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Case Developments Commercial

£25M Settlement Agreement Reached in South Western Trains ‘Boundary Fares’ Claim

As LFJ reported last year, several UK train operators have become the target of collective proceedings over claims that the rail companies failed to offer customers with lower-cost ‘boundary fares,’ and instead sold them more expensive tickets from central London. In a significant milestone, the claim brought against one of these operators appears to be approaching a conclusion, as the parties announced they have reached a settlement agreement. In a press release issued earlier this week, Stagecoach South Western Trains Limited (SSWT) and class representative Justin Guttman announced that they had reached a settlement agreement to end the claim brought against the train operating company. As part of the settlement agreement, the train operating company said that it would pay up to £25 million to eligible class members, describing it as “the largest settlement in the history of the collective proceedings regime in the UK”. The claim was brought against SSWT in 2019 over allegations that the train operator “had not made 'boundary fares' sufficiently available for Travelcard holders to purchase.” The claimants were represented by Charles Lyndon, whilst the proceedings were financed by Woodsford Group Limited. The announcement stated that the law firm and funder were “pleased to have been able to secure this outcome for class members without the necessity for the Parties to pursue the matter to trial.” The settlement agreement, which was published on the Boundary Fares claim website, states that the train companies deny “the existence of a dominant position and also any conduct which could amount to an alleged abuse of a dominant position” or that the class members “have suffered any loss or damages as a result of any of the conduct” that the proceedings alleged. However, it says that in order to end the legal proceedings “and avoid unnecessary legal and other costs”, all the parties have agreed to the terms of the settlement agreement. As emphasised in the settlement notice, “the Proposed Settlement relates to SSWT only and does not settle the claim against the other Defendant, First MTR South Western Trains Limited.” The first trial for the claim brought against the latter defendant is set to be heard on 17 June 2024. The settlement agreement will now be considered by the Competition Appeal Tribunal, with a hearing listed for 29 April 2024.
Commercial Regulatory Issues

Unified Patents’ General Counsel Calls for Mandatory Disclosure of Litigation Funding

It has been a long-held position of critics of the litigation finance industry that a lack of strict disclosure regulations represents a threat to national security. Unsurprisingly, the recent Bloomberg Law investigation into Russian oligarchs allegedly skirting sanctions through litigation funding has renewed these calls to actions. In an opinion piece for Bloomberg Law, Jonathan Stroud, general counsel at Unified Patents, argues that the latest revelations around foreign entities involvement in litigation funding demonstrates both the necessity and the urgency for new rules governing transparency and disclosure. In the article, he argues that the litigation finance industry “needs an overhaul to build in transparency”, suggesting that anything less than significant regulatory changes will allow “other countries to profit off the US judicial system and circumvent sanctions.” Whilst Stroud describes these changes as an ‘overhaul’, he suggests that it would be as simple as the judiciary introducing “a long-overdue tweak to existing Rules 7.1 and 26 of the Federal Rules of Civil Procedure.” He points out that the Judicial Conference is already aligned with this position, having been considering mandatory disclosure requirements as early as 2017. However, Stroud paints the judiciary as “characteristically slow to act”, and argues that it is time for either the judiciary or, if necessary, Congress to move forward with these changes. Looking at the attitude of funders faced with the potential of increased transparency, Stroud claims that “funders have opposed transparency by lobbying against it; writing letters, op-eds, and articles; and spending lavishly on events with sitting judges.” Instead of this position, he argues that both funders and investors should support self-disclosure, otherwise they may “get caught in a wave of over-enforcement down the road.”
Commercial Regulatory Issues

NYC Bar Association Proposes Amendments to Rules Governing Fee Sharing

Discussions around the regulation governing litigation funding are often focused on the decisions made at the legislative or executive levels of government. However, when it comes to assessing the rules for third-party funding within US states, it is clear that state bar associations play an equally important role in setting the playing field for litigation funders. An article in Bloomberg Law covers developments from the New York City Bar Association’s Professional Responsibility Committee, which has proposed changes to state rules governing the sharing of legal fees outside of lawyers and their firms. The two proposed amendments are for Rule 5.4(a), which would allow lawyers to share fees with litigation funders to secure third-party funding for their cases. Whilst these amendments would prove beneficial for litigation funders, the changes would ensure law firms still act independently of any funding arrangements and require lawyers to inform their clients over any relevant financing agreements. The Professional Responsibility Committee explained its proposed changes, stating that the existing rules assume “that one type of financing has the power to corrupt a lawyer’s professional ethics more than any other financial arrangement with a non-lawyer.” The Committee argued that this kind of presupposition “is an exercise in paternalism”, which it said it “cannot justify” after conducting its own research. For these proposed amendments to be adopted into New York’s regulations, they will be sent to the State Bar Association of New York for review and approval. If the association agrees with these changes, the amendments will go to the New York State Supreme Court’s appellate divisions for final approval.
Announcements Deals

