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Commercial Regulatory Issues

Westfleet Advisors Publishes Study of Litigation Funding and Confidentiality

There are few issues concerning litigation finance that have received more scrutiny and commentary than the ongoing debates around transparency in third-party funding, and conversely, the level of confidentiality that is afforded to lawyers and clients who engage with funders. To provide detailed guidance for industry participants, a leading litigation finance broker and adviser has published a new study that offers detailed insights into recent developments regarding confidentiality in litigation funding. Westfleet Advisors has published a new edition of its white paper, ‘Litigation Funding and Confidentiality: A Comprehensive Analysis of Current Case Law’, which aims to provide a thorough analysis of court decisions on the ‘confidentiality of information and documents about litigation funding.’ The report notes in its introduction that the number of decisions on this subject have risen dramatically over recent years, with Westfleet’s study analysing a total of 106 court decisions. The white paper explains that there has been a common misconception that ‘lawyers were unable to predict whether a court would compel discovery of information shared with a commercial litigation funder because few decisions existed on the issue.’ It goes on to explain that despite the lack of concrete appellate court rulings on the subject, ‘enough case law exists to see the shape and trend of the law on these questions.’ Through its analysis of these 106 trial court decisions, Westfleet found that in most cases (68%), the court denied or limited discovery of any communications with litigation funders or the actual litigation funding agreements. The report also looks at the volume of decisions on this subject over time, and found that ‘since 2011, each year has seen more courts denying discovery requests related to litigation funding than granting them.’ This has been consistently true, despite the fact that the number of rulings concerning confidentiality of litigation funding has risen over the last decade. The full report, which delves into the specifics of these decisions, the reasoning that the courts applied, and the conclusions that can be drawn from these trends, can be read here.
Commercial

Incorporating Litigation Funding into Preferred Legal Panels

As legal departments in companies across every sector face increasing pressures on their budgets and litigation strategies, funders are keen to demonstrate the different ways in which they can provide support, both through direct provisions of capital and by lending their expertise in litigation matters. In an insights post from Omni Bridgeway, Carrie Freed and Matt Leland offer an overview of the challenges facing legal departments using preferred legal panel (PLP) programs, and how in-house counsel can use litigation funding to enhance these PLPs.  The use of third-party funding by in-house attorneys allows these teams to ease budget pressures, whilst still maintaining sustainable relationships with high quality outside counsel. Looking at the benefits available to legal departments, Freed and Leland begin by stating the most immediately apparent benefit that by using litigation funding, ‘the company reduces its financial risks by capping or possibly eliminating its legal fees for the life of the litigation.’  Furthermore, the rigorous analysis that funders undertake before financing a case is a useful tool for ensuring the strength of the claim, which can provide ‘reassurance to in-house counsel, business partners, and directors who might be wary about filing a claim.’ In addition to verifying the merits of a claim, funders can also bring a wealth of experience both from their teams and the vast number of past engagements with similar cases, providing in-house counsel with ‘fresh perspectives about strategy or to pressure-test arguments.’ Freed and Leland therefore recommend that companies incorporate litigation funding into their PLPs, firstly by educating their law firms about funding opportunities and then by including ‘litigation funding provisions in PLP documents’. They suggest that this could include a variety of provisions, such as setting the expectation that a law firm would ‘solicit at least one proposal for litigation funding when pitching for a plaintiff-side case.’
Announcements Commercial Legal Innovation

Doorway Capital Launches New Product: The Shelf Facility

Doorway Capital, a specialist in legal funding solutions, has launched a new funding product designed to support law firms looking for M&A opportunities to achieve their growth ambitions.

The Shelf Facility provides a firm with pre-agreed access to funding - the facility is fully underwritten and documented in advance of being required, with funds being made available as they are needed.  This structure allows firms to actively pursue acquisition opportunities in the knowledge that they can act swiftly and decisively when they find the right target.

The product is an extension of the flexible solutions Doorway Capital has been offering law firms since 2015, including funding for the merger of Moore Blatch and Barlow Robins, and various acquisitions made by AWH Solicitors, Simpson Millar and other firms.

