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Commercial Deals

Maturing Litigation Finance Market Creates Opportunities for General Counsel

The benefits of litigation funding for general counsel and legal departments are regularly espoused by litigation funders, who see a huge opportunity to support companies in monetizing their claims. In addition to reducing risk and freeing up corporate cash flow that would otherwise be lost in financing these claims, a new article suggests that in-house counsel can take advantage of third-party funding in a variety of ways.  In a guest article for Today’s General Counsel, Michael Kelley, partner at Parker Poe, takes a look at the maturation of the litigation finance industry and explores the different ways that in-house counsel can third-party funding to ‘turn the legal function from a cost center to a profit center in the eyes of their C-suites and boards of directors.’ Kelley begins his article by highlighting some of the less common use cases for litigation finance, noting that when it comes to the defense side, ‘an increasing number of corporate leaders are thinking about litigation finance as an important tool in how they manage risk.’ Whilst plaintiff-side funding is more regularly used, Kelley notes that funding agreements can be structured for defense-side clients by using a ‘repayment formula based on what the projected liability of the company would be if all claims against the company are successful.’ Kelley also points out that some legal departments are accessing litigation finance services to cover the costs of judgment preservation insurance, thereby allowing the business ‘to prudently hedge its bets in case the appeals court reduces or overturns the judgment.’ Turning to the more common use of funding to pursue claims, Kelley argues that third-party financing can allow C-suite executives to ‘think about those claims as assets they can monetize,’ whilst also preserving the company’s own cash to fuel other growth areas.  Kelley suggests that the increasing maturity of the litigation finance market brings added benefits for GCs considering third-party funding, as the growing number of established funders means that ‘the competition for meritorious and financially viable deals has increased.’
Commercial People Moves

Zachary Krug Joins NorthWall Capital as Managing Director of Legal Assets

In a post on LinkedIn, NorthWall Capital announced the appointment of Zachary Krug to the position of Managing Director of Legal Assets. Krug joins NorthWall Capital from his position as Director at Signal Capital Partners, where he led the firm’s litigation finance and legal assets strategy through a joint venture, SLF Capital Limited.  Krug’s career in litigation funding also includes over four years at Woodsford as a Senior Investment Officer, with a focus on investment opportunities in U.S. litigation, Latin American disputes, and international arbitration matters. Prior to his move into litigation finance, Krug spent a decade as a qualified litigator, having served as a senior trial associate in Quinn Emanuel’s Los Angeles office. In the announcement, NorthWall Capital highlighted Krug’s ‘decades of experience’ and stated that he would ‘play a prominent role in the expansion of our legal assets strategy.’
Announcements Commercial People Moves

Ignite Specialty Risk Launches in the US with Litigation Capital Protection Insurance

 Ignite Specialty Risk, a leading provider of litigation risk insurance, announced today the US launch of its Litigation Capital Protection Insurance offering and the appointment of litigation finance expert and former litigator, Nicole Silver as Lead Underwriter and Head of US Operations.

Ignite’s Litigation Capital Protection Insurance enables litigation funders and law firms to deploy capital across a portfolio of litigation assets with the assurance that their underlying investment will be protected even if the portfolio does not perform as expected. It is backed by a panel of AM Best A- (Excellent) rated capacity.

Ignite was founded in the UK in 2022 by a team with deep experience in both litigation funding and insurance. Following the company’s London market success offering the most extensive range of litigation insurance products among UK providers, Ignite is now bringing its Litigation Capital Protection Insurance product to the US market.

“Litigation Capital Protection Insurance is a relatively new concept to many funders and law firms, but it is quickly gaining popularity for its ability to protect a litigation asset portfolio investment and, as a result, facilitate a more efficient and robust capital structure within the asset class,” said Byron Sumner, Ignite CEO and Co-founder. “Ignite’s US team has significant experience in the structuring of these policies, having been at the forefront of their design for several years. We are excited to bring this expertise to the US market to help litigation funders and law firms benefit from a meaningful risk-transfer in the context of litigation, and ultimately secure access to justice for claimants with meritorious disputes.”