QUINN EMANUEL AND LONGFORD CAPITAL TO OFFER LITIGATION FUNDING TO PRIVATE EQUITY CLIENTS

In a groundbreaking agreement, Longford Capital Management, LP and Quinn Emanuel Urquhart & Sullivan, LLP announced a litigation financing offering for private equity (PE) firms and their portfolio companies. Under the terms of today’s deal, Longford has committed up to $40M in equity capital to Quinn Emanuel’s private equity clients involved in litigation, funding attorneys’ fees and litigation costs and monetizing the value of meritorious legal claims.

The agreement provides Quinn Emanuel’s PE clients and their portfolio companies with an alternative method of funding litigation and enables those clients to treat meritorious legal claims as corporate assets capable of being monetized. Longford provides funding for disputes in several areas of law applicable to PE clients, including antitrust, intellectual property, and a variety of contract, tort, and fraud claims.

“Quinn Emanuel likes to innovate, and we have already partnered successfully with Longford on several occasions to produce excellent results for clients,” said Jonathan Bunge, Co-Chair of Quinn Emanuel’s National Trial Practice and Managing Partner of the Chicago office. “This latest collaboration will serve the interests of our private equity clients seeking alternatives and options in pursuing meritorious litigation.”

“We have identified a particular ability to assist private equity managers and their portfolio companies involved in commercial disputes,” said William Farrell, Co-Founder and Managing Director of Longford. “We look forward to assisting Quinn Emanuel by providing its private equity clients with attractive financial options.”

With litigation funding, portfolio companies and their private equity sponsors can pursue valuable, meritorious claims and monetize the value of those claims without risk or delay, accelerating liquidity and fueling growth, Farrell noted.

About Longford Capital

Longford Capital is a private investment company that provides capital to leading law firms, public and private companies, universities, government agencies, and other entities involved in large-scale, commercial legal disputes. Longford was one of the first litigation funds in the United States and is among the world’s largest litigation finance companies with more than $1.2 billion in assets under management. Longford offers a broad range of capital solutions to funds attorneys' fees and expenses and otherwise manage the financial risk of pursuing meritorious legal claims in return for a share of a favorable settlement or award. The firm manages a diversified portfolio and considers investments in subject matter areas where it has developed considerable expertise, including, business-to-business contract claims, antitrust and trade regulation claims, intellectual property claims (including patent, trademark, copyright, and trade secret), fiduciary duty claims, fraud claims, claims in bankruptcy and liquidation, domestic and international arbitrations, claim monetization, insurance matters, mass actions and class actions, and a variety of others.

About Quinn Emanuel

Quinn Emanuel Urquhart & Sullivan, LLP is a 1000+ lawyer business litigation firm—the largest in the world devoted solely to business litigation and arbitration with 34 global office locations. Surveys of major companies around the world have named it the “most feared” law firm in the world three times. Firm lawyers have tried over 2,500 cases, winning 86% of them. When representing defendants, Quinn Emanuel’s trial experience gets better settlements or defense verdicts. When representing plaintiffs, Quinn Emanuel lawyers have won nearly $80 billion in judgments and settlements. Quinn Emanuel has also obtained seven nine-figure jury verdicts, four 10-figure jury verdicts, 51 nine-figure settlements, and 20 10-figure settlements.

