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Commercial

Is the Trucking Insurance Industry Becoming Toxic?

Trucking companies, insurers, and employees have been having a rough couple of years. Tax law changes have cheated drivers out of their per diem, making their taxes skyrocket. Insurance rates climb ever higher as large payouts cripple insurers. Some have placed the blame on Litigation Finance, claiming that enabling plaintiffs has had a negative impact on insurers. But is that fair? Fleet Owner reports that higher insurance prices show no sign of slowing. Mehdi Arradizadeh explains that insurance rates for trucking companies are typically determined by looking at accident prevention, mitigating risk, and an evaluation of safety within the company culture. Other factors, like geography, can come into play with some areas being worse for insurers than others. Now, insurers fear that any claim could quickly become a multi-million-dollar settlement or verdict. Arradizadeh went on to stoke fears that insurers might not even insure trucking companies anymore if they have to keep paying out. He claims that plaintiff-side lawyers are disregarding reasonable liability in favor of seeking a high payout by generating anger and fear from jurists. Some have suggested that Litigation Finance exacerbates this. But what reputable funder is going to bankroll a case without merit? One might be tempted to suggest that insurers worried about payouts should take that up with their underwriters rather than with those who seek to increase access to justice. Underwriter Chris Mikolay explains that proper use of algorithms and research should prevent insurers from overpromising in a policy. He points out that “problems” are really just disguised opportunities, and that insurers simply need to find ways to outsmart the market—perhaps by avoiding claims rather than complaining that the payouts are untenably large. Mikolay suggests that getting one’s house in order is the best way to avoid high settlement amounts.
Commercial

Litigation Funding Comes to the Rescue of Prairie Mining in Case Against Poland

Is the country of Poland in violation of the Energy Charter Treaty or the Australia-Poland Bilateral Investment Treaty? That’s the question being asked in a case brought by Prairie Mining. A notice of dispute was served in February of last year along with a formal request to seek a resolution. Sharecast reports that Prairie Mining and Litigation Capital Management have entered into a funding agreement. LCM, a London-listed firm, explains that the money will be used in pursuit of damages claims, and to cover operational expenses while the case plays out.   It’s rare that even a large company like Prairie Mining could take on an entire government without financial help. A funding arrangement with LCM provides enough money to get through the case—but there’s more. Securing the full legal budget from an experienced entity like LCM lends legitimacy to the claim. LCM is confident that the case will end with them recouping their investment and then some.
Announcements Commercial

District Court in Poznań, Poland rejects Mariusz Świtalski’s request to lift injunction

CHICAGO, Illinois, June 30, 2020 -- Forteam Investments Ltd., an investment company controlled by the American private equity firm Delta Capital Partners Management LLC (“Delta”), which is seeking approximately USD $86 million from Mariusz Świtalski and companies he controls, has secured an injunction against Świtalski and his assets.

A second injunction was also obtained against Świtalski and his four children, Mateusz, Natasza, Marcin and Mikołaj in relation to their ownership in the Świtalski FIZ investment fund.

Świtalski is a Polish entrepreneur that has been named one of the richest persons in Poland by Wprost Weekly.

On June 25, 2020, a Poznań, Poland court rejected a request to lift the first injunction against Świtalski in a decision that is unappealable.

Delta’s CEO Christopher DeLise said, “This decision bodes well for the success of our legal case against Mariusz Świtalski. The court’s choice to deny Świtalski’s appeal underscores the judges’ confidence in the merits of our legal arguments. Moreover, the attempt to conceal expensive cars at the Świtalski family residence by changing their number plates ahead of our bailiff’s visit demonstrates desperate tactics to avoid fulfilling clear legal obligations. We understand that this matter with supporting evidence has been referred to the appropriate criminal prosecutor in Srem. We are also reassured by statements made last week by the Polish President and Prime Minister regarding the security and attractiveness of US investments in Poland. We are aware that this matter is being carefully observed by the American investment community.”

The two injunctions related to Forteam’s civil suits against Świtalski have been widely reported in the press, with outlets such as Gazeta Wyborcza and Puls Biznesu detailing Świtalski’s history of evading contractual obligations.

