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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.

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.”

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.”  

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.
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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.

Using Litigation Funding for Shareholder Disputes and Claims Against Directors

As litigation funders continue to try and grow their offering for corporate entities, they are looking to engage in a wide variety of cases, such as shareholder disputes. A new blog post from a UK law firm looks at the different ways third-party funding can support both companies and shareholders to pursue meritorious claims, helping them offset costs and reduce risk. An insights post from Damian Carter and Jessica Kraja at Weightmans highlights the different use cases for litigation funding in company and shareholder disputes, examining how third-party financing can achieve successful outcomes whilst reducing risk levels. Analysing shareholder disputes, Carter and Kraja acknowledge that shareholders looking to pursue a case against the company may find it ‘difficult to find the funds personally to pay for legal costs to bring such a claim’, especially when faced with the prospect of having to pay adverse costs if the claim is unsuccessful.  Similarly, the authors highlight an example where majority shareholders may face a claim from a group of disgruntled minority shareholders, and are unable to use company funds to finance their defence. In both situations, third-party funding may provide an avenue for shareholders to cover the costs of litigation without adding to their own risk portfolio. Carter and Kraja also raise the possibility of companies wanting to bring claims against directors who breach their fiduciary duties, thereby creating a dispute that the company’s legal department may not have accounted for in their budget and planning. Once again, litigation funding can enable the company to pursue such a claim against a director, without further straining internal legal costs. The article also highlights Weightmans’ own all-in-one litigation funding solution: Enable. The firm’s litigation funding service provides clients with a streamlined process for securing outside financing for their disputes, with Weightmans bringing together the funder, insurer, and broker, to craft a bespoke funding solution. The Enable service aims to complete the funding and insurance process within 18-21 days, and includes a review of the funding terms by a specialist broker to ensure the client receives a competitive offer.

Judgement Preservation Insurance in the Spotlight in Health Insurers’ Dispute with Quinn Emanuel

Alongside the growth of the litigation finance market, the proliferation of litigation insurance services has also experienced its own boom through the provision of a variety of policies, including after the event and judgement preservation insurance. A new court order in a dispute between a law firm and its clients over fees may now shed some light on the world of litigation insurance, which has as similar a reputation for limited transparency as litigation funding. An article in Bloomberg Law covers a new development in the dispute between Quinn Emanuel Urquhart & Sullivan and the health insurers which it represented in a case brought against the federal government over unfulfilled payments under Obamacare. The law firm has been ordered to disclose its judgement preservation insurance (JPI) policy documents, which it obtained on its $185 million fee to represent the insurers. Last year, an appeals court overturned the nine-figure fee and then ordered a federal court to recalculate the fee. US District Judge Kathryn Davis ordered Quinn Emanuel to hand over the details of the JPI policy, after the insurers argued that it was necessary to ensure they would receive an equitable payment if the recalculation of the fee resulted in a reduced amount.  Explaining her reasoning for ordering Quinn Emanuel to hand over the policy documents, Judge Davis said that “the JPI’s terms may be relevant to the court’s task on remand if the policy provisions are inconsistent with the court’s objective ‘to ensure an overall fee that is fair for counsel and equitable within the class.’”

Portfolio Funding for Law Firms in the Energy Sector

Whilst single case funding remains the bedrock of the litigation finance market, portfolio funding for law firms has continued to grow in popularity, thanks to its ability to offer a source of capital that can be deployed in a variety of ways. A new article suggests that the energy sector may be a prime candidate for the expansion of portfolio funding. In a guest editorial for the February issue of Inside Energy, Peter Petyt, CEO of 4 Rivers Services, examines the opportunities for third-party dispute funding in the energy sector. In particular, Petyt focuses on the opportunities for law firms who specialise in energy litigation, and how portfolio funding can be used to enhance their offerings to clients across the sector. Petyt provides a detailed overview of the different aspects of portfolio funding, explaining how law firms can use the capital in different ways: ‘to pay the (often significant) disbursements of a case (including court and arbitration fees, experts, e-disclosure etc); and potentially to fund other initiatives such as acquisitions, recruitment, marketing and IT.’ Petyt goes on to highlight that the portfolio funding model ‘allows for the law firm to draw capital more flexibly than in a single case funding scenario’, and has the benefit of avoiding ‘much of the often complex and torturous nature of single-case funding.’ Petyt points out that for law firms assessing energy sector claims with a variety of strength and viability, portfolio funding can enable the law firm to pursue some of these less sure claims as ‘the funder’s return is collateralised by all cases within the funder’s portfolio.’ He also draws specific focus to the current state of the energy sector, noting that ‘increased globalisation of the energy sector has made dispute avoidance and resolution strategies increasingly important for mitigating risk’. In this environment, third-party portfolio funding can allow law firms to offer their energy clients bespoke fee solutions that maximise positive litigation opportunities whilst downsizing their risk profile.