Quinn Emanuel has been named the No. 1 “most feared” law firm by The BTI Consulting Group three times in its annual “Most Feared Law Firms in Litigation” guide, in which in-house counsel named 46 firms they “want to steer clear of” when it comes to litigation. The American Lawyer named Quinn Emanuel the top IP litigation firm in the U.S. and the firm as one of the top six commercial litigation firms in the country. The UK legal periodical, The Lawyer named us “International Firm of the Year.” Law360 has most recently selected us as having Banking, Class Action, International Arbitration, and Trials “Practice Groups of the Year.” Managing IP twice recognized us as having the “Best ITC Litigation Practice” and honored us with the “Patent Contentious West” award. Legal Business has named us “US Law Firm of the Year” three times, and our German offices have twice been named both “IP Litigation Firm of the Year” and “Patent Litigation Firm of the Year” by JUVE, Germany’s most prestigious legal publication. Global Investigations Review, a leading legal periodical covering global white-collar investigations, named us the “Most Impressive Investigations Practice of the Year.” Global Arbitration Review named us the 3rd best arbitration practice in the world. Global Competition Review named our antitrust and competition practice among the “25 Global Elite,” and has included us in their list of the world’s top 10 competition litigation practices.

The LFJ Podcast

Episode 86: Luke Darkow

Hosted By Luke Darkow |
In this episode, we sat down with Luke Darkow, Principal on Victory Park Capital’s Investment Team. Luke discussed Victory Park's credit-like approach to litigation funding, why the asset class is so attractive to investors and LPs, how Victory Park can benefit law firms specifically, and the evolution of the asset class under a stricter regulatory regime. [podcast_episode episode="12778" content="title,player,details"]
Announcements Commercial Deals

Legal Finance SE Announces Acquisition by Nakiki SE

Legal Finance SE, which has been aiming for an IPO for some time, has been acquired by the listed company Nakiki SE. The shares of Nakiki SE have been traded on the Frankfurt Stock Exchange since 9 April 2024 under ISIN DE000WNDL300 / WKN WNDL30. Nakiki SE will soon operate under the name Legal Finance Holding SE. In a strategic decision, Legal Finance SE, a pioneer in litigation Finance, announces its acquisition by the listed company Nakiki SE (ISIN DE000WNDL300, WKN WNDL30). This acquisition is not only a significant step for both companies, but also marks the indirect IPO of Legal Finance SE, which will take the company to new heights. Legal Finance SE, known for its innovative approach to litigation Finance, will significantly expand its reach and influence through this acquisition. The acquisition by Nakiki SE not only provides Legal Finance with access to the capital markets, but also opens up new avenues for innovation and growth in the ever-changing world of litigation Finance. This acquisition is in line with the company's vision to make legal protection more accessible and fairer and sends a strong signal for the future of the industry. For clients and partners of both companies, this development means increased support and expanded services aimed at facilitating access to quality legal services worldwide.
Case Developments Commercial

Italian Supreme Court Provides Ruling on Registration Requirements for Litigation Funders

In jurisdictions where litigation funding is still in its early stages, it is instructive when the courts are forced to deal with questions around the legality of third-party funding. A recent decision published by Italy’s highest court has offered some insight into the country’s legal system and its current attitude towards litigation funders. In a post from RP legalitax, Paolo Grandi examines a judgement handed down by the Italian Supreme Court last month, which found that litigation funding firms are not required to be registered under Article 106 of Legislative Decree No. 385/1993 (‘Testo Unico Bancario’ “TUB”).  The Supreme Court’s judgement related to a case from the Justice of Peace in Busto Arsizio, where a claimant seeking compensation from an airline had sold their claim to a funder. The Justice of the Peace ruled that the purchaser of the claim was not entitled to the compensation, as the agreement between it and the claimant was invalidated by the fact that they were not registered under the TUB regulations. The claimant appealed the decision to the Court of Appeal in Busto Arsizio which upheld the appeal in July 2021, only for the airline to then bring a challenge of the decision to the Supreme Court. The Supreme Court rejected the airline’s challenge and, in its decision published on March 19 2024, stated that the ““the Court of Appeal, in solving this case, was compliant with what this Court has already affirmed in the different hypothesis of the assignment of the credit for compensation for road accident damages, namely that it is possible to assign such credit pursuant to Articles 1260 et seq. of the Italian Civil Code.” The Supreme Court went on to clarify that this kind of transaction “does not even imply any financial activity subject to authorization pursuant to Article 106 TUB.”
Commercial People Moves