Silver, head of Ignite’s US operations, brings a 20-year track record litigating complex disputes. She has worked at Winston & Strawn and Greenberg Traurig and has appeared before numerous courts and tribunals including the US Supreme Court, various appellate and district courts, as well as the ICDR, ICC, ICSID, UNCITRAL, and the USTR. Silver’s experience in litigation finance includes work at Validity Finance, where she supervised and advised on litigation matters including performing due diligence and underwriting portfolios of cases. As a funder, she has had exposure to all aspects of litigation insurance, including ATE, judgment protection, and litigation capital protection insurance.

“Not only is Nicole considered to be a highly skilled attorney, she brings along an excellent track record of success litigating complex disputes, and her work as a funder has given her an insider’s view on all aspects of litigation insurance,” said Sumner. “Her extensive expertise within the insurance, investment, and legal communities will be invaluable to Ignite in the US market, and we could not be more delighted to be launching here with Nicole leading the charge.”

About Ignite:

Ignite Specialty Risk provides an extensive range of insurance products to meet the growing demands of the commercial litigation marketplace. Founded in March 2022 Ignite provides litigation risk insurance with AM Best Financial Strength Rating of A- (Excellent) capacity to a range of clients including litigation funders, law firms, and other lenders.

For a full list of licenses, visit ignitespecialty.com.

Consumer

Florida Litigation Finance Bill Stalls in House Without Committee Support

As LFJ reported in recent weeks, the Florida state legislature has been the latest venue to see bills introduced which seek to impose a greater array of restrictions on the use of third-party litigation funding. Whilst the Senate saw success with its draft legislation at the committee stage, the House version of the bill has now failed to move forward twice. Reporting from Florida Politics provides an update on HB 1179, the ‘Litigation Investment Safeguards and Transparency Act’, which once again had its committee vote deferred and failed to progress past the House Justice Appropriations Subcommittee. The vote on the bill was deferred due to it failing to garner the support of Republican Representatives Mike Beltran, Mike Redondo and Paula Stark, along with the absence of Rep. Wayne Duggan.  With one absentee and three Republicans remaining opposed to the bill, the vote was deferred rather than face defeat by the Democrat representatives on the committee who would constitute a majority and are also opposed to the draft legislation. In an attempt to move the bill forward, Rep. Tyler Sirois has proposed an amendment that would soften disclosure requirements around financing agreements, by excluding the amount of funding provided and details of attorney’s fees and costs from any disclosure. It is unknown whether such an amendment will be sufficient to win majority support from the committee members, and if it is, when the committee could schedule a third attempt at a vote.
Case Developments Commercial

Music Royalty Claimant Points the Finger at Litigation Funder

When large companies are targeted by lawsuits supported by third-party litigation funders, it is not uncommon for these defendants to draw public attention to the presence of these funders to raise questions about the nature of the claim itself. A press release from one such corporate defendant appears to show this same tactic being used, with the company positioning the information as part of its response to ‘media commentary’ on the lawsuit. An article in Proactive Investors covers an announcement from Hipgnosis Songs Fund (SONG), a music royalty group, related to the ongoing legal claims being brought against it in the High Court. The litigation was filed last year by Hipgnosis Music Limited, who accused SONG, its founder Merck Mercuriadis, and the company’s investment adviser Hipgnosis Songs Management (HSM), of ‘diverting business opportunities to the trust and HSM.’ The company announcement largely focused on SONG’s appointment of commercial litigation specialists, Kastle Solicitors, ‘to review the claim’, and its intention to ‘seek to secure an indemnity from Mr Mercuriadis and Hipgnosis Songs Management against any liability that might be incurred.’  However, the announcement also revealed that SONG ‘has recently become aware that Hipgnosis Music Limited has secured litigation funding’, as the plaintiff is looking to ‘recover a substantial but as yet unquantified sum under the claim’. The announcement did not reveal the identity of the litigation funder or how the company has discovered the involvement of a third-party financier.
Commercial Deals

