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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.
Commercial

Arowana Unfazed by LPF Group’s Class Action

Arowana, the New Zealand company that established Intueri Education Group in 2010, took it public in 2014, then liquidated it in 2017, is facing a potential class action lawsuit by Adina Thorn Lawyers and funded by LPF Group. However Arowana has clearly stated that the company is confident any class action against it stands no chance of success. As reported in The NZ Herald, Adina Thorn and LPF are seeking to represent over 800 investors who lost millions in the Intueri liquidation. Their suit - which has yet to be filed - would allege that Arowana, Intueri, and the former directors of both companies pocketed over $100MM upon Intueri's liquidation, with former managing director of Arowana Kevin Chin pocketing over $13MM himself. The size of the claim is expected to be over $100MM. Arowana's current market cap is $25MM, yet company directors aren't worried about the lawsuit, even failing to mention it at all during the company's annual shareholder's meeting last week. Arowana feels confident given the fact that The Financial Markets Authority, Serious Fraud Office and the Tertiary Education Commission all investigated Intueri, and although they found wrongdoing, none of their findings amounted to anything criminal, in the regulators' estimation. Given that the liquidation will not make any payments to shareholders, Adina Thorn and LPF are signaling that a class action will be the only way for shareholders to obtain remuneration.
Commercial

Litigation Funders Chomping at the Bit to Invest in Obamacare Insurance Claims

Litigation funders have long been vying to get a piece of Obamacare insurance claims, which allege the federal government failed to make good on a host of payments to health insurers. Now that the Supreme Court has decided to hear several of those claims, funders have begun reaching out to insurers with more attractive terms and pricing. According to Crain's, the underlying claims involve insurance companies who allege the federal government failed to pay roughly $12bn in aggregate payments promised under the Affordable Care Act. Insurers are bringing so-called 'risk corridor' claims, alleging the government's plan to stabilize premiums by shifting those payments from profitable insurers to less profitable ones failed, leading many insurers into insolvency. Funders have been interested in insurance claims for years now, typically offering 10 cents on the dollar to purchase the entire claim payout. Last year, however, the U.S. Court of Appeals ruled that the government is not liable, and that sent funders running for the hills. Yet the Supreme Court's decision to hear several of the risk corridor claims has revitalized interest, and funders are now offering 25 cents on the dollar just for a piece of the backend. Most health insurers have declined funders' offers, preferring instead to take their chances with the Supreme Court's decision. Yet some funders have had luck with insolvent insurers. A prime example here is Juris Capital. The funder with the now-defunct Land of Lincoln Health, which is suing the government for $76MM. Juris had offered millions of dollars in capital in exchange for a portion of the claim proceeds, but backed away from the deal after the Court of Appeals ruling. Now that the Supreme Court is set to hear oral arguments next month, with a verdict expected for June 2020, Juris has struck a deal to fund Land of Lincoln to the tune of $28.9MM for 100% of the claim proceeds, assuming they fall under $57.7MM. Should the payout exceed that amount, Juris will receive even more on the backend. Funders are also approaching large, solvent insurance companies who may want to offload the risk of a binary Supreme Court decision. It's unclear how many such claims have been funded, but as the decision date approaches, insurers should expect their phones to continue ringing off the hook.
Commercial

Litigation Funders Spar as LPF Group Complains to ASIC About IMF Bentham

Litigation funder LPF Group is funding a shareholder class action against the now-defunct insurance company CBL Corp., as well as its former directors. LPF has complained to ASIC, an Australian regulator, about rival funder IMF Bentham's proposed action, which may end up targeting only CBL and not the former directors. As reported in the NZ Herald, IMF is set to go forward with its shareholder action against CBL with or without the liquidator's consent. According to Gavin Beardsell, investment manager at IMF Bentham, the funder believes there is enough insurance to cover any legal settlement or award, this despite not yet knowing who CBLs insurer is. For that reason, Beardsell says it is unnecessary to sue the directors of CBL. Yet LPF has 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. IMF has accused LPF of weaponizing its complaint, by taking it to the Aussie regulator. Class actions - especially shareholder claims - are extremely rare in New Zealand, with only one having made it to court thus far.
Commercial

