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Commercial Regulatory Issues

Government Must Protect Litigation Funding That Helped Sub-Postmasters, Say Consumer Champions and Small Businesses  

By Harry Moran |

Consumer champions and small businesses have called on the Government to introduce urgent legislation to protect the funding mechanism that helped Alan Bates expose the Post Office.

Litigation funding is currently supporting the equal pay claims of 100,000 female supermarket workers, rugby players facing life-changing injuries, and billpayers claiming water companies lied about dumping raw sewage in the UK’s waterways. Funders provide financial backing for cases in exchange for an agreed share of the proceeds.

But since a 2023 Supreme Court ruling in PACCAR which sent shockwaves through the sector, uncertainty has impacted claimants and funders. Defendants have mounted a series of legal challenges to funding arrangements with Apple, Sony and Mastercard all set to challenge current funding models in the Court of Appeal next year. Additionally, there was a 75% slowdown in cases funded in the second half of last year, according to Exton Advisors which is an independent specialist adviser to claimants, funders and law firms.

In an open letter to the Government, class representatives for millions of consumers and the truck hauliers involved in the original PACCAR claim against a price-fixing cartel, said the PACCAR ruling “jeopardises past, present and future funding agreements, and is threatening access to justice for individuals and businesses”.

A bill to fix the issue had won cross-party support in the previous Parliament, but had not passed into law before Parliament was dissolved. The new Government has said it will not review the need for legislation until late next year.  

Signatories of the open letter said: “While there has previously been cross-party support for a simple and speedy legislative fix, the Government is dragging its heels on addressing the issue. Until this issue is resolved, uncertainty for claimants will persist.  

“We call on the Prime Minister - who spent his legal career securing justice for those who needed it - to urgently introduce a simple legal fix to ensure David can afford to take on Goliath and access to justice is preserved for those seeking to protect their basic rights.”

Neil Purslow, chairman of the International Legal Finance Association and chief investment officer at funder Therium which backed the sub-postmasters’ case, said:

“Litigation funding provides a narrow route to justice for businesses and individuals - many of whom are trying to protect their basic rights.

“We hope the Government hears these concerns, understands the real impact this is having on claimants and brings forward an urgent fix so people like the sub-postmasters can continue to access and secure justice in the future.”

Notes

Professor Carolyn Roberts vs Thames Water, Severn Trent, Anglian Water and Others

  •  A collective action against six UK water companies for alleged overcharging due to underreporting of sewage pollution incidents between 2017-2020.

Alex Neill, Class Representative, vs Sony Playstation

  • A £5bn collective action alleging Sony abused its dominant position by imposing unfair terms on PlayStation game developers, resulting in excessive prices for consumers.

Nikki Stopford, Class Representative, vs Google and Others

  • A £7bn collective action alleging Google abused its dominant position in the search engine market, resulting in inflated advertising costs and higher prices for consumers.

Clare Spottiswoode, Class Representative, vs Nexans France SAS & Others

  • A collective action alleging that cable manufacturers' cartel activities led to inflated domestic electricity prices in Great Britain. 

Richard Smith, Chairman of Road Hauliers Association, vs PACCAR and Others

  • A £2bn opt-in class action against major truck manufacturers for their involvement in a price-fixing cartel that allegedly inflated vehicle prices between 1997 and 2011.

Open letter from claimants and class reps

Over the years, litigation funding has helped to remedy some of the worst miscarriages of justice in legal history. It has levelled the playing field for individuals and small businesses, as well as exposing corporate wrongdoing on a colossal scale - from the Post Office Horizon scandal to Dieselgate. 

Today the sector is financially backing attempts to secure people’s basic rights — supporting equal pay claims for over 100,000 women, helping sportspeople receive compensation for life-changing injuries, and holding water companies to account for dumping sewage in our waterways.

But the recent Supreme Court’s PACCAR ruling now jeopardizes past, present and future funding agreements, and is threatening access to justice for individuals and businesses. 

While there has previously been cross-party support for a simple and speedy legislative fix, the Government is dragging its heels on addressing the issue. Until that fix is put in place, uncertainty for claimants will persist.  

We call on the Prime Minister - who spent his legal career securing justice for those who needed it - to urgently introduce a simple legal fix to ensure David can afford to take on Goliath and access to justice is preserved for those seeking to protect their basic rights.