By way of background, on May 8, 2015, Forteam purchased from Czerwona Torebka, a 100% stake in Małpka, the owner of the Małpka Express chain. Forteam eventually sold its 16.18% stake in Czerwona Torebka. The parties to that transaction were aware of Małpka’s challenging situation and thus acknowledged in the agreement that additional considerable financing would be needed in order for Małpka to remain afloat.

Accordingly, Mariusz Świtalski and Sowiniec Group contractually agreed to guarantee that Forteam would make a profit from its investment when it eventually exited the business. In connection with the issuance of the guarantee in favor of Forteam, Mariusz Świtalski submitted a written declaration that his personal assets were sufficient to enable him to honor his obligations under the guarantee agreement.

Despite having engaged a well-respected independent investment bank in 2018 to run a robust sales process for it, Forteam was only able to sell Małpka Express for an amount well-below the minimum set forth in the definitive transaction documents and related guarantee agreement.

On December 28, 2018, Forteam notified Świtalski of its obligation to remit the monies owed to Forteam pursuant to the guarantee agreement. Notwithstanding, Świtalski and his companies have failed to pay any amounts due and owing to Forteam, which necessitated the filing of the injunctions and civil lawsuits.

Commercial

PFAS Pollution Case Settles, with Some Claimants Upset

An Australian case involving contamination from firefighting foam has settled with what the judge called a “fair and reasonable” amount. The class action over PFAS contamination in three Australian towns has been underway for years, involved multiple law firms and over 500 claimants. World Socialist Website explains that while the judge was pleased with the decision, many members of the class were not. Individual settlement amounts call into question whether the amount taken from the award for costs is excessive. The final settlement amount was $212 million. From that figure, litigation funder Omni Bridgeway will take $53.1 million in profits plus nearly a million more for costs. Lawyers will get just over $30 million, and a further $2 million will be taken for administration. Does taking nearly one-quarter of the settlement in exchange for providing funding seem fair? Legal minds may disagree, but the truth is, that without litigation funding, the case would probably not have moved forward at all. Most ordinary citizens or even small business owners lack the resources needed to sue the federal government. Still, it’s easy to see why there were objections to the settlement—75 of them all told. One farmer who reported a $2 million loss will receive a mere $152,000. Another lost $200,000 and will receive less than $33,000. Those who objected to the settlement determined that the money offered wouldn’t come close to covering their actual losses. The offer presumed a figure of 21.5% property devaluation. Many residents though, were shown to have suffered much larger losses than that. The judge accepted the settlement, saying that a trial might still end with a loss and would take years to resolve. Meanwhile, PFAS chemicals are still found in sites all over Australia.
Commercial

Scottish Courts Feeling the Dearth of Litigation Funders

Scotland, like much of the world, is bracing for a spike in litigation related to the Coronavirus. Business closures, insurance disputes, non-payment of rent, and other common types of litigation are expected to rise at least three-fold. Once courts are up and running again, the backlog of cases and filings is expected to take 1-3 years to completely clear. The Scotsman reports that Scottish courts were already struggling to keep up with cases before COVID-19 reared its ugly head. Between 2017-18, Scotland saw a staggering 81,000 cases. With the impending increase in cases, it’s expected that there will be a shortage of courtrooms, judges, available attorneys, and litigation funders. Unfortunately, opportunities to acquire litigation funding in Scotland are limited. Unlike places like the US, UK, and much of Asia—Scotland has been slow to get onboard with litigation funding. That may change as investors get wise to diversification opportunities and lack of correlation that litigation finance provides as an investment. By providing funds to plaintiffs for legal fees, expert witnesses, and other essentials during a case, litigation funders provide increased access to justice. By carefully vetting the cases they take on, funders also ensure that courts are not overburdened by frivolous litigation. It’s a win for plaintiffs and for the community at large.  
Commercial