“Doorway Capital’s new shelf facility is a gamechanger” says Abdul Hussain, Chief Executive of AWH Solicitors.  “It means that we can secure access to additional funds when we find a suitable investment opportunity in the M&A market without having to wait on credit approval.”

The launch comes in response to increased demand from across the sector, with leading M&A broker, Acquira Professional Services, reporting more than 60 M&A deals in 2023 to date, with a spike expected shortly to coincide with the PII renewal season.

“Over the last 18 months, law firms have increasingly asked Doorway for a funding commitment that can be established in advance of needing to draw upon it” says Steve Din, founder of Doorway Capital.  “The catalyst for this is, undoubtedly, the desire for law firms to make acquisitions and ensuring acquisition funding is available to be drawn, often, at very short notice.”

For more information please contact Steve Din (funding@doorwaycapital.com) or Phil Hales (bd@doorwaycapital.com).

About Doorway Capital

Doorway Capital has been providing specialist funding solutions for UK law firms since 2015.  Facilities are typically written up to values of £20m and tailored to clients’ individual needs.

“The team at Doorway Capital are extremely knowledgeable – they spent time and effort designing a facility that gave us the depth and flexibility we needed at a crucial time in our growth.  I couldn’t recommend a better funding partner for a law firm.” – Shane Hensman, CEO of Cordus Law.

As Doorway’s founder, Steve Din, was a former managing director of the global investment bank Morgan Stanley and European Head of Restructurings at Citigroup, it is no surprise that Doorway has chosen to pay close attention to the needs of law firms looking to grow by acquisition.

Commercial

ALFA Announces Agenda for Future of Class Actions in Australia Conference

As we continue to see a growing number of high profile class actions in Australia, industry leaders are keen to look at how the class action landscape in Australia will evolve and how it can be improved. In a post on LinkedIn, The Association of Litigation Funders of Australia (ALFA) announced the agenda for its upcoming Future of Class Actions in Australia conference, which will be held at Herbert Smith Freehills’ Sydney office on 27 October 2023. The half-day event will cover a wider range of topics including the current trends in Australian class actions, the future of court approval and settlement administration, and potential strategies for reducing the costs of class actions. The event will be bookended by two keynote addresses, opening with an address from the Hon Justice Michael Lee, Federal Court of Australia, and closing with a keynote from the Hon Justice Sarah Derrington AM, Federal Court of Australia. The three panel sessions during the afternoon will feature a range of speakers including senior leaders from Australia’s top law firms, funders, and insurers. Among the representatives from litigation funders set to speak are Stuart Price, CEO of CASL, and Kristen Smith, portfolio manager and senior investment manager at Omni Bridgeway. Limited in-person tickets for the vent are still available here, whilst unlimited virtual passes can be purchased here.
Commercial Regulatory Issues