Gordon Legal Exploring Funded Class Action Against Magnis Energy Technologies

Class actions representing investors who lost money due to the failings or fraudulent behaviour of corporate directors are a top target for litigation funders, with Australia being a prime jurisdiction for these claims. The appetite for these class actions has been highlighted once again as an Australian law firm has stated that it is exploring a claim, supported by litigation funding, against a battery manufacturing company. Reporting by The Australian reveals that Gordon Legal is investigating a potential class action against Magnis Energy Technologies, which would represent both current and former Magnis investors who suffered financial losses. The claim would primarily focus on Magnis’ actions from 2021 onwards, with the law firm exploring potential wrongdoing around the company’s directors ‘providing market sensitive information to shareholders, while the market remained uninformed.’ Speaking with The Australian, Andrew Grech, partner at Gordon Legal, emphasised that the law firm was “at the beginning, not the end, of our investigations,” but explained that the scope of the claim could include “the conduct of the directors, officers, and (Magnis’) auditors Hall Chadwick.” He also revealed that the firm had already made progress towards securing third-party funding for any potential claim, saying, “The discussions with funders are proceeding as we would hope and like us they want to get to all the facts and circumstances before any decision is made.”
Commercial Deals

Litigation Funders See ‘Incredible Opportunity’ in Impact Investing

Whilst there is much debate about what constitutes ESG investing and to what extent it is driven by a desire to achieve positive outcomes rather than increase financial returns, there can be no doubt that the litigation funding industry is increasingly focused on impact investments. An article in Bloomberg Law looks at the ongoing trend of litigation funders focusing their investments on cases with a positive social impact, with ESG issues at the forefront of many funders’ investment strategies. The article highlights several examples of new funders launching their businesses with an explicitly stated focus on impact investing, including the likes of Aristata Capital, Vallecito Capital, and Flashlight Capital. For Aristata Capital’s chief executive, Rob Ryan, the interest from funders in social impact cases is a clear result of the “recognition from investors that this is an incredible opportunity to generate impact and some significant returns.” Will Zerhouni, managing director at Flashlight Capital, argues that it speaks to the reason why legal professionals take on their vocation in the first place: “it wasn’t because this was the fastest way to money, but this was the fastest way to justice.” Looking at the trend from an outside perspective, Richard Wiles, president of the Center for Climate Integrity, acknowledges that whilst “hedge funds are going to bring a profit motive and will have a narrower set of cases that they’ll want to get involved in,” they can still offer a helping hand to plaintiffs who lack the financial resources to bring a claim.  Michael Gerrard, founder and faculty director at the Sabin Center for Climate Change Law, argues that the true test for the longevity of funders’ interest in social impact “is which of these cases will yield money.” Gerrard points out that, to date, “there hasn’t been a single court decision anywhere in the world awarding money damages against fossil fuel companies because of climate change.”  
Commercial Special Features

