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Commercial Funder's Corner Special Features

Upholding the Duty of Client Confidentiality During the Funding Process

By Jeff Manley |
The following article was contributed by Jeff Manley, Chief Operating Officer of Armadillo Litigation Funding.  In the competitive landscape of litigation, the strategic use of litigation financing has become a vital tool for law firms to manage cash flow, mitigate risk, and level the playing field. However, the infusion of external capital into the legal process brings forth intricate ethical considerations, particularly concerning client confidentiality. The Imperative of Confidentiality At the heart of the attorney-client relationship lies the paramount duty of confidentiality, a cornerstone enshrined in the American Bar Association (ABA) Model Rules of Professional Conduct Rule 1.6. The Rule obligates attorneys to not reveal information related to the representation of a client without the client's informed consent or unless the disclosure is otherwise permitted by the Rules. This duty persists beyond the attorney-client relationship and extends to all members of a law firm. Ethical Complexities in Litigation Financing Litigation financing requires attorneys to navigate a delicate balance: providing sufficient information to secure funding while safeguarding the sanctity of client confidences. The process typically involves disclosing case merits, potential outcomes, and strategies—details that, if not handled correctly, could jeopardize client confidentiality. Crafting the Safeguards Non-Disclosure Agreements (NDAs): Prior to any discussion, law firms must insist on stringent NDAs with financing entities. These NDAs must be tailored to explicitly protect any information that may relate to a client's case. De-identification of Data: Information shared during the funding process should be stripped of any identifiers that can link it to a specific client. This step ensures that financiers can evaluate the investment on its merits without risking a breach of confidentiality. Use of Aggregated Data: Where possible, firms should rely on aggregated statistics and data analytics that provide an overview of the firm’s track record and the types of cases they handle, rather than details of individual cases. Informed Consent: In scenarios where the disclosure of identifiable information is unavoidable, the law firm must obtain explicit, informed consent from the client. This consent should be thorough, documenting the specific information to be disclosed, the purpose of the disclosure, and the parties to whom it will be disclosed. The ethical obligations surrounding confidentiality are not mere guidelines but are anchored in legal and regulatory frameworks that govern the practice of law. Violations can lead to disciplinary actions by state bar associations, potential disqualification from cases, and even civil liability. Continuous Ethical Vigilance  The journey towards ethical compliance in litigation financing is not one that a law firm undertakes alone. It is a collaborative endeavor that greatly benefits from the engagement of a respected and knowledgeable funding partner. Such a partner brings to the table a deep understanding of the legal landscape and the specific nuances of confidentiality laws that govern attorney conduct. Selecting the Right Partner: A reputable litigation finance partner will have stringent ethical standards in place and will be well-versed in the ABA Model Rules, state bar directives, and relevant case law. This expertise is invaluable in helping to structure financing agreements that are not only beneficial but also fully compliant with legal ethics. Joint Compliance Efforts: A trusted funding partner contributes to the law firm's efforts by engaging in joint compliance checks and due diligence. They will proactively work with the firm to ensure that all shared information adheres to the principles of confidentiality and that any potential ethical pitfalls are identified and mitigated early on. The landscape of legal ethics is not static; it evolves with new rulings and regulations. A knowledgeable funding partner remains abreast of these changes and works alongside the law firm to adapt practices and agreements accordingly. This dynamic approach ensures that the firm's operations remain compliant over time. In the intricate process of litigation finance, a law firm's dedication to maintaining confidentiality must be matched by the acumen of its financial allies. The right funding partner does not merely provide capital; they contribute to the ethical fortitude of the funding process. Through continuous vigilance and a partnership grounded in mutual respect for the law, firms can navigate the complexities of litigation financing while upholding the sacred duty of client confidentiality.
Announcements Commercial People Moves