Signed

Richard Smith, Chairman of Road Hauliers Association, vs PACCAR and Others
Professor Carolyn Roberts vs Thames Water, Severn Trent, Anglian Water and Others
Alex Neill, Class Representative, vs Sony Playstation
Nikki Stopford, Class Representative, vs Google and Others
Clare Spottiswoode, Class Representative, vs Nexans France SAS & Others

The LFJ Podcast
Hosted By John Freund |

In this episode, we sat down with Louisa Klouda, CEO of Fenchurch Legal. Fenchurch is a specialist litigation funder providing finance to UK law firms to fund small ticket claims which are insured by an ATE insurance policy.

Announcements Commercial Regulatory Issues

More Than 100 Companies Sign Letter Urging Third-Party Litigation Funding Disclosure Rule for Federal Courts Ahead of October Judicial Rules Meeting

By Harry Moran |

In the most significant demonstration of concern for secretive third-party litigation funding (TPLF) to date, 124 companies, including industry leaders in healthcare, technology, financial services, insurance, energy, transportation, automotive and other sectors today sent a letter to the Advisory Committee on Civil Rules urging creation of a new rule that would require a uniform process for the disclosure of TPLF in federal cases nationwide. The Advisory Committee on Civil Rules will meet on October 10 and plans to discuss whether to move ahead with the development of a new rule addressing TPLF.

The letter, organized by Lawyers for Civil Justice (LCJ), comes at a time when TPLF has grown into a 15 billion dollar industry and invests funding in an increasing number of cases which, in turn, has triggered a growing number of requests from litigants asking courts to order the disclosure of funding agreements in their cases. The letter contends that courts are responding to these requests with a “variety of approaches and inconsistent practices [that] is creating a fragmented and incoherent procedural landscape in the federal courts.” It states that a rule is “particularly needed to supersede the misplaced reliance on ex parte conversations; ex parte communications are strongly disfavored by the Code of Conduct for U.S. Judges because they are both ineffective in educating courts and highly unfair to the parties who are excluded.”

Reflecting the growing concern with undisclosed TPLF and its impact on the justice system, LCJ and the Institute for Legal Reform (ILR) submitted a separate detailed comment letter to the Advisory Committee that also advocates for a “simple and predictable rule for TPLF disclosure.”

Alex Dahl, LCJ’s General Counsel said: “The Advisory Committee should propose a straightforward, uniform rule for TPLF disclosure. Absent such a rule, the continued uncertainty and court-endorsed secrecy of non-party funding will further unfairly skew federal civil litigation. The support from 124 companies reflects both the importance of a uniform disclosure rule and the urgent need for action.”

The corporate letter advances a number of additional reasons why TPLF disclosure is needed in federal courts:

Control: The letter argues that parties “cannot make informed decisions without knowing the stakeholders who control the litigation… and cannot understand the control features of a TPLF agreement without reading the agreement.” While many funding agreements state that the funder does not control the litigation strategy, companies are increasingly concerned that they use their growing financial leverage to exercise improper influence.

Procedural safeguards: The companies maintain that the safeguards embodied in the Federal Rules of Civil Procedure (FRCP) cannot work without disclosure of TPLF.  One example is that courts and parties today are largely unaware of and unable to address conflicts between witnesses, the court, and parties on the one hand, and non-parties on the other, when these funding agreements and the financial interests behind them remain largely secret.

Appraisal of the case: Finally, the letter reasons that the FRCP already require the disclosure of corporate insurance policies which the Advisory Committee explained in 1970 “will enable counsel for both sides to make the same realistic appraisal of the case, so that settlement and litigation strategy are based on knowledge and not speculation.” The companies maintain that this very same logic should also require the disclosure of TPLF given its growing role and impact on federal civil litigation.

Besides the corporate letter and joint comment, LCJ is intensifying its efforts to rally companies and practitioners to Ask About TPLF in their cases, and to press for a uniform federal rule to require disclosure. LCJ will be launching a new Ask About TPLF website that will serve as a hub for its new campaign later this month.

Commercial People Moves

Mesh Capital Hires Augusto Delarco to Bolster Litigation Finance Practice

By Harry Moran |

In a post on LinkedIn, Mesh Capital announced the hiring of Augusto Delarco who has joined the Brazilian firm as a Senior Associate, bringing a “solid and distinguished track record in complex litigation and innovative financial solutions” to help develop Mesh Capital’s Litigation Finance and Special Situations practices. 