An LFJ Conversation with Tanya Lansky, Managing Director of LionFish

Tanya Lansky is Managing Director of LionFish and has been working in the disputes finance and insurance industries for close to a decade. After reading law in London Tanya sought to abstain from treading the traditional legal pathways, and instead began her career at TheJudge Global, the then independent specialist broker of litigation insurance and funding. Tanya then joined boutique advisory firm Emissary Partners to leverage her relationships in the market and her economic understanding of disputes as an asset. LionFish is a London-based litigation funder offering financing solutions for litigation and arbitration risks. Founded in 2020 as a subsidiary of listed RBG Holdings Plc, the firm was acquired by funds managed by Foresight Group – the private equity firm with over £12bn AUM – in July 2023. With a core focus on efficient delivery, the firm’s transparent approach is a reflection of its corporate structure as principal investor which in turn also enables it to ensure alignment with its clients and their interests. Below is our LFJ Conversation with Ms. Lansky: Litigation finance has grown exponentially over the past decade, yet the industry is still nascent, with room for innovation and growth. What role does LionFish play in the funding industry's future growth? To-date, our market has often been compared to trends and growth of the legal industry. The reality is, we are a financial services industry which we believe should be our reference point as a market. This is why we encourage, share and apply standards that are commonplace in financial markets, which we believe will help drive further growth as well as a more robust framework with established credibility and transparency from which innovation can flourish. In this context, we frequently vocalise the drivers we believe would help further industry growth. Standardisation or documentation frameworks, as we recently wrote about in Bloomberg Law, is one such example. Another is encouraging market standard processes around the mechanics of how litigation funding agreements work, which naturally delivers greater transparency. Although the list can go on, a third is more coordination with the contingent and dispute risks insurance markets who play a central role in our market and beyond. We appreciate that we are just one of many players in the market and that this will have to be an industry-wide effort, but it must start somewhere. So, our contribution to the industry’s future growth is a starting point that encourages greater engagement and highlights the issues that we see prohibiting growth, all whilst practising the things we preach. Your website states that you are not a traditional litigation funder - how does LionFish differentiate from the competition? We are often asked by funders, insurers and lawyers to talk about “your fund” because many assume that all litigation funders are investment managers using third party capital raised from external investors. LionFish’s core business does not involve managing investor monies; we do not run a fund based on management and performance fees, but instead invest straight off our balance sheet such that if we lose, we are not losing investor monies but our own. Conversely, if we win, we keep those returns instead of paying them to investors. Greater reward but also greater risk, but critically, and in terms of how this translates to our client, this means that the decision-making sits with us and not our investors. This benefits our clients in several other ways. Firstly, we do not waste time looking at cases that may be remotely fundable but unsuitable for our portfolio. We are therefore candid, sincere and swift in our responses. Secondly, given that the decision-making sits solely within LionFish, we deal with opportunities and live investments efficiently and quickly. Thirdly, we are not investing in a defined pool of capital for fees but simply building and sustaining a profitable business. We therefore think in terms of long-term solutions that help forge long-term relationships. Perhaps most importantly though, our model allows us to invest in the £500k to £2m range that most often funders cannot do viably because of their business models. So, while we do compete for and have funded investment tickets considerably larger than £2m, our greater range of investment appetite means that we are more relevant to a wider range of lawyers than most others. How has the Foresight acquisition changed LionFish's strategy and operations? When our previous parent company, RBG Holdings Plc, announced that they were going to sell LionFish, we received significant interest in the business from multiple, differing parties. However, because of the different perspective they had on us as a business Foresight was such a natural fit. From very early on, it was very clear that Foresight recognised the strengths of our model and acknowledged that the issue was that the business was housed in the wrong structure (RBG being listed). Foresight therefore had no want to make changes to our business model but instead sought to enhance it. For example, our previously robust infrastructure became even more resilient and slick. We have also been able to assemble a new Board and panel of advisors, all of whom bring very relevant, heavy-hitting gravitas both in terms of breadth and depth of expertise and experience. So, although our strategy and USP has not changed, the operational tweaks have strengthened the business and improved the ‘user experience’ for our customers, providing them with greater confidence in working with and choosing LionFish as long-term partner. Much is being made about the recent PACCAR ruling in the UK, where the Supreme Court found that litigation funding agreements can be classified as 'DBAs', and may therefore be unenforceable under the 2013 DBA Regulations. What are your thoughts on the implications of this ruling? How impactful will this be on the funding industry in the UK going forward? Six months on from the judgment, we are pleased to see that the recognition of its damaging implications have been widespread and that there is movement and an explicit desire from the government to address it. The Post Office scandal in the UK has highlighted the value of litigation funding; at the height of its widespread media coverage, the lead claimant Alan Bates (after whom a BBC mini-series on the scandal was named) wrote a piece in the Financial Times regarding his views on reversing the PACCAR judgment given that justice would not have been served following one of the greatest domestic injustices of the 21st century to-date. This brought the consequences of the PACCAR judgment to the fore. Against this backdrop, Justice Secretary Alex Chalk MP told the Financial Times that litigation funders should be protected from the PACCAR judgment and that the Government would remedy the issue across the board at the earliest possible opportunity. The Digital Markets, Competition and Consumer bill is working its way through parliament and if it is passed into law, LFAs in opt-out competition claims (where DBAs are not permissible) will not be deemed to be DBAs (which would of course apply retrospectively). The latest Parliamentary debate surrounding the bill has been quite telling and reflective of the Lord Chancellor’s statement regards the intention to remedy what some Lords described as the “mistaken decision” and for this to be achieved across the justice system. Although the latest Parliamentary debate suggests that the bill will not go further than the CAT, Lord Offord of Garvel emphasised government’s policy to return to the pre-PACCAR position at the earliest opportunity. It is worth noting the long-term support of this point, in that as early as 2015, the Ministry of Justice has stated that LFAs should not be considered DBAs and the DBA Regulations should be clarified to reflect this. If nothing changes, the impact will continue to be damaging to the detriment of some claimants and more generally to access to justice – despite the fact that the industry would (as it has already done) adapt. That said, at the time of writing, we are encouraged by the drive and determination at the legislative and parliamentary levels to address the consequences of the PACCAR judgment. What are the key trends to watch out for as the litigation finance industry continues to evolve over the coming years? Consolidation and sophistication are probably the two key trends to watch out for. That said, the elements that drive these trends are what we think are the most interesting to watch. The first is that the institutional capital involved in the market is more experienced than ever and is sharpening in terms of appetites and investment profiles. This will inevitably continue to propel the industry forward and see it evolve in a Darwinistic way, with institutional capital focusing on the stronger players. Another, and a sign that the market is maturing, is the recognition of the various subsets of the litigation funding asset class – in the same way that real estate investing has long been recognised as a combination of many subsets of investing (e.g., residential, commercial, etc.). This is because funders are developing more targeted investment strategies. For example, the rise of law firm portfolio lending, which is very different from single case investing, appears to have driven funders to hire former bankers rather than lawyers. While some focus on group actions and mega-value claims, others focus on specialist claim types such as intellectual property or high-volume mass tort consumer claims. And, within single case investing, some are even redefining their strategies around philosophies such as ESG, or size (as we are). Fundamentally, with greater focus and specialisations, the feel of the litigation funding market will become more comparable to other established financial markets. The biggest trend-setting-element though is the increasing financial sophistication of the industry. To date, the industry has been dominated by ex-litigators but with the interplay of litigation insurance and funding, it is clear that beyond the underlying investment is a need to understand the structure it sits in. With funders increasingly hiring beyond the litigation sphere, we can only see this as a beneficial element which will allow for the market to continue evolving and maturing.
Community Spotlights
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Member Spotlight: Steven Weisbrot