Dane Lund Joins Juris Capital as Managing Director

Juris Capital, an investment manager specializing in innovative financial solutions for commercial litigants and law firms, is delighted to announce that Dane Lund has joined as a Managing Director. As Juris begins to expand its offerings of tailored financial solutions for commercial claimants, top-tier law firms and litigation boutiques, Lund will play a leading role in developing and executing new strategies for the firm. With the addition of Lund, Juris will offer more bespoke solutions for a wide range of cost needs, whether in the hundreds of thousands or millions. With over a decade of legal and financial experience, Dane brings valuable insight to Juris Capital. Dane has worked across a breadth of industries, including legal services, banking, litigation finance, and blockchain services, providing unique perspectives that can propel Juris’ business forward. "I am honored to join Juris Capital, an industry pioneer and one of the most successful firms in legal finance," said Lund. "I look forward to furthering Juris Capital's mission of providing innovative, client-focused solutions. I envision Juris growing to become not only a commercial litigation funder of choice, but also a balance sheet partner to the most innovative law firms in the country." About Juris Capital: Juris Capital is a capital partner to commercial litigants and law firms that has led financings ranging from $250k-$29mm. Since 2009, Juris has set a standard for ethical and collaborative legal financing. Juris helps commercial claimants and law firms manage litigation risk, pursue meritorious claims despite high litigation costs, and reallocate capital to core business purposes. Juris also works directly with law firms to help optimize their balance sheets, enable thoughtful growth and expand firm offerings. Dane Lund: dlund@juriscapitalcorp.com Juris Capital: www.juriscapitalcorp.com
Commercial Legal Innovation

Quantum Data Analysis Meets Litigation Finance and Investment

While engaging quantum computing across the legal spectrum is still in its infancy, litigation funders are increasingly looking to manage financial risk exposure with in-house data analytics systems. A new article pressure tests the most evident matters concerning quantum data and litigation finance.  Mondaq reports on how litigation financiers are integrating algorithmic data tools into their decision making. With the potential of billions of dollars in proceeds, it is important to understand the impact of data architecture through self inventory, extraction and analysis. Spotting holes in data systems is essential, and should be encouraged to promote a nimble innovation strategy within an organization.  Current popular uses of data analysis in litigation finance include quantifiable forecasts of economic harm caused by defendant actions, and contemplation of settlement proposals. Devising solutions to mitigate data disasters is also a prime concern for third party funding. For example, some litigation funders are compiling “data literacy” manuals to increase and enhance engagement between colleagues.   The future of quantum data analysis in litigation finance will belong to those who conceptualize systems that maximize ROI and improve operational efficiencies.  
Announcements Commercial Legal Innovation

LegalPay Awarded the Best LegalTech Startup of the Year by Entrepreneur India at Tech and Innovation Summit 2024

LegalPay, India's leading litigation finance company, has been named the BEST LEGALTECH STARTUP OF THE YEAR by Entrepreneur India at the prestigious Tech and Innovation Summit 2024. This recognition underscores LegalPay's unwavering commitment to revolutionizing the legal finance landscape and empowering businesses with innovative solutions.

LegalPay tackles the chronic issue of delayed payments faced by businesses. Their groundbreaking financing solution, QuickSettle, offers a lifeline to thousands of businesses struggling with cash flow. QuickSettle provides immediate funding to creditors, allowing them to receive their dues upfront. Simultaneously, debtors benefit from flexible repayment plans, easing financial strain and facilitating a win-win outcome for all parties involved.

"In today's dynamic economic climate, access to flexible financing solutions is vital for businesses to thrive," says Mr. Kundan Shahi, Founder & CEO of LegalPay. "We are incredibly honored to be recognized by Entrepreneur India. This award is a testament to our steadfast dedication to pushing the boundaries of innovation in the legal finance industry. We remain committed to empowering businesses and fostering a culture of faster dispute resolution in India."

LegalPay’s innovation transcends traditional boundaries. By bridging the gap between creditors and debtors, QuickSettle fosters collaboration and trust, reducing the need for costly litigation. In today’s dynamic business landscape, access to working capital is paramount. QuickSettle liberates working capital, allowing businesses to focus on growth and expansion.

The recognition from Entrepreneur India serves as a testament to LegalPay's dedication to pushing the boundaries of innovation in the legal and financial technology sector. As businesses continue to seek efficient and sustainable solutions to recover their dues, LegalPay remains steadfast in its mission to empower businesses and drive positive change in the industry.

About LegalPay:

Founded in 2019 by Kundan Shahi, LegalPay has emerged as India's largest litigation funding company, currently managing over USD 400 Million worth of claims. Through innovative solutions like QuickSettle, LegalPay empowers businesses to navigate financial hurdles seamlessly and unlock their true potential.

