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Commercial Regulatory Issues

UK Government ‘Considering Options’ for Legislative Solutions to PACCAR

As many industry commentators suggested when the Supreme Court released its PACCAR judgement, one of the most important and interesting elements has been the UK government’s response to the decision. In a story that is developing week after week, we are beginning to see how a potential solution may not emerge from one singular piece of legislation, but could instead be divided across multiple bills. Reporting by The Law Society Gazette provides an update on the ongoing parliamentary debate over the Digital Markets, Competition and Consumers Bill (DMCC), which includes an amendment (Clause 126) that has solved the issue for funding agreements in opt-out collective actions in the Competition Appeal Tribunal (CAT). However, this amendment only provides a solution for one type of funded proceeding, and industry leaders have been keen to understand how the government may provide a wider legislative fix. During the debate in the House of Lords, this issue was raised by Lord Sandhurst (Guy Mansfield KC), who argued that ‘clause 126 needs to be redrafted and expanded’ in order to address funded cases outside of opt-out cases before the CAT. He noted that there are a wide range of funded matters that require a solution, including opt-in cases in the CAT, ‘conventional bi-party litigation’, and claims brought in the High Court.  Lord Sandhurst emphasized that without a broader legislative solution, “Claimants will have no effective access to litigation funding agreements and many cases already in the pipeline face considerable problems.” However, the Gazette article also reports that in response to a parliamentary question, Lord Bellamy, the Parliamentary Under-Secretary of State for Justice, stated that “the government is assessing the impact of the judgment and considering options for non-CAT proceedings.” Whilst no details were specified for what these options might include, this is another encouraging sign for the UK litigation funding industry, given that the government is actively looking for more comprehensive solutions to the PACCAR ruling.
Commercial Fundraising

UK Funder Sandfield Capital Raises £20M to Fuel Expansion 

Whilst the largest international funders tend to dominate the headlines in the world of litigation finance, there is a still a plethora of activity among smaller funders operating within regional markets. An article on TheBusinessDesk.com covers the news that Sandfield Capital, a UK funder based out of Liverpool, has raised £20 million in funding through a credit facility from Ampla Finance. This initial tranche is part of a wider £100 million in fundraising led by Altimapa Capital, which will allow Sandfield to further its expansion plans including bringing on an additional 10 staff to its operations team. Steven Ambrosio, co-founder and CEO of Stanfield Capital, explained the company’s strategy which focused on “cases in areas of clear demand which have been overlooked by other finance providers and help tenants, home owners and others to seek justice through the courts.” He went on to say that the £20 million “is the first phase in our journey to raise £100m to transform our business”, which will allow the funder to “meet the growing demand” of this market.  Ampla Finance’s CEO, Richard Kennerley said that his firm had identified “a number of evolving tech trends in the civil litigation arena”, and that this new capital would allow Sandfield to capitalise on these advancements whilst also providing its client base with a high quality, ethical and comprehensive offering.” Pedro Tavares, founder and CEO of Altimapa Capital, also praised Sandfield for having “a well-thought-out business model and a sound proposition,” which had been overlooked by traditional funders.  Sandfield Capital currently operates from both its Liverpool and London offices, with a staff of eight employees including Paul Meehan who serves as COO and Mark Siney as the funder’s Head of Finance.
The LFJ Podcast

Episode 81: Blake Trueblood and Ed Gehres

Hosted By Invenio Law |
In this episode, we speak with Blake Trueblood and Ed Gehres, founding partners of Invenio, LLP, a law firm specializing in legal funding transactions. Blake and Ed discuss their firm's approach and services, why claimants and law firms both benefit from having counsel with an expertise in litigation funding, the top concerns of borrowers when sourcing funders, and how Invenio works with borrowers through the full life cycle of the investment. [podcast_episode episode="12310" content="title,player,details"]
Commercial

Omni Bridgeway Highlights Funding as a ‘Strategic Risk Management Tool’

When illustrating the benefits of litigation funding for businesses, funders are keen to point out the wider strategic benefits available to companies beyond the provision of capital. In a blog post on LinkedIn, Paul Rand, Chief Investment Officer (Canada) at Omni Bridgeway, discusses the use cases and benefits of litigation finance, explaining how it can be used by businesses to take ‘a more strategic approach to affirmative litigation.’ Rand argues that businesses who see litigation ‘exclusively as something to avoid’ are missing out on strategic opportunities, and that ‘his approach may avoid risk, it doesn’t manage the risk.’ Instead, Rand lays out the case for companies to take a proactive approach to litigation, noting that business leaders can still pursue meritorious disputes whilst mitigating risk through litigation funding. He goes on to suggest that companies can ‘use funding to generate successful outcomes’, reframing disputes as assets rather than seeing them solely as liabilities.  Rand goes on to explain the different ways that litigation funding can reduce risk, beyond the individual provision of non-recourse funding. These benefits include providing strategic guidance and expertise when determining whether to pursue a case, as well as managing the risks around judgement collection. The full blog post can be read here.
Commercial Regulatory Issues