Analysing the Potential Impact of Diag Human Ruling on Funding Agreements

Whilst industry commentators are still debating the potential impact of the Supreme Court’s PACCAR ruling on the enforceability of litigation funding agreements (LFAs), new court rulings in related practice areas are being analysed to see whether they offer lessons for funders post-PACCAR. The most notable in recent weeks has been a Court of Appeal ruling which dealt with the issue of severance of terms for a conditional fee agreement (CFA).  A new insights piece from LCM’s senior investment manager, James Foster, examines the recent decision from the English Court of Appeal in Diag Human v Volterra Fietta [2023] EWCA Civ 1107, looking at how the ruling may prove instructive on the issue of severance in LFAs, in a post-PACCAR world. This issue of the ‘severance of offending contract provisions’, is particularly important for LFAs which not only have a clause for a funder’s return to be calculated from a percentage of damages, but also have additional clauses for the return to be calculated on a different basis. Foster begins by highlighting the existing case law from the Supreme Court’s ruling in Egon Zehnder Ltd v Tillman [2019] UKSC 32, which lays out the conditions that must be met for contracts to remain effective after the removal or severance of an unenforceable provision. He goes on to examine the Court of Appeal’s judgement and reasoning, highlighting the court’s position that in this case, ‘public policy considerations alone precluded severance, irrespective of compliance or non-compliance with the three stage test.’ Turning to the decision’s relevance to LFAs, Foster explores whether an LFA, with additional clauses laying out differing methods for calculating a funder’s return, would violate the third condition of the Tilman ruling that specifies that the removal of an unenforceable provision must not ‘change the character of the contract that it becomes “not the sort of contract that the parties entered into at all”.’ Foster argues that severance of one provision for a funder’s return does not change the nature of the contract that the parties willingly entered into, as the use of any other provision for a funder’s return means that, ‘in all other respects the bargain struck between the parties in the LFA would be exactly the same.’ Furthermore, Foster argues that the public policy considerations are unlikely to be applicable in relation to LFAs, stating that, ‘it would not be possible to argue (as it might be in the case of lawyers who act under non-compliant CFAs or DBAs) that the reward arrangements pre-severance were both illegal and unenforceable and so should not be saved by severance.’ In recent days, other industry experts have also offered their own views on the impact of the Diag Human ruling. Martyn Griffiths, of Gatehouse Chambers, acknowledged that funders and their opponents will make differing arguments as to the applicability of the Diag Human decision to LFAs. However, he concluded his analysis by emphasising that the courts ‘will have to consider whether the funder should face the full consequences of the un-enforceability of their agreement or whether to allow those consequences to be ameliorated or avoided by permitting severance or the payment of a quantum meruit.’ In a piece for Sentry Funding on LinkedIn, Rachel Rothwell suggested that the Court of Appeal’s judgement ‘may not be seen as particularly helpful to the plight of litigation funders’, and that the main lesson is that for those ‘drawing up fee agreements with clients, make sure you get it right.’
Commercial Special Features

Member Spotlight: Susanna Taylor

Susanna Taylor is Head of Investments – APAC, for Litigation Capital Management (LCM). Susanna leads LCM’s team of Investment Managers in Australia and Singapore and is responsible for overseeing the sourcing, due diligence and management of LCM’s investment activities across the APAC region. Susanna is a highly experienced and skilled operator being active in the litigation funding industry since 2014 when she joined LCM. Since that time Susanna has been responsible for sourcing, underwriting and managing a large and diverse portfolio of dispute projects consisting of commercial disputes, class actions, insolvency claims and international arbitration. Susanna sits on LCM’s investment committees for both APAC and EMEA and is intimately involved in the operational aspects of LCM’s business, taking part in regulatory and compliance and capital raising activities, investor relations and the expansion of LCM to new jurisdictions. Prior to joining LCM in 2014, Susanna was a litigation specialist with Norton Rose Fulbright in Sydney where her practice canvassed class actions, financial institutions disputes, contentious regulatory work (including work for the Australian Competition and Consumer Commission) and corporate disputes. Before joining Norton Rose Fulbright, Susanna practised in London for UK firm Hammonds Suddards Edge where her focus was on construction litigation. Susanna’s Chambers and Partners profile describes her as “one of the top operators in the industry,” and as “an extremely impressive litigation funder with a strong ability to cut to the commercial reality of claims.” Company Name & Description:  LCM specialises in providing bespoke dispute finance solutions to facilitate the pursuit and successful recovery of funds from legal claims, while protecting our clients from the downside risk associated with disputes. Founded in 1998, LCM is one of Australia’s most experienced and successful disputes finance companies. LCM has completed over 260 cases and has assisted hundreds of companies and individuals in achieving significant recoveries from claims that, without LCM, may not have been pursued due to the associated costs and risks. All of LCM’s Investment Managers are former litigators with the level of experience required to facilitate successful outcomes in disputes. LCM’s team is highly skilled in the assessment of claims and in providing strategic assistance throughout the process of determining the dispute. LCM has an unparalleled track record, driven by effective project selection, active project management and robust risk management. LCM’s capability stems from being a pioneer of the industry with more than 25 years of disputes finance experience. LCM is listed on AIM (at the London Stock Exchange), trading under the ticker LIT. Company Website https://lcmfinance.com/ Year Founded: 1998 Headquarters: Headquartered in Sydney, with offices in London, Singapore, Brisbane and Melbourne Area of Focus: Arbitration, Insolvency Claims, Commercial Claims, Class Actions Member Quote: “Disputes finance is a risk management tool which allows a variety of claimants from small to large to leverage their dispute assets in order to transfer the costs and risk of a dispute to a third party funder.  Being involved in structuring these finance solutions and sitting alongside claimants to assist them to reach a successful outcome makes this a very rewarding industry to be a part of“.
Commercial Regulatory Issues