The announcement highlighted the experience Delarco would bring to the team, noting that throughout his career “he has advised clients, investors, and asset managers on strategic cases and the structuring of investments involving judicial assets.”

Delarco joins Mesh Capital from Padis Mattars Lawyers where he served as an associate lawyer, having previously spent six years at Tepedino, Migliore, Berezowski and Poppa Laywers.

Mesh Capital is based out of São Paulo and specialises in special situations, legal claims and distressed assets. Within litigation finance, Mesh Capital focuses on “the acquisition, sale and structuring of legal claims, covering private, public and court-ordered credit rights.”

Case Developments Commercial

Delaware Court Denies Target’s Discovery Request for Funding Documents in Copyright Infringement Case

By Harry Moran |

A recent court opinion in a copyright infringement cases has once again demonstrated that judges are hesitant to force plaintiffs and their funders to hand over information that is not relevant to the claim at hand, as the judge denied the defendant’s discovery request for documents sent by the plaintiff to its litigation funder.

In an article on E-Discovery LLC, Michael Berman analyses a ruling handed down by Judge Stephanos Bibas in the United States District Court for the District of Delaware, in the case of Design With Friends, Inc. v. Target Corporation. Design has brought a claim of copyright infringement and breach of contract, and received funding to pursue the case from Validity Finance. As part of its defense, Target had sought documents from the funder relating to its involvement in the case, but Judge Bibas ruled that Target’s request was both “too burdensome to disclose” and was seeking “information that is attorney work product”.

Target’s broad subpoena contained five requests for information including Validity’s valuations of the lawsuit, communications between the funder and plaintiff prior to the funding agreement being signed, and information about the relationship between the two parties.

With regards to the valuations, Judge Bibas wrote that “while those documents informed an investment decision, they did so by evaluating whether a lawsuit had merit and what damages it might recover,” which in the court’s opinion constitutes “legal analysis done for a legal purpose”. He went on to say that “if the work-product doctrine did not protect these records,” then the forced disclosure of these documents “would chill lawyers from discussing a pending case frankly.”

Regarding the requests for information about the relationship between Design and Validity, Judge Bibas was clear in his opinion that these requests were disproportionately burdensome. The opinion lays out clear the clear reasoning that “Target already knows that Validity is funding the suit and that it does not need to approve a settlement”, and with this information already available “Further minutiae about Validity are hardly relevant to whether Target infringed a copyright or breached a contract years before Validity entered the picture.”The full opinion from Judge Bibas can be read here.

Commercial Deals

Burford CEO Sees Opportunities for Funding Hospital Lawsuits

By Harry Moran |

When discussing the use of litigation funding for disputes in the healthcare sector, we most often think of funders providing the financial backing for individuals or groups of patients who were victims of medical malpractice in some form. However, a statement by the leader of one of the world’s leading funders suggests that it may be hospitals themselves who could seek litigation financing.

An article in BNN Bloomberg reports on a media briefing given by Burford Capital’s CEO, Christopher Bogart, who discussed the potential opportunities for litigation funders to invest in health care lawsuits. 

Bogart said that “there is such enormous economic pressure in the health care industry that it leads to a fair bit of bad behavior and quite a significant number of disputes”, and that in this environment, “insurance companies are increasingly difficult in paying health care claims.” 

Whilst Bogart acknowledged that it is a “relatively new” trend for hospitals to access third-party legal funding, there are opportunities in situations where these hospitals can bundle individual claims into one lawsuit or arbitration to force these insurers to pay the outstanding claims. However, according to Bloomberg’s reporting, Bogart did not say whether Burford Capital has already funded this type of lawsuit brought by hospitals.

Commercial Special Features

Key Takeaways from LFJ’s Virtual Town Hall: Spotlight on Insurance

By John Freund |

On September 26th, LFJ hosted a virtual town hall titled "Spotlight on Insurance." The panel discussion featured David Kerstein (DK), Founder and Managing Director at Arcadia Finance, Michael Perich (MP), Director, Head of Litigation Insurance at Lockton Companies, Steve Jones (SJ), Managing Director, M&A, Litigation and Tax Practice at Gallagher, and Jeremy Marshall, Chief Investment Officer and Managing Director, Winward U.K. Limited. The panel was moderated by Jim Batson (JB), Chief Operating Officer at Westfleet Advisors.