LCM Argues PACCAR Decision is ‘Old News’ for Funded Opt-Out Claims

Following the Supreme Court’s PACCAR ruling, opinions on the impact of the decision ranged from descriptions of it as a small bump in the road, to predictions that there would be no easy solutions for funders looking to modify their funding agreements. A new insights post from Litigation Capital Management (LCM) looks at two of the most important developments that have occurred in the wake of the PACCAR decision, and questions whether its impact on funding agreements in opt-out collective actions has dissipated. The article first highlights the current draft of the Digital Markets, Competition and Consumers Bill (DMCC), which now includes an amendment which clarifies ‘that a DBA is only unenforceable in opt-out collective proceedings before the CAT if the agreement is with a provider of advocacy or litigation services.’ This specification, along with the removal of any reference to ‘claims management services’, has been lauded for resolving the issue of enforceability for these types of cases. However, it should be noted that industry leaders and analysts have continued to raise concerns around the limited scope of the DMCC amendment, arguing that it is still only a ‘partial solution’ to issues raised by PACCAR. The second development that LCM’s post addresses, is the CAT’s decision in November to certify the opt-out claim brought against Sony, and particularly the CAT’s dismissal of Sony’s objections over changes to the funding agreement. The article points out that ‘Sony sought to attack the new arrangements on a number of fronts’, but in each and every case, the tribunal disagreed with Sony and rejected their arguments in turn. LCM concludes by arguing that in contrast to the doomsaying following the Supreme Court’s decision in PACCAR, the funding of opt-out claims has largely survived intact. The article suggests that ‘Defendants can now concentrate on the merits of the claims, rather than being distracted by unmeritorious attempts to derail valid proceedings by reference to the supposed wider ramifications of the PACCAR judgment.’
Commercial Regulatory Issues

UK Lobby Group Calls for Regulation to Protect Consumers from ‘Opportunistic Claimant Law Firms’

Whilst recent court victories and settlements have demonstrated the benefits that funded class actions can bring to consumers, there are still groups who argue that there are insufficient regulatory measures to govern these claims, and to protect the interests of businesses.  An article in The Law Society Gazette highlights lobbying efforts by Fair Civil Justice (FCJ) against the proliferation of ‘no win, no fee’ advertising from law firms, and calling for the UK government to crack down on the practice through tougher regulation. These calls for regulation are part of FCJ’s latest research focused on what it describes as the UK’s ‘predatory claim culture’, which supposedly misleads people about these lawsuits by underselling the risks involved. Seema Kennedy, executive director of FCJ, called on the government to ‘take notice and update the regulations to protect people from opportunistic claimant law firms.’ The FCJ suggests that these regulations should include more rigorous regulation of advertisements, such as banning targeted claims adverts on social media, a 60-day cooling off period for those who register for a group claim, and the option for these claimants to end the retainer without facing additional costs. Kenny Henderson, partner at CMS, is quoted in the article and echoes concerns around the current state of UK class actions. He suggests that whilst the market is beneficial for funders and law firms, ‘it is questionable whether it is good for consumers and it is definitely not good for the UK’s business environment.’ The Gazette’s article points out that whilst the source of FCJ’s funding is unknown, reporting by Law.com in December 2022 claimed that the group was launched by the US Chamber of Commerce’s Institute for Legal Reform. Readers will of course be very familiar with the Chamber’s lobbying efforts against litigation funding in the US and will notice the familiar language around the ‘opportunistic’ nature of claimant law firms and funders. Earlier this week, the British Chamber of Commerce (BCC) announced that it had become a member of FCJ, stating that the campaign group “is striving to protect the interests of consumers, businesses and the civil justice system.”
Case Developments Commercial

Funded Class Action Targets UK Mobile Operators for Overcharging Customers

In the face of alleged corporate wrongdoing, consumer-led group actions are continuing to gather momentum in the UK, with litigation funders eagerly stepping up to provide the financial support needed to bring these claims. Reporting from The Guardian provides an overview of the latest UK class action to be brought against big business, as the UK’s largest mobile operates are faced with a new lawsuit focusing on allegations that they have overcharged customers after the handsets were paid off in their contracts. The opt-out class action could represent up to 4.8 million consumers who purchased contracts with EE, O2, Three or Vodafone, arguing that customers could have been collectively overcharged as much as £3.28 billion since 2007. Justin Gutmann, who is acting as the proposed class representative for the lawsuit, said that “these four mobile phone companies have systematically exploited millions of loyal customers across the UK through loyalty penalties.” Law firm Charles Lyndon has been instructed by Gutmann to represent group members, and according to the Loyalty Penalty Claim website, LCM Funding UK Limited is providing the financing for the claim. The website states that Gutmann is ‘seeking a total compensation sum of £2.822 billion plus interest for the proposed classes as a whole.’ Gutmann has been involved in a number of other consumer-led class actions, including the case brought against Apple, which as LFJ reported, recently saw the CAT grant the application for a collective proceedings order (CPO). Of the four mobile operators targeted by the claim, only O2 provided a comment, with its spokesperson stating that the company has “long been calling for an end to the ‘smartphone swindle’ and for other mobile operators to stop the pernicious practice of charging their customers for phones they already own.” The spokesperson also emphasized that it is “the first provider to have launched split contracts a decade ago which automatically and fully reduce customers’ bills once they’ve paid off their handset.”
Case Developments Commercial

