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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.”
Announcements Commercial

International Legal Finance Association Adds Orchard Global as New Member

The International Legal Finance Association (ILFA), the only global association of commercial legal finance companies, has announced the addition of Orchard Global to the organization’s rapidly growing membership base.  Orchard Global is a multi-strategy alternative asset management firm that launched its legal finance strategy in 2015 and has made over 100 legal finance investments across its managed funds. The firm launched its standalone legal finance fund in November of last year.  “As the only global association representing the commercial legal finance industry, ILFA is excited to welcome Orchard Global as its newest member,” said Gary Barnett, ILFA’s Executive Director. “Orchard’s addition continues to demonstrate that ILFA’s membership is made up of the world’s leading legal finance providers and to strengthen ILFA’s role in promoting the highest standards of operation and service for the commercial legal finance sector around the world.” “We are thrilled that the team at Orchard Global will be joining ILFA’s ranks,” said Neil Purslow, ILFA Chairman and Co-Founder of Therium, an ILFA member. “The addition of yet another leading legal finance provider will serve to bolster our efforts as the voice of the legal finance industry throughout the world.” “We look forward to joining the ILFA membership, supporting ILFA’s mission and deepening our collaboration with our colleagues across the industry,” said Co-Heads of Litigation Finance at Orchard Global, Ben Moss and Lara Melrose.  Orchard Global provides creative and flexible litigation financing solutions to lawyers and claimants, investing in commercial litigation and arbitration cases globally, with a focus on England and Europe, as well as other common law and other selective jurisdictions. The firm’s investments span a broad spectrum of commercial claim types and structures, including general commercial disputes, group actions, competition claims, insolvency-related disputes, law firm lending, equity stake investments and portfolio financing.  About the International Legal Finance Association  The International Legal Finance Association ILFA represents the global commercial legal finance community, and its mission is to engage, educate and influence legislative, regulatory and judicial landscapes as the global voice of the commercial legal finance industry. It is the only global association of commercial legal finance companies and is an independent, non-profit trade association promoting the highest standards of operation and service for the commercial legal finance sector. ILFA has local chapter representation around the world. For more information, visit www.ilfa.com and find us on LinkedIn and X @ILFA_Official.  About Orchard Global Orchard  Global is an alternative asset manager providing transformational solutions to banks, asset managers, and other borrowers seeking capital solutions to complex problems. Orchard provides lending and risk-transfer solutions across a range of private and public markets strategies. Orchard Global manages capital on behalf of pensions, sovereigns, endowments, hospitals, educational institutions, families, and many others around the world. Orchard Global offers private credit and public credit strategies by leveraging its complex structuring capabilities, an in-house legal team, comprehensive credit expertise, and global reach.
Announcements Commercial Deals

Omni Bridgeway Announces: Secondary market transaction completed in relation to Fund 4’s IP portfolio

Omni Bridgeway Limited (Omni Bridgeway, OBL, Group) (ASX: OBL) announces that it has completed the sale of a 25% interest in a portfolio of 15 intellectual property (IP) investments (Investments) in Fund 4 (Fund) to an affiliate of GLS Capital Partners Fund II, LP (GLS) for an initial amount of US$21.5 million, representing a multiple on invested capital (MOIC) of 2.0x of the apportioned aggregated deployments to date.  GLS will receive a preferred return on its deployments alongside OBL, beyond which OBL retains further profit rights on the 25% interest.  The cash consideration is anticipated to be received within five business days.  The total committed capital of the Investments is US$104.4 million with total deployed capital of US$42.9 million. The future budgeted costs (committed but undeployed capital) of US$61.5 million will be split proportionately between the Fund and GLS.  The sale will be treated as a partial completion of each of the 15 Investments for our fund and performance reporting. The full estimated portfolio value (EPV) of the Investments, at 30 September 2023, was approximately A$3.3 billion, with the Fund’s remaining proportionate share being A$2.5 billion.  The transaction will result in the deconsolidation of the Investments and an estimated net gain before non-controlling interests (NCI) of approximately US$51.0 million EBITDA (after NCI of approximately US$4.6 million EBITDA) before management and performance fees.  The residual interests of the Investments will be recognised as “Litigation Investments - investment in associate” within the Group Consolidated Financial Statements.
Transaction detailsUS$ million
Cash consideration21.5
add fair value of the residual interest179.5
less derecognition of associated net assets, capitalised overheads, direct costs and expenses1(50.0)
Group net profit151.0
Attributable to NCI1(46.4)
Group net profit after NCI1,24.6
  1. Amounts are estimated and subject to finalisation of costs and audit of balances. 2. Excluding management and performance fees.
Raymond van Hulst, Managing Director and CEO, commented “The conclusion of this transaction with an expert litigation finance investor with strong IP capability demonstrates the continued growth and depth of the secondaries market as well as the intrinsic value of our portfolio. The thorough due diligence process undertaken affirms our belief in the value of the Investments.  “Opportunities in IP are expected to exceed our concentration limits within Fund 4, this deal strategically frees up capacity for this growing and highly accretive sub asset class. It enables us to redeploy capital towards our strong pipeline of new, attractively priced IP investments, while retaining majority ownership in the Investments. It furthermore supports diversification of our portfolio overall.  “This also reinforces our commitment to diversifying revenue sources, while concurrently mitigating underwriting risks, monetising the incremental value created from the portfolio and advancing our strategic priorities,” said Mr van Hulst.  Adam Gill, Managing Director of GLS commented “GLS is pleased to partner with Omni Bridgeway in this transaction which accomplishes important strategic goals for both parties. The transaction provides GLS an attractive risk-reward proposition in a highly diversified and collateralized portfolio of litigation finance investments, curated and managed by an industry leader. We look forward to our continued collaboration with Omni Bridgeway to maximize the value of this portfolio for our respective investors.”
Case Developments Commercial

£1.5M Settlement Approved by CAT in ‘Car Delivery Charges’ Class Action

Despite the ongoing consternation over the future of litigation funding’s role in UK class actions, we continue to see victories and major milestones achieved in funded cases over recent weeks. The approval of a settlement in the ‘car delivery charges’ class action represents another such success for claimants and their funders. Reporting by CDR confirms that the Competition Appeal Tribunal (CAT) has approved the £1.5 million settlement in the opt-out class action brought against Compañía Sudamericana de Vapores (CSAV), following the settlement agreement being reached in October. The CAT approved the settlement in Mark McLaren v MOL and Others at a hearing on 6 December but have yet to publish a written judgement. Following the CAT’s approval, this now stands as the first ever settlement in a UK opt-out class action. Class representative Mark McLaren praised the approval of the settlement, saying that it would “provide redress to those British consumers and businesses who bought new cars and vans and have suffered a loss as a result of the cartel.”  Scott+Scott’s Belinda Hollway, who acted for the class representative, said that the CAT’s decision demonstrated “that collective settlements can be achieved and that the regime is working to deliver compensation to the victims of breaches of competition law.” Woodsford provided litigation funding for the claim. As LFJ reported in October, claims have been brought against five international shipping companies: MOL, “K” Line, NYK, WWL/EUKOR and CSAV, over allegations that they engaged in a price-fixing scheme between 2006 and 2015. The settlement with CSAV was hailed as a “significant milestone” by McLaren, but it still only represents a small portion of the overall class action, as CSAV is the smallest of the defendants with a 1.5% market share. The remaining four defendants are currently set to continue their defence at trial in 2025, having previously been censured by the CAT ‘for undermining the ethos of collective actions by communicating directly with class members.’