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Commercial

Exton Advisors Offers Seven Predictions for Litigation Finance in 2024

With less than two weeks until the end of 2023, industry leaders are busy planning for next year and attempting to forecast how the litigation finance market will evolve in 2024. In a post on LinkedIn, Exton Advisors looks ahead to what opportunities and challenges the litigation finance market will face over the next 12 months, offering its top seven predictions for 2024:
  1. Increased opportunities for well capitalised funders
  2. Pricing will increase
  3. Law firm financing will increase
  4. Regulation will continue to be a topic of conversation
  5. The secondary market will continue to expand and develop
  6. Key judgements will impact funding
  7. AI and tokenisation will be disruptive
Exton’s prediction of increased opportunities highlights the potential for rising volumes of insolvency and commercial disputes, whilst the likely increase in pricing is predicted to be ‘driven by high interest rates and the overall cost of financing.’ These factors are also the drivers behind the prediction of increased law firm financing, as funders may move away from single case funding for small to mid-sized commercial claims. However, Exton’s prediction of an increase in pricing is also paired with the suggestion that funders will explore alternative fee structures and focus their capital on a smaller number of transactions. To read Exton’s full predictions and the accompanying explanations, click here.
Case Developments Commercial

Meta Class Action Set for Certification Hearing in January

As a busy year of activity for UK class actions comes to a close, the industry’s sights are already set on funded proceedings which are looking to advance in early 2024. Among the high profile cases to watch next year, an opt-out claim being brought against Meta has received an early Christmas present, as a date for its certification hearing has been announced.  An article in CDR reports that the proposed opt-out class action filed against Meta will have its certification hearing before the Competition Appeal Tribunal (CAT) on 8 and 9 January. The application for the class action, which was originally filed on 6 October, has been revised following comments from the CAT and now includes ‘an expert report from Fiona Scott Morton, Theodore Nierenberg Professor of Economics at the Yale School of Management.’ The claim, which has secured funding from Innsworth and representation from Quinn Emanuel Urquhart & Sullivan, focuses on allegations that ‘Meta has violated UK competition law by forcing users to share their data from activities outside of the Facebook platform.’ Dr Liza Lovdahl Gormsen is the proposed class representative, with the class action looking to represent any UK Facebook users who had an account “at any time between 14 February 2016 and the date of final judgment or earlier settlement of the present proposed collective proceedings, inclusive”. Kate Vernon, partner and head of the competition litigation practice at Quin Emanuel, stated that they were “pleased that a quick certification hearing for the revised application has now been listed for 8–9 January”, and emphasised that the newly included expert report “sets out a clear blueprint to trial of this important claim on behalf of the UK users of Facebook.”
Case Developments Commercial

NSW Supreme Court Ends Class Action, Citing Lack of Funding

Over recent months we have seen numerous victories for funded class actions in Australia, with litigation funders earning significant returns on their investments. However, a judgement from one of the state Supreme Courts shows that if funders lose confidence in a case, the prospect of success for group members can quickly disappear.  A judgement by the Supreme Court of New South Wales in the case of Australian Retirement Group Pty Ltd v The Commonwealth Bank of Australia Ltd (No 4), approved the settlement and discontinuance of proceedings the class action brought against CBA after the plaintiffs failed to secure litigation funding to continue the litigation.  In his decision, Justice Ball explained that ‘it is not realistic to think that the plaintiffs will be able to obtain alternative litigation funding or representation by counsel on a contingency basis.’ He went on to say that as ‘the underlying claim appears to have poor prosects of success’, and he remained unconvinced that the plaintiffs would be able to secure either funding or representation. The class action had previously received litigation funding from JustKapital Limited, with Shine Lawyers paid to represent the plaintiffs. However, JustKapital stopped funding for the case on 29 September 2020. Following the cessation in funding, Hall Partners acted for the plaintiffs starting from 20 May 2021, but ‘neither Hall Partners nor the plaintiffs have been able to arrange alternative funding.’ The class action was first brought in 2016 on behalf of small business customers of Bankwest, now a subsidiary of CBA, ‘who were placed into the Credit Asset Management (CAM) division of Bankwest and were not subsequently “rehabilitated”.’ The litigation focused on allegations that after Bankwest was acquired by CBA, the bank ‘engaged in unconscionable conduct by treating the loans of group members as nonperforming and bringing them to an end in a way that was harsh, unconscionable and in breach of provisions of the Banking Code of Conduct.’ The terms of the proposed settlement for ending the proceedings include CBA receiving a payment of $2.9 million to cover legal costs. This will be paid by AmTrust Europe Limited, ‘which provided an indemnity as security for CBA’s costs.’ In return, CBA will pay £375,000 as a contribution towards the group members’ legal costs. The full judgement can be read here.
Commercial Regulatory Issues

UK Government ‘Considering Options’ for Legislative Solutions to PACCAR

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

UK Funder Sandfield Capital Raises £20M to Fuel Expansion 

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

Episode 81: Blake Trueblood and Ed Gehres

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

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

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

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

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

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

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