Australian Federal Court Approves $30M Settlement in BT Super Class Action

The use of litigation funding for class actions in Australia continues to achieve successful results for both the group members and the funder, as the Federal Court has approved another class action settlement along with a significant deduction for the funder.  An article from Financial Standard highlights a recent ruling from the Federal Court of Australia, where Justice Murphy approved a $29.95 million settlement sum in Ghee v BT Funds Management Limited. The class action had first been brought in 2019 against BT Funds Management Limited (BTFM) and Westpac Life Insurance Services Ltd (WLIS), on behalf of members of BT Super for Life Superannuation Fund (SFL) who were invested in the Super Cash option.  The class action focused on allegations that BTFM had ‘breached various legal duties owed to members’ by investing funds in WLIS’ life policy. Slater & Gordon, who represented group members, argued that ‘BTFM’s contraventions caused loss to be suffered by the Applicant and group members, in that higher investment returns would have been earned if those contraventions had not occurred.’ The court order approved a $9.6 million deduction from the settlement to be paid to Therium, who funded the class action.. This figure was divided into $2.7 million for paid legal costs, $1.2 million for the reimbursement of ATE insurance costs, and $5.7 million. In his ruling, Justice Murphy said that it was “appropriate to order the deduction of total funding charges of $6,888,500 which equates to 23% of the gross settlement,” and described the deduction as “reasonable and proportionate in the circumstances of the case.” According to Slater & Gordon’s class action page, following the various deductions from the overall settlement sum, the final amount distributed to group members will likely total approximately $15.45 million, plus interest. There are approximately 15,000 registered group members who are eligible to receive money from the settlement distribution scheme.
Case Developments Commercial

Valve Alleges Law Firm and Litigation Funder are Attempting to ‘Extort a Settlement’

A common criticism of litigation funders' involvement in claims against large corporations is that funders are more concerned with generating ROI than with assisting the consumers being represented. A recent complaint filed by the world’s largest video games distributor bears a striking resemblance to this critique. An article in Reuters highlights an ongoing lawsuit filed by video game company Valve, alleging that a law firm and funder had planned to take advantage of the company’s users and ‘extort Valve for their own benefit’. The filing alleges that Zaiger, LLC ‘hatched a scheme’ with the litigation funder to ‘weaponize’ the Steam Subscriber Agreement (SSA), which Valve uses to resolve disputes with customers of its video game marketplace, Steam. The origins of Valve’s complaint lie in the allegation that Zaiger has planned to ‘to recruit 75,000 clients and then bring arbitrations on behalf of a subset (no more than 160) of those clients to drive a settlement on behalf of all 75,000 of its clients.’ The complaint goes on to illustrate how Zaiger’s plan would use the SSA’s arbitration clause, in which ‘Valve agrees to pay the fees and costs associated with arbitration’, to expose Valve to ‘potentially millions of dollars of arbitration fees alone.’ These allegations are based on a presentation that Zaiger gave to Black Diamond Capital Management, a company which Valve claims is the unnamed litigation funder. Valve’s complaint then highlights that Zaiger’s presentation planned to “offer a settlement slightly less than the [arbitration] charge—$2,900 per claim or so—attempting to induce a quick resolution.” They further argue that Zaiger made no reference to ‘Steam users’ concerns or interests’ and provided ‘no space in that lifecycle for investigating the legal issues involved or evaluating the facts of any particular Steam user’s situation.’ The filing asserts two causes of action: ‘tortious interference’ and ‘abuse of process’, arguing that ‘Zaiger and its funder are engaging in an egregious abuse of the litigation process.’ Going even further, Valve’s complaint makes the claim that ‘the point of all of Defendants’ actions against Valve is to improperly interfere in Valve’s valid contractual relationships with its customers and to use the arbitration system to extort a settlement from Valve.’ Jeffrey Zaiger, in response to Reuter’s request for comment, described Valve’s legal action as “meritless” and said that it was “a transparent attempt to intimidate my law firm into abandoning meritorious claims on behalf of our clients.”