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Commercial Legal Innovation

Using Litigation Funding to Protect Company Value

Undertaking litigation poses many risks for small and medium-sized companies that are publicly traded, not only from the specific financial risk that comes from the costly litigation process, but also the impact it can have on the business’ reputation and the knock-on effects on the share price. However, one law firm argues that litigation funding may be able to offer remedial support when it comes to the share price, and offer value to a company beyond the simple provision of capital to fight any lawsuit. In a piece of analysis on The Financial Times, Gowling WLG looks at the ways litigation financing may be able to support growing companies that are concerned about the impact of litigation on company value. Highlighting its recent study conducted in partnership with Scott Evans of London Business School: ‘Taking AIM: how litigation can strike company value’, Gowling WLG states that even the announcement of litigation negatively affects a company’s share price by -5% on average. Whilst the average negative decline is highest for defendants at -6.1%, claimants are not immune to this effect and also suffer, with an average decline of -3.5%. The article goes on to explain that litigation funding can be a very useful tool to alleviate these negative effects, as third-party financing ensures that businesses can pursue meritorious litigation to completion. Most importantly, the securing of litigation financing can demonstrate to the market that the litigation being undertaken is worthy of outside backing, as the third-party funder will have completed due diligence to ensure legal merit, and has a viable financial resolution.  Behind these specific benefits, Emma Carr, commercial litigation and litigation funding partner at Gowling WLG, reinforces the principle that third-party funding is “a useful tool in helping to alleviate the pressures that businesses are now under, to try and shore up their legal expenditure.”
Announcements Consumer

Golden Pear Upsizes Corporate Note to $67.2 Million

Golden Pear Funding (Golden Pear), a national leader in pre-settlement legal funding, announced the upsizing to $67.2 million of its existing corporate notes. The incremental capital raise was assigned a BBB rating by a nationally recognized statistical ratings organization (NRSRO) and follows the Company's successful corporate note issuance announced in January 2022. Proceeds from the upsize will be used to repay subordinated debt and support additional growth of the business. Since inception, Golden Pear has funded nearly $1 billion in aggregate to more than 70,000 clients nationwide. "Golden Pear continues to demonstrate significant momentum and has completed this transaction to further our ability to serve the consumer litigation marketplace," said Gary Amos, Chief Executive Officer of Golden Pear. "We greatly appreciate the continued support of our institutional investor base, which recognizes the resilience of our business and our strong financial position." Daniel Amsellem, Chief Financial Officer of Golden Pear, added, "Our demonstrated access to institutional capital in a difficult credit environment is a strategic advantage, as we further pursue market opportunities in a disciplined and profitable manner. These notes complement our asset-backed debt to provide us with an efficient capital structure at a competitive cost of capital." Brean Capital, LLC served as the Company's exclusive financial advisor and sole placement agent in connection with the transaction. About Golden Pear Funding Founded in 2008, Golden Pear is one of the largest specialty finance companies in the United States funding legal matters and purchasing medical receivables from physicians and medical centers. The Company empowers its clients to navigate the legal system and provides them with financial solutions that work. Golden Pear is backed by a partnership of several private equity firms that allow for the stability and continued institutional growth of the firm. For additional information about the Company, visit https://goldenpearfunding.com.
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Announcements Commercial People Moves

Apex Litigation Finance appoint Chris Thenabadu and Stephen Caldecott

Litigation funding specialists Apex Litigation Finance have announced the appointment of two new Legal team members: Chris Thenabadu joining as Senior Case Underwriter, and Stephen Caldecott joining as a Case Underwriter. Chris and Stephen joined the Apex team this month. Chris brings many years of experience in the after-the-event insurance and litigation funding markets and will lead the team focused on reviewing new cases and the management of existing risks. Stephen has an insolvency litigation background and will further strengthen Apex’s ability to support the litigation funding needs of the insolvency sector.