Burford Targets Gender Inequity in Law with Equity Project

Burford Capital's Equity Project turned one year old last month. The initiative - launched by senior managing director Aviva Will - is aimed at incentivizing female lawyers to take greater risks. The mechanism for accomplishing this is a $50MM fund that can only be used for claims where a female attorney is first-chair, plaintiffs’ lead counsel or on a plaintiffs’ steering committee, or if the claimant is represented by a female-owned law firm. As reported in Bloomberg, The Equity Project has funded numerous cases over the last 12 months, many which surpassed Will's expectations in terms of case valuation. She initially thought the funding would go to smaller claims - those worth $2MM or less. However, the size of The Equity Project's cases has been comparable to those of the broader pool of cases that Burford funds. Will acknowledges that The Equity Project isn't going to flatten the gender inequity gap overnight, however she views her initiative as sowing the seeds of future generations of female leaders in Big Law. The project's long-term goal is to steer more women into equity partnerships and onto compensation committees at law firms. By helping women originate more claims and (hopefully) generate more revenue, The Equity Project will contribute to a cultural shift in law firms over time.
The LFJ Podcast
Hosted By Laina Hammond |
On this episode, we speak with Laina Miller Hammond of Validity Finance. Laina recently conducted research into the gender pay gap that exists for lawyers. She discusses its root causes, how female lawyers can maneuver within the current system to achieve greater pay equity, and how litigation finance can be leveraged to achieve that very goal. [podcast_episode episode="4743" content="title,player,details"]
Announcements Commercial

$2.3 Billion of Capital Deployed Over 12-Month Period Across U.S. Commercial Litigation Finance Industry, According to First-of-Its-Kind Study

November 19, 2019—NASHVILLE— The first-ever detailed analysis of the U.S. commercial litigation finance industry places its size at $2.3 billion, leading U.S. litigation finance advisor, Westfleet Advisors, reported today in its inaugural Westfleet Advisors Litigation Finance Buyer’s Guide. Driven by data collected directly from litigation funders, the Guide represents the first reliable calculation of the size of the U.S. litigation finance industry and offers the most complete and revealing picture ever painted of the sector. This study includes data on the size, scope and focus of U.S. commercial litigation finance, as well as detailed profiles of many of the 41 litigation funders active in the space.

Litigation finance has remained to many—including the corporate legal departments that are its customer base—a market shrouded in mystery but filled with tremendous opportunity for users and funders alike. Through its canvassing of individual providers, Westfleet Advisors was able to “pull back the curtain” on the industry, finding that financiers have $9.5 billion of capital dedicated to financing commercial litigation in the U.S. During the 12-months from July 1, 2018 to June 30, 2019, $2.3 billion was committed to commercial litigation finance transactions in the U.S. market, quite possibly indicative of a current oversupply of capital. “[T]hese industry dynamics create favorable conditions for those potential users of litigation finance who can successfully navigate the market,” the guide concludes.

“Despite all the industry’s advances and virtues, litigation finance remains mostly opaque to its potential users, to the courts, and to other stakeholders in the civil litigation system,” said Charles Agee, founder of Westfleet Advisors and co-author of the buyer’s guide. “The industry will benefit from a broader understanding of its many benefits and from greater transparency generally. This has long been among our core objectives, and we are hopeful that this guide represents an important step in that direction.”

The guide includes one-page snapshots of major litigation financiers, identifying their preferred financing ranges, assets under management (AUM), financing criteria, and key personnel, among other information. Funders included in the guide vary from those with AUM in excess of a billion (including Bentham IMF and Therium), to those with hundreds of millions in AUM (like Validity, Parabellum, and Curiam), to small boutiques with less than $10 million under management.

Additional significant findings from the guide include:

  • The commercial litigation finance industry employs nearly 300 people in the U.S.;
  • Portfolio deals with law firms make up 47% of capital deployed; and
  • 70% of financing supports litigation being handled by law firms outside the AmLaw 200.