Commercial Regulatory Issues

Industry Reacts to UK Government’s Announcement of Legislation to Reverse PACCAR Ruling

Earlier this week, LFJ covered the announcement by the Ministry of Justice (MOJ) that it would introduce new legislation to reverse the effects of the Supreme Court’s PACCAR ruling, and protect access to third-party litigation funding. As part of this announcement, the government also revealed that it would be conducting a review of litigation funding, to ensure that claimants who access funding receive an adequate share of any compensation secured through funded litigation. Since the announcement, we have seen a variety of responses from litigation funders and legal professionals, as the industry looks towards the future of litigation finance in the UK. Reacting to the announcement on Monday, Factor Risk Management’s managing director, Mohsin Patel, described it as ‘very welcome news to funders, claimants and lawyers alike’, adding that the proposed law ‘will provide much needed certainty and clarity for stakeholders in future.’ However, he voiced caution around the Government’s plans for reform of litigation funding in the UK, emphasising that it should not ‘take any steps that may jeopardise its development.’ The president of the Law Society of England and Wales, Nick Emmerson said that his organisation welcomed ‘the UK government’s aim of helping the public achieve access to justice.’ With regards to the planned review of the litigation finance market, he acknowledged that ‘there could be merit in a review,’ but suggested that the government should consider ‘the risk of the funding arrangement rendering any victory hollow for the consumers affected.’ A statement from Martyn Day, co-president of The Collective Redress Lawyers Association (CORLA), described the government’s plans as ‘a very sensible and welcome development’ and suggested that the new legislation would prevent ‘corporations tying up court time and money in trying to unpick the funding agreements that make the claims possible.’ Similarly to other industry figures, Day argued that any planned reforms around the funding of collective actions ‘must build on today’s welcome announcement and not undermine it.’ Furthermore, he expressed CORLA’s willingness to ‘work closely with government on any reform that gives clarity, certainty and fairness to claimants and those who support them in bringing their claims.’ In a letter to the Financial Times, Steven Friel, chief executive of Woodsford, focused on the Lord Chancellor’s suggestion that as part of the review of litigation funding, it would consider a cap on the fees paid to litigation funders. Friel stated that instituting a cap ‘would be a mistake’, arguing that with a competitive market already providing a measure of self-regulation on fees, ‘a cap that will inevitably be lower than the market is prepared to go on some cases will cause many meritorious claims to become economically unviable to fund.’ Instead, Friel suggested that the government should ‘redirect the obligation to pay some or all of the litigation funding fees from the victims to the wrongdoers.’ Tets Ishikawa, managing director of LionFish Litigation Finance, offered a similar verdict on the government’s intention to conduct a review into third-party funding, arguing that recoverability of funders’ fees is the best solution. Ishikawa suggested that ‘allowing recoverability would allow the funding industry to support the many impecunious clients with cases smaller than the Post Office matter that we currently have to turn away.’ Jack Bradley-Seddon, partner and litigation funding specialist at Thaxted Capital, celebrated the ‘positive tone in the announcement’ and highlighted that it  was a welcome contrast with ‘a lot of the negative sentiment that has been printed about the industry previously.’ He went on to caution that ‘the devil will be in the detail’ of the proposed legislation, noting that there is ‘a big difference between positive soundbites before an election, and a precise and carefully worded piece of legislation that actually fixes the problem.’
Case Developments Commercial

$18 Million Settlement Agreed in Merivale Underpayment Class Action

The strength of litigation funding for class actions in Australia continues to be demonstrated, as a class action representing underpaid hospitality workers has reached a multimillion dollar settlement with the employer. An article in the Australian Financial Review covers the resolution of a class action brought against hospitality company, Merivale, who has agreed to a without-admission settlement of $18 million. If approved by the Federal Court, $8.6 million of the settlement will be distributed to cover the legal costs and the commission for the class action’s litigation funder, ICP Funding. The class action was brought against the hospitality giant over allegations that it had underpaid around 14,000 employees, with the total amount of unpaid wages amounting to $129 million. The lawsuit alleged that Merivale had been relying on an outdated ‘WorkChoices’ agreement from 2007, which had not been legitimately approved and failed to meet the industry award. Despite agreeing to settle the case, Merivale’s spokesperson said that the company “strongly denies these allegations and continues to do so.” The group action’s members were represented in the case by Adero Law, with the costs of the case covered by ICP Funding. The terms of the settlement agreement would see the funder receive roughly 25% of the total amount, with $2.5 million for costs and $4.4 million as commission. Adero would receive $1.25 million for its deferred costs, plus $500,000 to cover its administration costs for distributing the remaining settlement.
The LFJ Podcast