Chris Thenabadu

Since 2007, Chris has dedicated his professional career to becoming an expert underwriter in ATE insurance. After qualifying as a solicitor and gaining experience in litigation funding and brokerage for ATE and M&A markets, he was appointed to high-level positions within two of the most prominent ATE insurers. This has allowed Chris to create strong relationships with many UK-based brokers, barristers, and law firms. Chris Thenabadu says: “I specialise in various commercial litigation cases and am known as one of the most competent underwriters in the UK for insolvency and professional negligence cases. I pride myself on being able to apply my considerable market experience to take a pragmatic and commercial approach to the structure of litigation finance risks. I look forward to leading the team at Apex Litigation Finance.”

Stephen Caldecott

Stephen has worked within the insolvency profession since 2000; as an experienced insolvency investigator, Stephen is trained in identifying, assessing, and pursuing potential legal claims in all forms of formal insolvency cases. Stephen’s experience in insolvency litigation is a significant asset to Apex, as it furthers its ability to meet the litigation funding needs of the insolvency market. Stephen Caldecott says: “I bring a wealth of knowledge and experience in all areas of insolvency litigation and will aid Apex in delivering excellent litigation funding solutions to the insolvency sector. My litigation experience, coupled with the gut instinct of a born investigator, will help me to understand and support the needs of Apex clients. I am looking forward to working with the team at Apex”. Apex CEO Maurice Power says: “It’s a pleasure to have Chris and Stephen joining our team. Both their experience and expertise are perfect for their roles, and we know that they will add huge value to our business and our clients. With Apex’s focus of providing litigation funding solutions to small/mid-size commercial claims, the addition of Chris and Stephen will further enhance Apex’s ability to provide access to justice to many more meritorious claimants.” Head of Legal, Stephen Allinson added “I am delighted to welcome Chris and Stephen to our business and very much look forward to working with them. The litigation funding market is developing apace, and I really believe Apex is in an excellent position to build on its already well-established reputation. With Chris and Stephen, we shall be able to respond even more quickly to all enquiries and work very positively with all professional sectors.” Apex is constantly looking to expand its team and is open to hearing from candidates with diverse expertise, from legal to insolvency, litigation funding, AI development, and business development. Having previous experience with litigation funding is optional, as Apex will evaluate an individual’s skillset to see if they can benefit. Interested applicants are asked to contact Apex via enquiries@apexlitigationfinance.com by sending a current cv and details of why they would be ideal for Apex.
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Commercial Regulatory Issues

Insurance Broker Argues for Reform of ‘Largely Unregulated’ Funding Industry

Proposals for increased regulatory measures on litigation finance have become a more common sight in state legislatures across the United States, with such a bill being vetoed by the Louisiana governor last week. Among those calling for an increase in oversight of the practice, are members of the insurance industry. In an interview with Insurance Business, Casey Petersen, head of US casualty at McGill and Partners, explains the main concerns that insurers have around the growing influence of litigation funding in America. Petersen highlights that insurers perceive it to be “a largely unregulated industry that is growing at a rapid pace and is driving verdicts at trial”, and when combined with the wider inflationary pressures in the economy, is creating “a problem within the insurance industry that is unsustainable without regulation.” Petersen suggests that the main issue is the increasing regularity of so-called ‘nuclear verdicts’, which is in turn forcing carriers to accept costly settlements to avoid going to trial and facing such a verdict. He argues that whilst legislative attempts to impose tighter controls are encouraging, “none of these states are where they have the most verdict award issues.” Petersen emphasizes that a desire for increased regulation is not aimed at outlawing litigation funding, but instead these are measures which would create “a sound business practice for all.” Until such reforms are implemented, Petersen states that it’s imperative for insurers to educate their buyers and provide “risk management policies and procedures in order to create safe working environments for employees and to the general population.”
Case Developments Commercial

Canadian Court Denies Insolvent Company’s Request for Litigation Trust and Financing