Below are some key takeaways from the event:

JB: As Arcadia is a relatively new player in the litigation finance space, how has Arcadia incorporated insurance products into your underwriting and claims selection processes?

DK: As we were raising capital earlier this year, we explored using insurance to wrap a future portfolio, to potentially help drive fundraising and lower cost of capital. We weren't able to do that as a first-time manager, but it's something we'd like to explore in the future. We're currently exploring traditional insurance products like JPI, and wrapping portfolios that may be on the edge of our mandate, and wrapping them in insurance would help us get to 'yes.'

JB: So wrapping portfolios will help you look at some deals you might not otherwise consider?

DK: Exactly.

JB: Steve, can you give us an overview of the current Legal Insurance market? Especially focusing on recent developments in Capital Protection Insurance.

SJ: At the moment, I'm seeing a lot of innovation, so it seems like no two deals are the same, as there is a lot of creativity to get deals done. Very high submission rates, which probably suggests that knowledge of the products is increasing. And I see insurers and funders collaborating. It's very seldom we see funders approach portfolio deals without thinking of insurance, and capital protection insurance (CPI) is the most obvious example of that. The net result of all of that is increased choice for clients, which I think we can all agree is a good thing.

JB: Jeremy, how do you view the relationship between funders and insurers? Some have thought of insurers as competitors to litigation funders - an example is in the appeal context, where the client has the option of taking funding and de-risking immediately, or taking insurance and de-risking at conclusion of the matter. How do you see the relationship between insurers and funders evolving?

JM: I view it very much as a collaborative venture, for at least two specific reasons: One is the competition appeal tribunal (CAT) in the UK. You couldn't go into the CAT without the support of the insurers. And that morphs into the concept of co-funding, which is growing. And you wouldn't be able to do this without insurers, particularly when you've got a policy with an insurer and you're invited to participate with somebody else, it might be syndicated with more than one funder-- all the insurers are going to have positions in relation to that and you're not going to get it off the ground without the insurers involved. It really is a team effort, as cases have lots of ups and downs.

Without a good relationship with an insurer, you're not going to get off the ground. And particularly in a client-facing situation, you want insurers and funders to be speaking with the same voice, and often you'll see in points of tension where clients and law firms sometimes, will try to play the 'divide and rule game' with insurers and funders. And we need to speak with a unified voice if we can. And I think that will grow in time, where insurers will play a bigger role in both the front and back end of a transaction.

JB: Michael, from your perspective, what are you seeing as the most interesting trends in terms of the intersection of insurance and litigation funding?

MP: Litigation insurance has been in the transaction space for quite a long time. What we've been seeing lately is a substantial uptick in deal flow based on increased awareness and knowledge of the product base. Some of that deal flow are things that are not insurable (in the US market) - things like portfolios of personal injury or mass tort cases. Those won't be insurable in the US. But we're seeing more IP and antitrust cases, and more interest around building a sustainable market that involves portfolio risks and complex pieces of commercial litigation that helps make a more efficient transaction for everybody. And that's where all of the parties are getting more aligned. So over the past six months, we've been noticing a lot more collaboration and innovation lately, which is a good thing.

For the full panel discussion, please click here.

Announcements Commercial

Burford Capital Marks 15-Year Anniversary with Business Data and New Legal Finance Research

By Harry Moran |

Burford Capital, the leading global finance and asset management firm focused on law, has grown significantly since its founding in 2009. As part of ongoing recognition of the growth in legal finance and Burford’s industry leadership as it celebrates its 15th anniversary, it today shares data from its own performance and releases new research based on one-on-one phone interviews with senior lawyers at global law firms who have a front seat to growing awareness and use of legal finance by their clients and firms.

Christopher Bogart, CEO of Burford Capital, says: “Jon Molot and I started Burford 15 years ago because of economic inefficiencies we saw in the business of law. We’re delighted that our business has since grown from niche to mainstream and is now truly ‘corporate finance for law.’ From day one, our priority has been to listen to clients’ needs, and as a result, we have a suite of tools that provide liquidity, de-risk contingent matters and enable more strategic affirmative recoveries. Burford has earned a reputation as the go-to firm for legal finance, and we’re excited about the road ahead. We’ll keep our focus on clients, innovation and advancing the business of law.”