What You Should Know Before Investing in Litigation Finance

Litigation is more popular than it’s ever been. With a predicted spike in litigation just around the corner, plenty of investors are wondering whether or not they should get involved. This rapidly growing industry has gone from just six dedicated lit fin firms in 2008, to over 40 commercial litigation funding entities as of last year. Together, they manage assets of nearly $10 billion. CNBC explains that the potential to invest in the Litigation Finance industry also comes with important caveats. First of all, litigation funding is an opportunity generally extended to accredited investors. Accredited investors must have a net worth of at least $1 million, and an annual income of at least four times the national average—so the current threshold is $200,000 per year. Litigation finance firms employ a team of attorneys to vet cases and determine which are strong investments. This includes the merits of the case, the size of the potential award, and the likelihood of recovery. In commercial cases, litigation funding often helps pay for expert witnesses, and the research involved in complex patent or IP law. In other instances, funding helps plaintiffs hire more and better attorneys than they could otherwise afford.   Litigation funding is an attractive investment because it’s not impacted by the rest of the market. The drawback is that funders get paid only when a case is successful, and the award collected. This is why investors might prefer to diversify into a portfolio of litigation rather than investing on an individual case basis. Portfolio investments can carry steep minimums, but this is a net gain, as investors can invest in a fund that is diversified among multiple other investors, thus lowering risk overall. Once the risks are fully comprehended, Litigation Finance remains an attractive option for investors.
Commercial

John Garda Makes the Switch from Litigator to Litigation Funder

Last year, former law firm managing partner John Garda was recruited by Longford Capital to head up their new Dallas office. This includes underwriting in addition to investment sourcing and monitoring. With more than 25 years of litigation experience, his expertise includes complex commercial and securities litigation, investment banking disputes, real estate, and construction disputes, healthcare contracts, and more. Above the Law writer Gaston Kroub talks to Garda about his passion for Litigation Finance. When asked why he made the decision to move from litigation to lit funding, Garda had much to say. Garda’s introduction to Litigation Finance came when Longford Capital involved his then-firm, K&L Gates, to help vet potential investments. Garda was impressed by Longford's two-stage diligence policy. This means Garda has been involved with Longford Capital since they started funding cases way back in 2013. Longford, of course, has been growing by leaps and bounds since. Due diligence in vetting cases can be a difficult issue for any funder. Firms approach these efforts in myriad ways, with varying degrees of success. Longford uses both internal and external resources when determining the merits of a case and its suitability for funding. This ensures investors that their investment is safe, and assures parties involved in cases that they’re receiving careful attention. Due diligence can give funders a huge competitive advantage in acquiring funding and new clients. When Longford Capital announced that they’d be opening a Dallas office, it made sense to hire someone who was experienced in the finer points of litigation funding. And Garda’s belief in the ability of third-party funding to increase access to justice had already been illustrated through his work with the firm. Garda explains that the opportunity to combine his passions was simply too good to pass up. Fortunately, he also believes Longford to have the best management team in the lit fin industry.
Commercial

Is Litigation Finance a Viable Option in Bankruptcy Cases?

Bankruptcy cases are expected to increase in the coming months, as companies struggle to recover from pandemic-related losses. It’s been reported that firms across the world are looking desperately to hire more bankruptcy lawyers to help handle the expected flood in new cases. Above the Law explains that bankruptcy law is another field that could benefit from increased use of litigation funding. For creditors and debtors alike, third-party funding can increase the value of claims, improve chances of recovery, and help keep expenses off the balance sheet. Small or medium-sized businesses in financial distress can use litigation to cover the costs of bringing a claim. Litigation and recovery take time, which is often in short supply when companies are already struggling. DIP financing cases are also well-placed to make use of litigation funding. Sometimes an estate’s pending litigation claims are its most valuable asset. Lit funding can keep a troubled company on its feet until it can be sold—thereby creating more profit than a simple liquidation. In some cases, utilizing a litigation funder makes more sense than investments from the involved parties—if only because experienced funders can better evaluate risks and may even offer funds at lower rates. Litigation assets can also be sold in the event of a bankruptcy, just like any other asset being liquidated. The value of a litigation claim may be more difficult to determine than traditional assets. Selling off litigation claims can reduce financial pressure on the rest of the estate. The same applies to liquidation trusts—which can take years to complete. Litigation funding can make more sense than traditional contingency arrangements with a law firm. We’re about to see a massive increase in bankruptcy filings. Businesses will scramble to restructure while creditors look to recover losses. Regardless of how the chips fall—litigation funding may be able to help.
Announcements Commercial

Validity Finance Welcomes University of Chicago Law Student for 2020 Equal Access Fellowship

NEW YORK (June 24, 2020) – Leading litigation funder Validity Finance has selected University of Chicago Law School law student Amber S. Stewart for its 2020 Equal Access Fellowship. The program, launched last year, provides a 10-week paid summer fellowship to first-year law students of diverse backgrounds to spend the first half of their summer at Validity learning the basic principles of litigation funding before spending the second half working at the non-profit of their choice. Validity is one of the only funders to provide such a program for first-year law students.

