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Commercial

Is Litigation Finance the Key to Surviving an Economic Downturn?

Given that the stock market has fallen almost 20% in the last 30 days, securities claims are expected to surge. The need for increased operational funds and asset liquidity makes Litigation Finance an attractive option for companies facing such claims. Burford Capital explains that while opportunities to recover losses are plentiful—recognizing them requires an expertise not every firm is capable of. Portfolio companies that have misinformed investors may be easy to spot, but recovering those losses will require forensic follow-up, intensive research, and a keen legal mind. For asset managers, it’s essential to determine actual fraud from unlucky circumstances or simply not getting the results clients expect. If a company is not doing well financially, how much sense does it even make to sue? Asset managers must determine how long the case will take and whether the expected payout will be worth the effort. Monetizing claims, or a portion of claims, is also a good way to free up operating capital. When a firm like Burford provides monetization capital, it can only be recovered if the case is successful. This means the firm assumes the risk. Monetization can also free up funds for shareholders, or to cover unexpected expenses. Portfolio financing is also a popular solution to cash shortfalls. By funding multiple claims in an array of jurisdictions, risk is reduced for the funder while the cost is lowered for the firm. Typically, the funder provides non-recourse capital in exchange for the commitment to using that funder for all eligible claims. Under usual terms, the asset manager (along with a funding board) decides whether to pursue each claim. Litigation Finance will be key in the coming months as firms struggle with slowdowns and an influx of cases. Knowing how to use the tools at your disposal may make all the difference in the longevity of any law firm.
Commercial Covid-19

Declaratory Judgements Sought as Lawyers Prepare for COVID-19 Suits

It’s clear that insurers and policyholders are keeping a close eye on the law as it pertains to pandemics. Clauses in contracts specifically related to viral or biological agents will take center stage in new lawsuits that are sure to spring up after COVID-19 precautions have taken a heavy toll on businesses. Bloomberg Law explains that lawsuits seeking early declaratory judgements are often sought by insurers trying to determine their expected liability coverage in a given situation. In such suits, a judge determines whether or not it’s expected that an insurer should cover (or not cover) a claim. This ruling happens independently of any financial claims arising from the case. Though we’re far from opening businesses up to pre-COVID-19 levels, companies are already filing suits against their insurers. For their parts, insurers are searching frantically for escape hatches to avoid covering the myriad claims arising from COVID-19 shutdowns. Some insurers have already been pursuing the idea that business interruption policies do not cover losses related to viruses or other mass-contagions. Travelers Casualty Insurance Co of America has filed against the firm Geragos & Geragos with this argument in mind. G&G claims to welcome this case, but if Travelers wins, that may cause a ripple effect that winds up devastating policyholders relying on their policies to cover them. No doubt, all eyes will be on cases of this type.
Commercial

$350MM Claim Involving Russian Oligarchs Raises Questions

Convicted of fraud in 2007, Alexander Tugushev is now suing a former business partner. The case is being funded by 17 Arm, a firm advised by a former prosecutor and former foreign secretary, and is raising questions due to the high-profile nature of those involved, and because of the use of Litigation Finance. The Guardian reports that the plaintiff, Tugushev, was convicted of receiving a bribe—an allegation that he has consistently denied—for which he served six years. Tugushev’s assertion is that his former business partner owes him a share of their joint business, valued at $350MM. If recovered, 17 Arm would receive a significant but undisclosed portion. Given that the London case involves a man who was banned from Britain, it’s not surprising that people are paying attention. Some are also asserting that the case is an example of litigation funding inspiring litigation for the purpose of profit rather than the pursuit of justice. 17 Arm’s advisory board lends its opinion on which cases appear to be good investments based on potential recovery and likelihood of success. They defend their decision to fund Tugushev’s case despite his earlier conviction, explaining that everyone has the right to be heard in court.  
Announcements Commercial

