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Commercial

Burford Capital Brings Columbia Law School Study to Court in Bid to Uncover Market Manipulation

Burford Capital has commissioned a study by Joshua Mitts of Columbia Law School which found that there is indeed evidence to back the funder's claim that it was the victim of market manipulation in the wake of the Muddy Waters attack which shed 50% of the stock's valuation in a single day. Burford is presenting the study in court to compel the London Stock Exchange to release the names of the short-seller sho it says manipulated the trading. According to City A.M., Burford is accusing market manipulators of 'spoofing' and 'layering,' whereby a trader issues a heavy dose of sell order on a particular stock, then quickly cancels those orders. The idea is that the cancelled trades place downward pressure on a stock and can lead to a bear-rush - or selloff - which any short-seller will of course benefit from. Carson Block, Muddy Waters' founder, denies any allegations his firm was involved in the spoofing and layering tactics. He alleges these are tools used by high-frequency traders and computer algorithms, which he claims his firm has zero capability of facilitating. Block contends that his company's public short of Burford is what led to the stock decline, and that any spoofing or layering - if it did occur - was not his firm's doing. But Burford isn't so sure. The funder is seeking to compel the LSE to divulge the identities of the spoofers/layerers, and has petitioned the High Court for an order. The funder hasn't ruled out civil litigation and even criminal proceedings against those involved.
Commercial

Why Litigation Funding is Surging in Popularity in India

Third party funding is taking off in India, thanks in part to a robust construction and infrastructure sector that is asset and debt-heavy, yet encumbered with the prospect of litigation. As reported by CNBC, there is no statutory bar on litigation funding in India. In fact, amendments to Order XXV, Rule 1 of the Code of Civil Procedure, 1908, have established that courts have the power to secure costs from litigation funders by asking them to become a party and meeting a costs order. And The Supreme Court of India has already ruled that litigation funding does not violate the age-old tort of champerty. Recently, large conglomerates in the infrastructure and EPC sector have been engaging with third party funders. Distressed debt is a major factor for these companies, as is a recent court ruling which makes it easier for creditors to pursue defaulters in insolvency litigation once they have secured an adverse court/arbitration order. This ruling is forcing EPC companies to try to resolve litigation much sooner than they otherwise would, and that is prompting their inviting litigation funders into the mix. Hindustan Construction Company Limited and Patel Engineering Limited are two prime examples. Both are pursuing claims against government-backed entities, so there is the added security that the defendants are solvent and credit-worthy and will eventually fulfill any payment obligation. In each of these examples, the litigants have structured their funding agreements as assignments of the claims themselves to the litigation funder. It's worth noting, however, that the funders in these cases are investment firms BlackRock and Eight Capital. We have yet to see how dedicated litigation funders may structure an agreement or partake in the Indian funding market. That said, the very fact that funding is taking off in India makes the world's second most populous nation one to watch where litigation funding is concerned.
Commercial

Southern Response Wants to Avoid Paying Claims Funding Australia in Settlement

New Zealand government insurer Southern Response wants to eschew a Court of Appeals order that  a portion of its settlement go to litigation funder Claims Funding Australia. Maurice Blackburn and Claims Funding took over representation for 3,000 claimants after a New Zealand court allowed an opt-out class action for only the second time in history. Southern Response is weighing an appeal to the decision, preferring to deal with the claimant pool directly. As reported in Share Chat, in 2012, Southern Response took over claims on policies written by failed insurance company AMI. The court allowed some 3,000 claimants to engage in an opt-out action, thereby including all potential claimants in the action unless they specifically opt out. The claim is being funded by Claims Funding Australia, and Southern Response is challenging the funder's ability to collect on its portion of any settlement in the case. Currently, the government insurer is dealing with a separate action - also in the Court of Appeal - and wants to address this action once the other has concluded. Maurice Blackburn and GCA lawyers - both representing the claimant pool - have said they plan to negotiate with Southern Response, but are taking the position that the insurer has no business eschewing the opt-out order from the court.
Commercial

