news” “AGCS continues to see more claims against D&Os emanating from ‘bad news’ events not necessarily related to financial results,” says Shanil Williams, Global Head of Financial Lines at AGCS. “Scenarios include product problems, man-made disasters, environmental disasters, corruption and cyber-attacks.” These types of “event-driven” cases often result in significant securities or derivative claims from shareholders after the bad news causes a fall in share price or a regulatory investigation. Of the top 100 US securities fraud settlements, 59% are event-driven1. There has also been a spike in claims resulting from the #metoo movement, where it is alleged D&Os allowed a toxic culture to take hold and endure within companies. Other prevalent types of events are cyber incidents. AGCS has seen a number of securities class actions, derivative actions and regulatory investigations and fines, including from the EU’s General Data Protection Regulation (GDPR), in the last year, and expects an acceleration in 2020. 2. Climate change litigation on the rise Failure to disclose climate change risks will increasingly result in future litigation. Climate change cases have already been brought in at least 28 countries around the world to date with three-quarters of those cases filed in the US. There are an increasing number of cases alleging that companies have failed to adjust business practices in line with changing climate conditions. Environmental, social and governance (ESG) failings can cause brand values to plummet. “Directors will be held responsible for how ESG issues and climate change are addressed at a corporate level,” says Laura Coppola, AGCS Regional Head of Financial Lines in North America. “Increasingly, they will have to consider the impact of these when looking at strategy, governance, risk management and financial reporting.” 3. Growth of securities class actions globally Securities class actions are growing globally as legal environments evolve. AGCS has seen increasing receptivity of governments around the world to collective redress and class actions, particularly across Europe but also in Thailand and Saudi Arabia. The level of filing activity in the US has been at record highs in recent years with over 400 filings in both 2017 and 2018, almost double the average number of the preceding two decades. This increased activity is impacting both US and foreign companies that have securities listed directly in the US. Shareholder activism is also increasing dramatically. With global law firm, Clyde & Co, AGCS has compiled a risk map in the report that assesses the risk of a company being subject to a securities group action in a particular jurisdiction, taking into account the availability and prevalence of third party litigation funding, which is regarded as a strong factor in increased group action activity around the globe. While countries such as the US, Canada and Australia see the highest activity and most developed securities class action mechanisms, overall, such mechanisms are developing and strengthening around the world with the Netherlands, Germany, England and Wales showing notable development and increased activity in recent years. 4. Bankruptcies and political challenges impact AGCS expects to see increased insolvencies, which may potentially translate into D&O claims. Business insolvencies rose in 2018 by more than 10% year-on-year, owing to a sharp surge of over 60% in China2. In 2019, business failures are set to rise for the third consecutive year by more than 6% year-on-year, with two out of three countries poised to post higher numbers of insolvencies than in 2018. “Political challenges, including significant elections, Brexit and trade wars, could create the need for risk planning for boards, including revisiting currency strategy, merger and acquisition (M&A) planning and supply chain and sourcing decisions based on tariffs. Poor decision-making may also result in claims from stakeholders,” says Coppola. 5. Litigation funders spread across the world All of these mega trends are further fueled by litigation funding now becoming a global investment class, attracting investors hurt by years of low interest rates searching for higher returns. Litigation funding reduces many of the entrance cost barriers for individuals wanting to seek compensation, although there is much debate around the remuneration model of this business. Recently, many of the largest litigation funders have set up in Europe. Although the US accounts for roughly 40% of the market, followed by Australia and the UK, other areas are opening up, such as recent authorizations for litigation funding for arbitration cases in Singapore and Hong Kong. India and parts of the Middle East are predicted to be future hotspots. The challenging D&O insurance market Although it is estimated around US $15bn worth of premiums are collected annually for D&O insurance, the profitability of the sector has been challenged in recent years due to increasing competition, growth in the number of lawsuits and rising claims frequency and severity. AGCS has seen double digit growth in the number of claims it has received over the past five years. Insurers are facing more legal costs due to increasing activity, as well as more settlements and claims. Another issue is that “event-driven” litigation results in aggregation issues where multiple policies may be triggered. One event could trigger both D&O and either aviation, environmental, construction, product recall or cyber insurance policy claims. Find out more about D&O insurance About Allianz Global Corporate & Specialty Allianz Global Corporate & Specialty (AGCS) is a leading global corporate insurance carrier and a key business unit of Allianz Group. We provide risk consultancy, Property-Casualty insurance solutions and alternative risk transfer for a wide spectrum of commercial, corporate and specialty risks across 12 dedicated lines of business. Our customers are as diverse as business can be, ranging from Fortune Global 500 companies to small businesses, and private individuals. Among them are not only the world’s largest consumer brands, tech companies and the global aviation and shipping industry, but also wineries, satellite operators or Hollywood film productions. They all look to AGCS for smart answers to their largest and most complex risks in a dynamic, multinational business environment and trust us to deliver an outstanding claims experience. Worldwide, AGCS operates with its own teams in 33 countries and through the Allianz Group network and partners in over 200 countries and territories, employing over 4,400 people. As one of the largest Property-Casualty units of Allianz Group, we are backed by strong and stable financial ratings. In 2018, AGCS generated a total of €8.2 billion gross premium globally.
Commercial

IMF Bentham Formally Jumps into Contentious CBL Class Action

Last week, we reported on the contentious back-and-forth between litigation funders LPF Group and IMF Bentham. LPF accused IMF of muddying the waters with a potential shareholder action against failed insurer CBL, whom LPF is already bankrolling an action against. Now, IMF Bentham has formally stepped into the fray, after law firm Glaister Ennor filed a shareholder action which the Aussie-based funder is backing on a no-win, no-fee basis. As reported in RNZ, Glaister and IMF claim to have a significant number of both retail and institutional investors, who together purchased tens of millions of shares in CBL prior to its February, 2018 collapse. The insurer was worth $750MM on the New Zealand stock exchange when it fell apart. The Financial Markets Authority and Serious Fraud Office are investigating CBL, and LPF is already funding a shareholder action against the defunct insurer, alleging a breach of continuous disclosure obligations and insider trading by company directors. Upon IMF's announcement that it was considering its own action, LPF filed a complaint to ASIC stating that potential plaintiffs are likely to be confused by the dual action, which LPF director Phil Newland says is highly irregular. New Zealand's class action regime is far less robust than that of neighboring Australia, given the lack of such actions - especially shareholder actions. However such actions are on the rise in New Zealand thanks to litigation funding, so it will be interesting to see how the court handles the competing actions.