Tribeca Capital moves into the commercial litigation funding arena

NEW YORK, April 22, 2020 /PRNewswire/ -- Tribeca Capital Group, LLC, a leading voice in the field of consumer pre-settlement funding, is pleased to announce its new initiative designed to expand its lawsuit client base to include high dollar commercial plaintiffs and the law firms who represent them. "While we began as a firm working primarily with individuals in personal injury cases, we've known for some time that as a company we wanted to head in the direction of funding bigger and more complicated cases," said Rory Donadio, Tribeca founder. "We've got the know-how and the financial resources to make that happen." Over the last ten years, the litigation funding industry has grown exponentially from its roots in consumer litigation over car accidents and medical malpractice. After those initial successes, lawsuit funding companies began financing more complex commercial litigation involving contract and compliance issues, class actions and multi-jurisdictional cases. Tribeca is poised to leverage its growth and experience as a successful investor in personal injury litigation to become a leading funder of plaintiff complex commercial lawsuits. "Litigation is expensive," says Donadio. "Those with worthy cases often find themselves literally priced out of a case because of the resources needed to finance the litigation or to keep the plaintiff solvent during a case that can last months or years." As Donadio explains, other plaintiffs settle for less than their cases are worth because they can no longer afford the time or money to continue the fight. "We help level the playing field. And, just like consumer cases, if a commercial litigant doesn't receive a monetary award, we don't get paid either." Lawsuit funding can also directly benefit the law firms, who often don't get paid until the case settles or the plaintiff wins at trial. Complex litigation can have a strong negative impact on the firm's cash flow. Litigation funding can help alleviate that pressure so that the law firm can focus on the litigation and not on whether it can make payroll. "We've put a lot of work into our platform and have been able to help a lot of people," says Donadio. "I'm proud of the work we've done, and I look forward to these new challenges and taking our experience to the next level."
Since 2016, Tribeca has invested $150M in litigation and helped hundreds of plaintiffs. If you need help funding your case, or if you are a law firm prosecuting a case of any size, consumer to complex commercial litigation, contact Rory Donadio, Tribeca Capital Group, LLC, rdonadio@tribecacapllc.com SOURCE Tribeca Capital Group, LLC
Announcements Commercial

AxiaFunder Returns 94% to Investors Through Second Commercial Litigation Case Win

LONDON, April 24, 2020 /PRNewswire/ -- AxiaFunder, the UK's first for-profit litigation funding platform, today announces its second case win, returning 93.75% to investors in just 15 months.

The breach of contract case, which was funded in February 2019, raised £12,000 to enforce an adjudication award against a property developer. The case was favourably settled following a three-party mediation.

It comes after AxiaFunder's first case win produced a 43.00% return in only eight months with no losses to date.

Cormac Leech, CEO and Founder of AxiaFunder, said: "We are pleased to announce our second case win, which has produced solid returns to our investors through an Innovative Finance ISA eligible bond which was 83% principal protected via insurance. Despite market volatility in the wake of COVID-19, litigation funding offers retail and institutional investors an opportunity to diversify their investment portfolio. Unlike equities, litigation funding is uncorrelated to financial markets and the economy, continuing to generate healthy returns to investors while many other assets classes are underperforming in the current economic climate."

AxiaFunder has a strong pipeline of vetted cases that will be launched over the coming weeks. The first of which is the relaunch of a pre-vetted case backing a 'Francovich' claim – an action seeking damages against a Member State for breaching EU law. The VAT dispute claim is being relaunched to reflect a recent unexpected strike-out application during the funding process. AxiaFunder expects a net 5.5x multiple on investor capital if the case wins at trial, which is expected in around 18 months. Risk Warning: Capital at risk and returns not guaranteed.

Despite COVID-19 and the resulting economic headwinds, AxiaFunder's latest investment opportunity – a portfolio of three commercial litigation cases – was fully funded less than 24 hours after the launch of its marketing campaign.