Security Costs Ordered in Harbour-Funded Feltex Claim

Defunct New Zealand firm Felted Carpets - which collapsed just two years after its IPO - is being sued on behalf of over 3,000 investors. Harbour Litigation Funding had funded the claim up through 2015, with 'Stage 2 Funding' coming from a group of investors including Joint Action Funding. Now, the Supreme Court has ordered a $1.65MM security for costs order, which the plaintiffs are contesting. As reported in Share Chat, former Fay Richwhite banker Tony Gavigan, who is organizing the funding, has contested the need to pay security for costs. Gavigan also claims insurance is on the way - though none has been procured as of yet. Gavigan claims that his Stage 2 Funding is coming from a quintet of Auckland businessmen. The claim, meanwhile is headed for the Court of Appeal next month in regard to witness testimony. Gavigan wants more time to secure both funding and insurance, even through the claim is more than a decade old, and Feltex collapsed nearly 14 years ago.
Commercial

With Nod to Burford, Rosenblatt Clarifies Accounting for Litigation Funding Arm

UK law firm Rosenblatt announced the formation of a litigation funding arm when the firm went public last year. Now, in the firm's half-year report, CEO Nicola Foulston announced that Rosenblatt will be treating all un-concluded claims as costs, eschewing any potential concern over its accounting methodology. As reported in the Financial Times, Rosenblatt's announcement comes on the heels of the Muddy Waters allegations against Burford Capital. The core allegation is that Burford inflates its balance sheet by accounting for profits from cases that haven't been concluded yet. Foulston said her company will only account revenue/earnings from concluded claims, and not those that reach certain benchmarks and achieve a likely probability of payout. Both Rosenblatt and Burford adhere to IFRS 9 accounting standards, but those standards allow for some wiggle room when it comes to investment valuation. Burford's accounting is audited by Big-4 accounting firm EY, but that hasn't stopped some in the investment community from questioning its use of fair value accounting for inherently risky financial products. Clearly, Rosenblatt is distancing its own accounting practices from those of Burford. In the six months ending June 30th, Rosenblatt realized £10.2MM in firm revenue and £3.2MM in pre-tax profit. The company has invested £1.5MM in four claims, none of which have concluded yet. The firm also sold off its stake in a separate claim as a secondary for £2MM.
Commercial

Harvard Law Tackles Litigation Finance

The latest issue of Harvard Law School's Center on the Legal Profession's 'The Practice' magazine features a robust examination of the litigation finance industry, including how the industry operates, who the major players are, how deals get done, and what law students should do to secure a career in legal finance. Selvyn Seidel of litigation funding broker Fulbrook Capital Management, and Elizabeth Korchin of Therium Capital Management cogently explain the diligence process, including both case examination and financial analysis. Korchin points out that her firm typically doesn't fund for anything less than $1MM, looks for a 10:1 multiple on damages/budget (which is the industry standard). Therium looks for their investment back, plus a 3x multiple. So if they finance a $10MM claim for $1MM, they'll accept a $4MM return, leaving the claimant and their law firm with the rest. Of course, there is an alignment of interests issue. If the claimant is mandated to pay out that $4MM to the funder, he or she is not going to settle for anything close to $4MM (in order to maximize his/her own return). In order to better align their interests with those of their clients, funders often tranche their funding structures, establishing benchmarks whereby their return escalates as a claim continues. That way, funders accept a smaller return for an early settlement, which better aligns all parties' interests. Should a case drag on, both the risk and cost of capital for a funder increase, so their payout ratio should as well. The article is very informative and worth a read. One interesting tidbit comes as advice to future litigation funders - those currently in law school. Seidel urges anyone seeking a career in funding to first enter the legal practice and gain expertise in a desired field - preferably one that frequently engages with funding (IP, trade secrets, insolvency). Once you've gained the requisite legal expertise and established a strong network from which you can source case investments, then consider transitioning into litigation funding.
Announcements Consumer