CFLF Announces Relaunch of Campaign to Reform Consumer Lawsuit Lending 

Consumers for Fair Legal Funding (CFLF) — a coalition of community groups, social justice organizations, and business interests across New York — today announced the relaunch of its push for commonsense reform of the unregulated and predatory lawsuit lending industry.  The coalition’s founding members have been joined by two of the best-known ride-hailing companies — Uber and Lyft. Uber is the nation’s largest insurance consumer and is committed to ensuring both affordable coverage and safety for drivers and riders alike.  “Uber drivers operate in every corner of the state and are critical to helping New Yorkers get around, while also playing an important role in supporting the local economy,” said Hayley Prim, Senior Policy Manager at Uber. “The unchecked lawsuit lending industry is driving insurance costs up, consuming an ever-larger share of fares, and making it harder for drivers to earn a living. Lawmakers need to establish some simple rules to reign in lenders and protect hardworking individuals statewide.”  “Steadily rising insurance costs are the biggest hurdle to keeping rides affordable and paying drivers more,” said Megan Sirjane-Samples, Director of Public Policy at Lyft. “If we can curb — or better yet, reduce — these costs, the savings are going to go directly back into drivers’ pockets and help lower fares. Without putting in place some commonsense regulations, the lawsuit lending industry will continue to boom, and consumers and hardworking New Yorkers will pay the price.”  Over the past decade, lawsuit lending — also known as third-party litigation funding, litigation financing, or car accident loans — has grown into a multibillion-dollar global industry, with lenders funded by deep-pocketed hedge funds and foreign interests. A 2022 study found that increased litigation, fueled by unchecked and unregulated lawsuit lending, contributes to rising insurance costs. That’s something New York, with the nation’s second-highest average insurance premiums, can’t afford.  CFLF was launched in 2022 to push for lawsuit lending reform that would preserve an important funding stream for vulnerable individuals in need of funds — often to cover medical bills or living expenses as they await the outcome of legal action — while protecting them from unscrupulous lenders. CFLF supports both an interest rate cap on lawsuit loans and transparency in the lawsuit lending process to expose conflicts of interest and create a level playing field for all.  Unbanked and underbanked individuals — frequently members of communities of color — are often targeted by lenders who promise them fast cash by borrowing against expected legal settlements. With no limit on interest rate caps, lenders can charge up to 100 percent — or more — and borrowers can end up owing most or all of their eventual settlement or jury award to a lender, ending up with very little of their settlement or even in debt.  “If the governor and lawmakers are truly committed to a robust and equitable consumer protection agenda this session, they will pass lawsuit lending reform,” said the Rev. Kirsten John Foy, faith leader and founder of CFLF member Arc of Justice, who is himself a lawsuit lending victim. “At a time when New Yorkers are struggling and the state faces a budget deficit, this issue is an easy way to protect vulnerable individuals — at no additional cost to the taxpayers.”  Lawsuit lending firms are expanding in New York — one of the four most attractive states for those looking to invest in the industry. Unprincipled lenders have been known to pursue anyone without a financial safety net, even taking advantage of unhoused and wrongly convicted New Yorkers.  To learn more about CFLF and efforts to enact commonsense reforms on lawsuit lending, visit https://fairlegalfunding.org/.