Leech added: "The litigation funding market is expected to grow as COVID-19 increases insolvency litigation. As the UK's first for-profit litigation funding platform, AxiaFunder is well placed to provide access to capital for many of Britain's SMEs, who would otherwise struggle to afford the cost of litigation.

"AxiaFunder takes a stringent approach to vetting cases and only invests in those that have an estimated probability of a favourable outcome for investors of at least 70%. The vast majority of cases settle before trial with AxiaFunder's investors typically getting paid before the claimant which improves returns."

AxiaFunder itself recently closed an equity round raising over £250,000 of working capital, some of which was raised through Seedrs, the equity crowdfunding platform.

To date AxiaFunder has in total raised £775,000 of litigation funding for 6 commercial cases.

About AxiaFunder

Launched in November 2018, AxiaFunder (an appointed representative Share In Ltd) which is authorised and regulated by the Financial Conduct Authority (FRN 603332) enables both retail and institutional investors to provide funding to claimants who cannot afford to pay for their legal disputes. Investors receive a return on their capital if the case wins, however should note that Capital is at risk and returns are not guaranteed.

Commercial Investor's Corner Slingshot Capital Special Features

2020 Co-Investment Survey Results

The following article is part of an ongoing column titled ‘Investor Insights.’  Brought to you by Ed Truant, founder and content manager of Slingshot Capital, ‘Investor Insights’ will provide thoughtful and engaging perspectives on all aspects of investing in litigation finance.  EXECUTIVE SUMARY
  • Survey suggests the litigation finance industry has demand for co-investment capital
  • Speed to commitment and having a fully funded commitment ranked highest in terms of co-investor characteristics
  • Most funders expect a co-investment commitment within less than 4 weeks
INVESTOR INSIGHTS
  • While investors might be attracted to co-investment opportunities, diversification is a strong component to successful long-term investing in commercial litigation finance
  • Co-investing should only be considered in the context of creating a portfolio, or to add specific exposures to an existing portfolio, but should never be viewed as a single investment
Slingshot Capital and Litigation Finance Journal recently undertook a survey of commercial litigation finance participants to obtain a deeper understanding of the extent to which there is demand for third-party co-investment capital. The survey was distributed globally, with the majority of responses coming from constituents in the USA (50%) and UK (18%) markets, or from funders that invested globally (18%).  Of the responses, 22% were from advisors/intermediaries and 78% were from funders (with the vast majority of funders having dedicated litigation finance funds). Co-Investment in Litigation Finance  Co-investment opportunities are an attractive sub-set of opportunities for many investors in a variety of asset classes, with particular appeal for private equity (buy-out, growth equity, real estate and venture capital) asset classes.  However, in the context of litigation finance, an investor needs to take a different perspective when considering co-investment opportunities. Whereas it may be perfectly acceptable for a family office, endowment or pension plan to co-invest in a specific private equity opportunity as part of their larger portfolio, the quasi-binary nature of litigation finance should make investors think twice about how they approach investing in litigation finance.  The key difference lies in the probability weighted set of outcomes accorded to each asset class. In a private equity buy-out transaction, a high number produce positive results, and the results vary across a spectrum of potential return outcomes (from 1+ X original investment, to a 5+ X original investment). In litigation finance, even though many cases settle before going to court, there tends to be two outcomes – a win or a loss.  The wins are allocated across a tighter spectrum than private equity, and the losses tend to be absolute (with exceptions).  Accordingly, due to the quasi-binary nature of the outcomes of litigation finance, co-investing should only be considered where the investors are committed to assembling a portfolio of such co-investment opportunities, and have the ability to assess the fundamental aspects of litigation finance.  Alternatively, to the extent an investor has existing investments in litigation finance, but is looking to round out his or her portfolio with specific case exposures to achieve a particular portfolio objective, co-investment opportunities may play a role in that investor’s portfolio construction approach. 2020 Co-Investment Survey results are summarized below: Demand Of the 23 respondents, 70% stated they had a need for co-investment capital, whereas 30% did not.  However, 13% indicated that the need for co-investment was occasional, and that sometimes their LPs had pre-emptive rights with respect to investing in those opportunities. Frequency In terms of frequency of co-investment opportunities, almost 50% of respondents indicated they have from 1 to 5 opportunities in a given year, with just over 20% in the 6-10 range, and a few managers indicating they had 20 such opportunities in a given year.  The number of opportunities directly correlated with the size of the funder and the size of the cases they typically finance. Co-Investor Characteristics Regarding the characteristics that are most important in a co-investment partner, speed to commitment and having a funded capital source ranked the highest, with responsiveness and understanding complex litigation also ranking highly.  However, there was not a huge disparity in terms of the importance of the six criteria listed, suggesting that all criteria were factored into their decision-making process. Keep in mind that the compilation of rankings on the chart below is an average of the six criteria, so a high number on the chart should be viewed as being more important (even though that answer drew more 1's and 2's), whereas a low number on the chart should be viewed as less important. For example, 'Speed to Commitment' and 'Having a Funding Capital Source' both received the most 1's and 2's, but their average ranking is the highest and therefore most important.  'Flexible Capital' received the most 6's, but has the lowest average score, and is therefore the least important metric. When we dive further into the ‘speed to commitment’ characteristic, we find the vast majority of respondents expect a commitment within 3-4 weeks.  It remains to be seen if expectations and reality are in alignment, a good question to include in the next survey. Expected Duration With respect to the underwritten expected duration, most fall within the 12-36 month range, which is consistent with duration expectations for the industry as a whole.  However, 30% of respondents did indicate that duration was a function of the type of case being underwritten, with certain case types (patent, international arbitration, etc.) having longer durations and appeal cases having shorter durations. Co-Investment Structuring In terms of insight into how these co-investment transactions are typically structured, the responses varied.  In the ‘other’ category, some respondents indicated they have used a variety of the choices offered, whereas one respondent stated that they received a specified interest in the profits produced by the investment. Current Co-Investors As it relates to where the current co-investment opportunities are being offered, the majority were offered to other funders, suggesting there is a fair amount of cooperation in the litigation finance marketplace.  However, within the ‘other’ category, most respondents suggested it was a combination of all of the choices listed. This brings to a close the results of our first commercial litigation finance co-investment survey.  Slingshot Capital and Litigation Finance Journal would like to thank those that participated in the survey for their time and feedback. Our next survey will cover fundraising initiatives by fund managers in the commercial litigation finance sector. We anticipate making the fundraising survey an annual survey so we can track fundraising activities over time. If you would like to participate in future surveys, please contact Ed Truant here to register your interest. Edward Truant is the founder of Slingshot Capital Inc. and an investor in the consumer and commercial litigation finance industry.
Commercial