Data from Burford’s business confirms its performance as a legal finance industry leader:

  • Exceptional growth in our business: Burford began in 2009 as a $130 million fund; today, Burford has a portfolio of more than $7 billion.
  • Increased demand for what we do: In 2009, Burford committed $11 million to legal finance assets; in 2023, that number was $1.2 billion on a Group-wide basis.
  • Growing relevance to sophisticated businesses, with innovation to address corporate balance sheet and P&L needs: More than half our business now comes from corporate clients. Many seek monetizations ― where Burford provides businesses immediate capital by advancing some of the expected entitlement of a pending claim, judgment or award ― and we have committed very substantial capital over the past five years to monetization deals from $10 million to $325 million.
  • Development of human capital and proprietary data: In 2009, we had five employees; today, we have seven offices and more than 150 employees. In addition, Burford has built an industry-leading proprietary database of commercial dispute outcomes and tools that harness machine learning, data analytics and artificial intelligence to benefit our clients and our performance.
  • NYSE-listed in 2020: We have been public since 2009 and have been listed on the New York Stock Exchange since 2020.

Similarly, research released today by Burford reveals that legal finance has exploded in visibility and value with lawyers. Key findings include:

  • 82% of law firm lawyers surveyed claim to have used legal finance, a ninefold increase since Burford first asked law firm lawyers this question in 2012. Although confirmation bias may result in overstatement of actual use, even accounting for this, legal finance’s enormous increased stated use reflects its visibility and acceptance in the business of law.
  • Lawyers are using legal finance in more sophisticated ways: Many law firm lawyers affirm that legal finance is now used to strategically manage risk rather than because clients lack funds. Law firm lawyers and their clients see legal finance as a strategic tool across commercial litigation and arbitration as well as more complex financial structures like portfolio financing and funded patent divestitures.
  • An Am Law 50 law firm partner said: “For some of the bigger clients, you see more portfolio deals rather than single transactions. Not many companies start with a portfolio, but as they see success, both law firms and corporations are pursuing portfolio transactions.”
  • Law firms are embracing legal finance to fuel growth, as more than eight in ten of those surveyed report a more positive perception of legal finance than 15 years ago.
  • A Global 100 law firm partner said: “The client's mindset has completely changed, and they are now coming to their outside counsel and asking for litigation funding options. Offering the use of funding and using it is a validation of the merit of a claim and is a good pressure point.”
  • Law firm lawyers confirm that corporate clients are increasingly using legal finance, as 82% of those surveyed said the use of legal finance by corporations has increased over this period.
  • A litigation boutique partner said: “Litigation is a bottom-line cost. If corporations can spread that risk by sharing it with an outside capital provider, CFOs want to explore that option, especially because corporations hate litigation expenses. They are much more open to it if they can get some or all of it covered by legal finance.”

The research is based on one-on-one phone interviews conducted by Ari Kaplan Advisors with 44 senior lawyers from global law firms in August and September 2024. The participants included partners, department heads and practice group chairs. Of these respondents, 34% came from AmLaw 100 law firms and 30% from Global 100 law firms.

Case Developments Commercial

Funded Class Action Targeting Online Gambling Operators in the Netherlands

By Harry Moran |

The online gambling market has seen enormous growth over recent years. However, the dramatic rise of this sector has left vulnerable consumers open to abuse, with a new class action in the Netherlands seeking to address this.

An article in iGB covers a Dutch class action being brought against a group of licensed online gambling operators, who were active in the Netherlands prior to receiving their official licenses to operate. The class action is being brought by Dutch advocacy organisation, Gokverliesterug, on behalf of Dutch consumers for losses suffered with these operators prior to 1 October 2021, the date at which the Netherlands legalised its online gambling market. 

The core allegation of the class action is that these companies allowed Dutch citizens to gamble using their online platforms before the legalisation took place, meaning that these consumers were not protected by the proper oversight and regulation of problem gambling behaviours. The gambling operators named in the Gokverliesterug lawsuit include major global gaming brands such as Unibet, Bwin, PokerStars and Bet365; although iGB’s article includes a denial from Bet365 that it was active in the Netherlands prior to being licensed. 

The lawyer representing Gokverliesterug, Koen Rutten of law firm Finch, stated: “We hope for a quick settlement of the case, but thanks to a litigation funder, we have sufficient clout to conduct a lengthy procedure up to the European Court. In doing so, we have paid extra attention for the role of parties that have facilitated illegal casinos for years, such as banks and payment processors.”

The litigation funder backing the case has not been identified.