The full report is available at this link.

About Westfleet Advisors

Westfleet Advisors is the leading litigation finance advisor in the United States. It was founded in 2013 to bring greater transparency and efficiency to the litigation finance market by equipping users of litigation financing with expertise and resources. Our core mission is to ensure claim holders and lawyers have all the information they need to be successful with litigation financing. Our senior leadership has been active in the litigation finance industry since 1998.

Announcements Consumer

Segue Cloud Services Names Kevin Flood as Chief Operating Officer

Woodstock, NY—November 18, 2019, — Segue Cloud Services, a leading provider of cloud-based litigation finance management tools for the legal community, announced that it has appointed Kevin Flood, a proven business leader and former executive with the Coca-Cola Bottling System, as its new Chief Operating Officer. Flood will design and implement Segue Cloud Services’ ongoing business strategy, delivering both short- and long-term growth plans to build a robust organization serving attorneys and law firms across the United States. Flood has a proven track record of leading complex organizations and consistently delivering positive results. He served in several executive positions at Coca-Cola for more than two decades, including General Manager of Southern California, Vice President of Sales and Operations for the West Region, and Vice President of the New York Market Unit. In his capacity at Segue, Flood will work closely with the organization’s leadership team as the company expands its geographic and services footprint. “Kevin’s extensive experience as a driven, effective leader brings a new level of creativity and expertise to our operations,” said Jerry Fastman, Chief Executive Officer at Segue Cloud Services. “We’re excited to have him on board, and look forward to his contributions as Segue continues to reimagine technologies that serve the pre-settlement funding sector.” “I’m delighted to join the accomplished and dedicated leadership team at Segue,” said Flood. “The company is delivering a comprehensive platform that automates the entire pre-settlement funding process, allowing employees to focus on serving their clients instead of handling cumbersome administrative chores. I look forward to contributing to Segue’s growth as it continues to gain traction in the legal sector.” Headquartered in Woodstock, New York, Segue Cloud Services has developed an innovative software platform that has successfully operated a pre-settlement company since 2015. This software automates a full range of tasks associated with the pre-settlement funding process, from intake to settlement. Built on the popular Salesforce.com platform, Segue’s solution is secure, efficient, and effective. The software organizes and centralizes all contact information, populates forms, generates reports and documents, and notifies all parties by automating status changes, contract generation, and pay-off letters. Through this intuitive solution, legal finance providers can enhance productivity, streamline daily workflows, reduce costs, and speed time-to-market. About Segue Cloud Services Headquartered in Woodstock, New York, Segue Cloud Services provides cloud-based technology that automates all aspects of pre-settlement funding, from intake to settlement. Built on the Salesforce.com platform, Segue’s robust, customizable software tracks the progress of all funding requests, including the intake of forms, and automatically notifies staff, attorneys, paralegals and clients of status changes. Segue is integrated with Conga’s document management system, enabling customers to seamlessly create documents and generate reports. For additional information, visit www.seguecloudservices.com.
Commercial

In Bid for Greater Transparency, NAB Warn Shareholders of Mounting Legal Costs

National Australia Bank (NAB) is facing a myriad of regulatory actions and lawsuits which is leaving company executives in a lurch. After voluntarily self-reporting potential compliance issues to regulators, the bank announced to shareholders in its annual report that it is facing mounting legal and financial pressure in the wake of revelations from the Hayne Royal Commission. As reported in The Market Herald, NAB is alleged to have violated anti-money laundering and counter-terrorism financing laws. Regulator AUSTRAC hit the bank with a $700MM fine last year, and now NAB has self-reported potential compliance issues to various regulators in charge of those anti-money laundering and counter-terrorism financing laws. NAB also faces regulatory pressure from the Australian Securities and Investment Commission (ASIC), which is filing a civil claim against NAB after a report from the Royal Commission found the bank to have allegedly violated the Consumer Credit Protection Act. NAB's self-reporting to regulators and announcement to shareholders can be viewed as the bank turning over a new leaf, in a bid for greater transparency. However, given the intense pressure the bank is already under, it could be too little too late.