Africa: An Untapped Growth Market for Litigation Funding?

It’s no secret that Litigation Finance is a profitable and growing industry around the world. With Australia, Asia, Europe and North America all enjoying the fruits of lit fin's labor, is it time for Africa to get in on the act? ICIG explains that there are numerous countries in Africa that have very little in the way of affordable legal aid. But since 2010, lit fin has become an attractive option for banks, insurers, equity funds, and others. Many in the Finance world recall that after the 2008 financial crisis, Litigation Finance proved to be a profitable investment. Some assert that lit fin is an excellent option for investors since it isn’t tied to the rest of the market. How should Africa respond to the expansion of Litigation Finance within its legal system? Consistency will be key in assuring that clients, funders, and legal professionals are all treated fairly and with transparency. African courts are known to be inconsistent in their application of the law, something that must be reigned in if Litigation Finance is to be taken seriously as a viable legal option for businesses, class actions, and individuals. Matters of contingency fee arrangements, and even basic contracts will need to be standardized in their coverage and enforcement to ensure that everyone is playing by the same rules. Trust and clarity between parties is an essential component of successful litigation funding. The rise of third-party funding creates opportunity for any number of businesses, investors, and law firms. Africa has an opportunity to allow Litigation Finance to increase access to justice all over the continent.
Commercial