Episode 85: Michael Volpe

Hosted By Michael Volpe |
Our guest today is Michael Volpe, Executive Director of the Milestone Foundation. Michael discussed the Milestone Foundation's unique structure as a nonprofit that funds litigation, and how this benefits both their clients, and the broader litigation finance industry. [podcast_episode episode="12666" content="title,player,details"]
Case Developments Commercial

Ontario Court Approves Funding Arrangements in Class Actions Targeting Canadian Banks

Within North America, it is the US market which sees the majority of activity when it comes to funded litigation. However, north of the border, there are still viable opportunities for funders to engage with, as has been demonstrated by an Ontario court’s decision to approve the funding agreements in a number of class actions brought against Canadian banks. An article on Advisor.ca highlights a decision by Ontario’s Superior Court of Justice to approve third-party funding arrangements for several proposed class actions targeting four of Canada’s largest banks. The class actions are being brought against Bank of Montreal, CIBC, Bank of Nova Scotia, and Royal Bank of Canada, over allegations that these financial institutions improperly charged their customers with ‘duplicative insufficient funds (NSF) fees for failed pre-authorized debit (PAD) transactions.’ Whilst each of the class actions is technically a separate lawsuit, due to the similarities and overlap between the claims, the Superior Court provided a single ruling to approve the litigation funding arrangements for all four cases. As part of its ruling, the court approved the scale of the funder’s returns, which will vary between 7% and 12% of any final damages awarded, based on the point at which the case is settled or resolved. In addition, the court found that the funder had sufficient capital to cover a costs award, if the defendants are successful in the cases. In its ruling, the Superior Court wrote that the terms of the funding agreements allowed for “a reasonable reward for the funder in exchange for providing the necessary costs indemnity and disbursement funding.” Appearing to acknowledge the importance of third-party funding in such cases, the court went on to say that “the funding agreements are thus necessary to facilitate access to justice for the class, and promote behaviour modification.” With the funding agreements approved and the plaintiffs’ motions approved, the class actions are now able to proceed.
Commercial Regulatory Issues

Proposed Litigation Funding Disclosure Rule Rejected by Supreme Court Of New Jersey’s Civil Practice Committee

Moves by state legislatures to introduce new laws governing litigation financing have dominated much of the recent conversation around the regulation of third-party funding. However, the roles of state and federal courts in implementing rules around funding disclosure are helping to shape the future of litigation finance in the US. Reporting by The National Law Review provides an overview of the decision by the Supreme Court of New Jersey’s Civil Practice Committee to reject a proposal that would require the disclosure of litigation funding arrangements at the start of any civil lawsuit. The proposal had been brought by the New Jersey Civil Justice Institute, which had argued that such a rule would provide transparency around third-party litigation funding, and would ensure that all parties were aware of funding arrangements that could affect resolution and settlement proceedings. In its rejection of the proposed rule, the Committee argued that it did not have the “sufficient experience to meaningfully develop a rule change at this time,” and suggested that attempts to draft such a rule “may prove difficult.” Whilst the Committee has declined to introduce a disclosure rule at this time, it acknowledged that legal or regulatory developments may require the issue to be revisited “at some point in the future.” The Committee’s decision stands in contrast to the action taken by the District Court for the District of New Jersey in 2021, when it passed Local Civil Rule 7.1.1. This rule requires the disclosure of information surrounding litigation funding, including the identity of the funder and their financial interest in the case, for all cases in New Jersey’s federal courts. The District Court’s decision echoed similar moves to introduce a disclosure rule by many federal District Courts across the country, along with six United States Courts of Appeal.