Multi Funding USA Earns NMLS Certification

Woodstock, NY—September 24, 2019 — Multi Funding USA, a leading pre-settlement funding provider serving law firms and attorneys, announced that it has received NMLS  (Nationwide Mortgage Licensing System and Registry) certification, indicating that the company has the financial resources and security protocols to satisfy the needs of lawyers and plaintiffs. Applying for NMLS certification is completely voluntary. Only a select group of litigation finance providers have applied and received NMLS designation. During the NMLS evaluation process, applicants undergo comprehensive business and personal background checks, financial audits, and a review of corporate documentation, including business plans, shareholder agreements, and financial statements. Applicants must also demonstrate compliance in safeguarding personal data and financial transactions. “We’re extremely proud to have earned this certification, which is certainly unique in the litigation finance sector. This designation demonstrates that our company has the financial resources, expertise, and technology to properly serve the attorneys and their clients that rely on pre-settlement funding to manage their daily living expenses,” said Michelle Fuoco, chief financial officer of Multi Funding USA. “Pursuing NMLS certification is complex, however. We felt this designation was essential to assure our customers that Multi Funding is a reliable, secure, and stable company that can fulfill all their pre-settlement funding needs.” Multi Funding USA invests in litigations for attorneys and their clients. The company has developed a system that can place funds into the hands of plaintiffs and attorneys in less than 24 hours, providing financial security in the often-lengthy pre-settlement period. About Multi Funding USA Headquartered in Woodstock, New York, Multi Funding USA is a major provider of specialized legal funding, attorney funding, and law firm funding services. With decades of lawsuit funding, business, and legal experience, the company’s founders have made it their focus to provide simple and fast services while maintaining a high standard of excellence. Multi Funding USA has provided millions of dollars of legal funding to plaintiffs and attorneys across the United States. www.multifundingusa.com
Announcements Commercial

Burford Capital briefing on fair value and return computations

In response to investor inquiries, Burford Capital Limited (“Burford Capital” or “Burford” or “the Company”), the leading global finance and investment management firm focused on law, has today uploaded to the investor relations section of its website a briefing of the Company’s investment fair value and return computations.
The document can be found at http://www.burfordcapital.com/investors.

For further information, please contact:

Burford Capital Limited
Jim Kilman, CFA, Chief Financial Officer+1 917 985 9840
Robert Bailhache, Head of Investor Relations – email+44 (0)20 3530 2023
Macquarie Capital (Europe) Limited – NOMAD and Joint Broker+44 (0)20 3037 2000
Jonny Allison
Alex Reynolds
Jefferies International Limited – Joint Broker+44 (0)20 7029 8000
Graham Davidson
Tony White
Numis Securities Limited – Joint Broker+44 (0)20 7260 1000
Charlie Farquhar
Jonathan Abbott
About Burford Capital Burford Capital is the leading global finance and investment management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the London Stock Exchange, and it works with law firms and clients around the world from its principal offices in New York, London, Chicago, Washington, Singapore and Sydney. For more information about Burford: www.burfordcapital.com This release does not constitute an offer of any Burford fund. Burford Capital Investment Management LLC (“BCIM”), which acts as the fund manager of all Burford funds, is registered as an investment adviser with the U.S. Securities and Exchange Commission. The information provided herein is for informational purposes only. Past performance is not indicative of future results. The information contained herein is not, and should not be construed as, an offer to sell or the solicitation of an offer to buy any securities (including, without limitation, interests or shares in the funds). Any such offer or solicitation may be made only by means of a final confidential Private Placement Memorandum and other offering documents.
Commercial

CFPB Determines Own Structure Unconstitutional; RD Legal Claim Likely to be Stayed

Well, how often does this happen? A government agency officially declares itself unconstitutional. That's what the Consumer Financial Protection Bureau (CFPB) just did, as director Kraninger sent letters to House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell, stating in no uncertain terms that the agency is unconstitutional given the single-director-removable-only-by-POTUS structure. According to JD Supra, the CFPB has formally agreed with its numerous critics, which have moved that its actions against them be dropped because the agency is unconstitutional. Several courts have agreed, and currently there are two appeals courts - the 5th and 2nd circuits - hearing those cases. One of those involves RD Legal, the consumer legal funder being sued by the CFPB for alleged 'predatory lending' tactics. In the letters, Kraninger suggest simply removing the for-cause-removal provision, and letting the CFPB get on with business as usual. However, it is possible the end result here is a termination of the CFPBs enforcement activities entirely. For now at least, it seems the CFPBs claim against RD Legal is going nowhere. We'll have to wait and see if the CFPB will continue to be an enforcement entity at all.