Litigation Funding is Fueling a Contingency Fee Boom

In a typical scenario, contingency cases involve Davids v. Goliaths. That is to say, usually smaller law firms are the ones who take cases on contingency. Established firms are less likely to take cases on a contingency basis, but that may be changing—thanks in part to litigation funding. Legal Executive Institute reports that some larger firms are having success in contingent fee cases. Michigan firm Varnum specialized in defense, but has branched out into plaintiff work successfully. Now, such cases make up a significant percentage of Varnum’s litigation practice. Kirkland & Ellis, meanwhile, has the largest revenue in the legal world. The firm has announced the launch of a plaintiff-side trial group. This move certainly seems to solidify the emergence of contingent fee cases as a viable plan for large firms.  Contingency fee work is less risky for firms when they utilize third-party funding. The popularity of litigation finance is a key reason that contingency fee litigation is becoming more widely used by established firms. Freeing up capital that’s no longer needed for litigation is an attractive prospect for any firm—especially during financially unstable times.  Contingency cases can be difficult to plan for in the long-term, but long-term planning is necessary. If a firm typically focuses on billable hours, switching gears may be a disruptive change. When a firm is adept at planning and choosing contingency fee cases effectively, it can be a huge advantage both fiscally and in terms of differentiating oneself from the competition.
Announcements Commercial

Delta Capital Partners Management Announces New Senior Executive

April 20, 2020, Chicago IL--Delta Capital Partners Management LLC, a global private equity firm specializing in litigation and legal finance, today announced the hiring of a new senior executive. Martin Lueck has been hired as a Senior Managing Director to work closely with Delta’s CEO and other senior executives on deal origination, due diligence, and strategic development matters. Prior to joining Delta, Mr. Lueck was a litigator for over 35 years, spending the last 20+ years at Robins Kaplan LLP. While at Robins Kaplan representing plaintiffs, he amassed numerous eight- and nine-figure trial victories as lead counsel against Fortune 500 defendants. Mr. Lueck was also a dominant force on the Management Committee while at Robins Kaplan, where he evaluated, modified, approved, or rejected the firm’s contingent, incentive and alternative fee arrangements. Mr. Lueck was Chairman of the Executive Board from 2008 to 2019. His experience lends immeasurable insight into the factors that best predict successful outcomes, as well as pragmatic strategies that lead to consistent returns. As a result of his notable trial success, Mr. Lueck was named one of the Nation’s Top-10 trial lawyers by the National Law Journal in 2004 and is a fellow in the International Academy of Trial Lawyers, which is limited to 500 US trial attorneys, and the American College of Trial Lawyers. Christopher DeLise, Delta’s Founder, CEO and CO-CIO, stated, “We are honored to have someone with Marty’s talent and experience joining Delta’s senior management team as he will enable Delta take the next step in its evolution. His experience as a top-tier litigator and his management of his former firm’s contingency fee engagements are extremely complementary to Delta’s litigation finance business and enhance our ongoing commitment to provide unparalleled service to claimants, law firms, professional service providers, and other end-users of litigation and legal finance around the world.” Mr. Lueck joins Delta as the firm continues to expand to meet the growing liquidity and other financing needs of law firms, businesses, private investment funds, and individual claimants affected by recent macroeconomic developments, including those resulting from the COVID-19 pandemic. Demand for Delta’s proprietary liquidity solutions (DLS), including those involving litigation-collateralized loans (LCLs), term loans and draw-down facilities, has skyrocketed over the past month. About Delta Delta Capital Partners Management LLC is a US-based global private equity firm specializing in litigation and legal finance, judgment enforcement, asset recovery, and related strategies serving claimants, businesses, private investment funds, law firm and other professional service firms across the world. The firm provides capital and expertise that enables such parties to shift risk, significantly enhance the probability of a successful and timely resolution of claims, and/or maximize the effectiveness of their businesses.