Validity elected to maintain its full 10-week summer program, notwithstanding the logistical difficulties presented by the COVID-19 pandemic. Ms. Stewart will work with the team at Validity for the first five weeks of her fellowship, beginning mid-July. She will assist in analyzing potential case investments, participating in meetings with claimants and lawyers, drafting articles and conducting legal research on topics related to litigation and dispute funding. Like the rest of the Validity team, she expects to be working remotely during these five weeks. For the second part of her fellowship Ms. Stewart has elected to work at the Corporate Accountability Lab, a Chicago-based international human rights organization that develops legal tools for holding corporations accountable when they commit human rights and environmental violations. “We’re looking forward to having Amber join us this summer as our 2020 Equal Access Fellow,” said Validity founder and CEO Ralph Sutton. “Despite constraints the pandemic has placed on businesses across the country, we’re happy to convene our program for a second year. Our team is enthusiastic about working closely with Amber, who has a remarkable academic resumé and background.” A Florida native, Ms. Stewart had stiff competition from over three dozen applicants from top-tier U.S. law schools. Candidates were asked to submit academic transcripts, and submit essays addressing their interest in litigation funding and describing how they have overcome personal challenges. As a rising 2L, Ms. Stewart is part of the University of Chicago Law School’s Doctoroff Business Leadership Program — a certificate-granting track for high-achieving students that blends an MBA curriculum into a three-year law school degree. She is also Vice President of the school’s Black Law Students Association (Earl B. Dickerson Chapter). Ms. Stewart obtained an A.B. in Art History and Gender & Sexuality Studies from Princeton University in 2015. “I was motivated to apply for the fellowship program in part because of Validity’s mission of making the civil justice system more accessible and equitable, which especially resonated with me,” said Ms. Stewart. “I’m hoping the summer will help me better understand the economic and business case for litigation funding, and what kinds of disputes can best benefit from third-party finance solutions.” Equal Access Fellows work an initial five weeks at Validity and have the option of spending the balance of the summer at the firm or a public service organization of their choice. Validity pays the fellows’ salary for the entire 10-week program. Last year's inaugural fellows, Jarrett Lewis and Amanda Gonzalez Burton, remain in touch with the Validity Finance team, and will be connecting with Ms. Stewart as part of her orientation. Mr. Lewis is a rising 3L at Georgetown University Law School and managing editor of operations for the Georgetown Journal of Legal Ethics; he will be participating in Debevoise & Plimpton LLP’s summer associate program. Ms. Burton, a rising 3L at the NYU School of Law, will be summering at Cooley LLP. For more on last year’s fellows, visit: https://validity-finance.com/news/summer_fellowship_2019/ Mr. Sutton commented, “As our corner of the legal profession continues to evolve, we want to draw new entrants from diverse communities, who can bring important perspective on disparities in access to justice. Our fellowship program provides law students an excellent grounding in the fundamental best practices of litigation funding and an opportunity for our team to maintain a mentoring relationship as the fellows continue their path in the legal profession.”

About Validity Validity is a commercial litigation finance company that provides businesses, law firms and individuals with non-recourse financing for a wide variety of commercial disputes. Validity was founded in 2018 with $250 million in committed capital, one of the largest first-round capital raises in the U.S. market. The firm announced an additional $50 million in committed capital in 2019. Validity believes that capital and legal expertise combine to help solve legal problems on behalf of clients. Validity’s mission is to make a meaningful difference for clients by focusing on fairness, innovation, and clarity. Validity is committed to developing a diverse and inclusive workforce in its own offices and within the legal profession as a whole. Validity embraces a broad definition of diversity, encompassing race, gender, ethnicity, disability, and LGBTQ background, as well as individuals from underrepresented social, economic, religious, and geographic backgrounds. Equal access to justice; equal access to opportunity— this is what Validity believes is fair and right. For more, visit www.validity-finance.com.