ALFA Welcomes Litica as Newest Associate Member

In a post on LinkedIn, The Association of Litigation Funders of Australia (ALFA) announced that it is welcoming Litica as its newest Associate Member. Litica becomes the 11th Associate Member of ALFA, joining the likes of FTI Consulting, Piper Alderman, and William Roberts Lawyers. Since its launch in 2019, Litica has grown to become a leading provider of commercial ATE insurance in the UK and has since built a global footprint by expanding its operations to Australia in 2022. As part of this expansion, Litica appointed Philip Lomax to the position of Managing Director for Asia Pacific, with Lomax leading Litica’s Australian offering from Sydney. As LFJ reported in November 2023, Litica followed its expansion to Australia by establishing a European presence through a new office in Cologne (Köln) Germany, with Ed Yell appointed as Managing Director of Litica Europe GmbH.
Commercial Special Features

Key Takeaways from LFJ’s Special Digital Event “Litigation Finance: Investor Perspectives”

On Thursday April 4th, 2024, Litigation Finance Journal hosted a special digital event titled "Litigation Finance: Investor Perspectives." The panel discussion featured Bobby Curtis (BC), Principal at Cloverlay, Cesar Bello (CB), Partner at Corbin Capital, and Zachary Krug (ZK), Managing Director at NorthWall Capital. The event was moderated by Ed Truant, Founder of Slingshot Capital. Below are some key takeaways from the event: If you were to pinpoint some factors that you pay particular attention to when analyzing managers & their track records, what would those be? BC: It's a similar setup to any strategy that you're looking at--you want to slice and dice a track record as much as possible, to try to get to the answer of what's driving returns. Within litigation finance, that could be what sub-sectors are they focused on, is it intellectual property? Is it ex-US deals? What's the sourcing been? How has deployment been historically relative to the capital they're looking to raise now? It's an industry that is starting to become data rich. You have publicly-listed companies that have some pretty interesting track record that's available. I'm constantly consuming track record data and we're building our internal database to be able to comp against. Within PE broadly, a lot of people are talking about DPI is the new IRR, and I think that's particularly true in litigation finance. If I'm opening a new investment with a fund I've never partnered with before, my eyes are going to 'how long have they been at it, and what's the realization activity?' There is also a qualitative aspect to this--has the team been together for a while, do they have a nice mix of legal acumen, investment and structuring acumen, what's the overall firm look like? It's a little bit art and science, but not too dissimilar from any track record analysis with alternative investment opportunities. Zach, you've got a bit more of a credit-focus. What are you looking for in your opportunities?  ZK: We want to understand where the realizations are coming from. So if I'm looking at a track record, I want to understand if these realizations are coming through settlements or late-stage trial events. From my perspective as an investor, I'd be more attracted to those late-stage settlements, even if the returns were a little bit lower than a track record that had several large trial wins. And I say that because when you're looking at the types of cases that you'll be investing in, you want to invest in cases that will resolve before trial and get away from that binary risk. You want cases that have good merit, make economic sense, and have alignment between claimant and law firm, and ultimately are settleable by defendants. That type of track record is much more replicable than if you have a few outsized trial wins. What are things that managers generally do particularly well in this asset class, and particularly poorly?  CB: I don't want to paint with a broad brush here. With managers it can be idiosyncratic, but there can be structuring mistakes - not getting paid for extension risks, not putting in IRR provisions. Portfolio construction mistakes like not deploying enough and being undercommitted, which is a killer. Conversely, on the good side, we've seen a ton of activity around insurance, which seems to be a bigger part of the landscape. We also welcome risk management optionality with secondaries. Some folks are clearly skating to where the puck is going and doing more innovative things, so it really depends who you're dealing with. But on the fundamental underwriting, you rarely see a consistent train wreck - it's more on the other stuff where people get tripped up. How do you approach valuation of litigation finance portfolios? What I’m more specifically interested in is (i) do you rely on manager portfolio valuations, (ii) do you apply rules of thumb to determine valuations, (iii) do you focus your diligence efforts on a few meaningful cases or review & value the entire portfolio, and (iv) do you use third parties to assist in valuations?  CB: If you're in a fund, you're relying on the manager's marks. What we do is not that - we own the assets directly or make co-investments. We see a lot of people approach this differently. Sometimes we have the same underlying exposure as partners and they're marking it differently. Not to say that one party is rational and the other is not, it's just hard to do. So this is one we struggle with. I don't love mark-to-motion. I know there's a tug toward trying to fair value things more, but as we've experienced in the venture space, you can put a lot of valuations in DPI, but I like to keep it at cost unless there is a material event. Check out the full 1-hour discussion here.