Ireland Law Reform Commission Guidance on Third Party Investment

Ireland's litigation funding laws differ from those of the United Kingdom and other common law jurisdictions. Dispute resolution investment in Ireland is broadly illegal under champerty and maintenance crime statutes, however, Ireland's Courts and Civil Law Act 2023 offers a new legal framework that permits the use of third party funding products and services for international arbitration proceedings in commercial disputes.  Mondaq reports lawmakers in Ireland are embracing litigation finance as a tool for citizens' access to justice. The Representative Actions for the Protection of the Collective Interests of Consumers Act 2023 is a positive step to decriminalize third party funding in international arbitration in Ireland. Furthermore, recommendations to expand legalization of litigation funding vehicles in Ireland have included insolvency, liquidation, receivership and bankruptcy actions.  The Law Reform Commission continues to explore and examine policy considerations that decriminalize litigation investment in Ireland. According to Mondaq, Ireland's Department of Justice is working to publish additional policy findings on litigation finance by the second quarter of 2024.
Commercial Fundraising

Milberg London Secures Funding From Bench Walk Advisors for Competition Claim Against Valve 

The video game industry has seen tremendous growth over recent decades, with research from PwC projecting that it could generate more than $300 billion in revenue by 2026. However, this rising tide has also brought with it allegations that some of the largest gaming companies have engaged in anti-competitive and anti-consumer practices, resulting in claims being brought with increasing regularity. A LinkedIn post and announcement from Milberg London LLP reveal that the law firm has secured ‘a substantial funding package’ from Bench Walk Advisors to bring a claim against Valve Corporation, one of the world’s largest gaming companies. The opt-out competition claim focuses on allegations that Valve’s digital distribution service and storefront, Steam, used ‘excessive pricing and anti-competitive price parity clauses, with the aim of ensuring fair competition in the digital gaming marketplace.’ The intended claim will be filed with the UK’s Competition Appeal Tribunal (CAT), with Vicki Shotbolt, founder and CEO of Parent Zone, acting as the proposed class representative. Shotbolt is working with Milberg London, as well as barristers from Monckton Chambers including Robert Palmer KC, Julian Gregory, and Will Perry.  This is notably the second opt-out claim that Milberg London has brought against a gaming corporation, having already brought a claim, worth up to £5 billion, against Sony Playstation for alleged abuses of its monopolistic position.
Announcements Commercial People Moves

Silver Bull Announces Execution of Key Persons Retention Agreement

Silver Bull Resources, Inc. (TSX: SVB, OTCQB: SVBL) (“Silver Bull” or the “Company”) is pleased to announce that following the entering into the litigation funding agreement with Bench Walk Advisors LLC (the “LFA”), the Company has established a Management Retention Agreement (“MRA”), which is a long-term incentive program to retain key personnel of the Company who have important historical information and knowledge to contribute towards the Claim. The MRA provides that if the international arbitration claims against Mexico for breaches of its obligations under NAFTA (the “Claim”) is successful and the Company receives damages proceeds, 12% of the net proceeds will be directed to the MRA for distribution to its participants, which include Timothy Barry, President, CEO and Director, Brian Edgar, Chairman of the Board, Christopher Richards, CFO, Juan Manuel Lopez Ramirez, and David Xuan. Each participant must satisfy specific Claim related duties and if they do so, each participant may be entitled to a pre-defined percentage of the proceeds received by the MRA. Certain participants under the MRA constitute related parties of the Company and accordingly the MRA constitutes a “related party transaction” of the Company under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”). The Company is relying on the exemption from the requirement to obtain a formal valuation pursuant to section 5.5(g) of MI 61-101, which provides an exemption where the criteria set out therein are met. The Toronto Stock Exchange (the “TSX”) has provided their conditional approval of the MRA, including that the MRA be approved by the Company’s disinterested shareholders at the next Annual Meeting of Shareholders, which will also be sought in compliance with the requirements for minority shareholder approval under MI 61-101.