Steven Weisbrot is an internationally recognised class action expert who is known for innovative data-based media and bookbuilding plans as well as class and collective action claims administration and distributions. He regularly writes and lectures on class action notice and is a widely sought out speaker to address industry conferences across the globe, as well as bar associations and private law firms, on the best methodologies to communicate with large audiences and driving them to act.

Steven is often hired for his expertise where local norms require cultural nuance or where comprehensive messaging is at the heart of case communication requirements. He is the only class action notice expert currently running notice programmes in five different European countries, in addition to the thousands of integrated notice plans that he has successfully implemented in the United States.

Steven received his J.D. degree from Rutgers University School of Law and holds a bachelor’s in Professional Writing from Rowan University.

Company Name and Description:  Angeion Group provides comprehensive settlement management services for class and collective actions, including notice, distribution and claims administration.

Company Website: www.AngeionGroup.com

Year Founded:  2014

Headquarters:  Philadelphia, PA

Areas of Focus: Class and Collective Actions including Bookbuilds, Claim Rate Estimates, Notice Programs and Distribution of Proceeds.

Member Quote: I see our role as notice and claims administrator as an essential element of providing access to justice in the truest sense of the phrase, which in large part, is what the funding mechanism is designed to do.  By notifying and then verifying claimants, we make sure that the monies are distributed to as many legitimate claimants as possible.  We also assure the justice or judge that all reasonable steps are being taken to reach claimants, which is of heightened importance in an opt-out situation since claimants will be bound by the judgment whether they see the notice of settlement or not.  We work with funders to help estimate the take up rates and redemption rate as part of their due diligence.