Litigation funding has regularly been put forward as a powerful tool in the area of insolvency by providing the necessary capital to pursue litigation. However, a recent ruling from a Canadian court has demonstrated the need for those seeking such relief in this jurisdiction to provide ample and appropriate evidence to support their requests. In a piece of analysis on Lexology, Kelly Bourassa, Keith Marlowe, and Tom Wagner of Blake, Cassels & Graydon LLP, provide commentary on the recent Goldenkey Oil Inc. (Re) decision from the Court of King’s Bench of Alberta. In this case, Goldenkey Oil was in insolvency, and sought court orders to create a litigation trust to transfer the rights of a lawsuit and to approve a financing arrangement to allow the litigation trustee to borrow up to C$3.2 million to finance the claim. However, after a defendant to the claim opposed these requests, Justice Michael J. Lema ruled that Goldenkey failed to present sufficient evidence to show that the requests for the litigation trust and financing were reasonable or appropriate under the remit of the Bankruptcy and Insolvency Act (BIA). The authors of the analysis note that this ruling demonstrates that parties cannot expect relief to be granted on the ‘bare assertion that the relief sought is reasonable, appropriate, and furthers the objectives of the BIA’, without providing the necessary evidence.
Case Developments Commercial

Binance and Coinbase vs. the SEC

On June 5, 2023, the United States Securities and Exchange Commission (SEC) sued the world's largest cryptocurrency exchange, Binance, for allegedly misleading investors and regulators while operating an unregistered exchange. One day later, the SEC sued the largest cryptocurrency exchange in the United States, Coinbase, for similar allegations. Now, litigation financiers around the globe look on as top law firms organize to defend Binance and Coinbase against the SEC.  Bloomberg Law reports that Binance and Coinbase have tapped some of the United States' top law firms to defend their future to exchange nearly $120B in cryptocurrency token assets. The SEC claims that most of these tokens sum up to unregistered securities. Binance and Coinbase deny any wrongdoing.  Agencies such as Lipton, Rosen & Katz, Milbank, Latham & Watkins, Wilmer Hale and Sullivan & Cromwell are among those said to bank upwards of $50M - $100M in legal fees for Binance's and Coinbase's defense against the SEC's recent actions. Sullivan & Cromwell is reported to have billed over $80M in fees associated with the FTX Chapter 11 bankruptcy litigation, according to court documents.    The SEC says that unregistered securities in the form of cryptocurrency violate US investor protection laws. Yet, former SEC leaders have joined Binance's defense team. Richard Grime (of Gibson Dunn & Crutcher) has been hired by Binance. Mr. Grime formerly served as assistant director of the SEC's enforcement division. William McLucas (of Wilmer Culter Pickering Hale and Dorr) formerly served as the SEC's enforcement director. Mr. McLucus has been hired by BAM Trading Services, the operator of Binance.US.  What does all of this mean for the litigation finance industry?  Experts suggest that private actions could be explored by litigation investors and their clients in the wake of the SEC's approach to cryptocurrency tokens being exchanged as unregistered securities. However, collectability remains a pertinent issue for litigation investors, as they consider whether to pursue crypto litigation funding. 
Announcements Commercial Fundraising

BURFORD CAPITAL ANNOUNCES PRIVATE OFFERING OF SENIOR NOTES

Burford Capital Limited ("Burford" or "Burford Capital"), the leading global finance and asset management firm focused on law, today announces the planned private offering of $400 million aggregate principal amount of senior notes due 2031 (the "Notes") by its indirect, wholly owned subsidiary, Burford Capital Global Finance LLC, subject to market and other conditions. The Notes will be guaranteed on a senior unsecured basis by Burford Capital as well as Burford Capital Finance LLC and Burford Capital PLC, both indirect, wholly owned subsidiaries of Burford Capital (such guarantees, together with the Notes, the "Securities"). Burford Capital intends to use the net proceeds from the offering of the Securities for general corporate purposes, including the potential repayment or retirement of existing indebtedness. The Securities have not been, and will not be, registered under the US Securities Act of 1933, as amended (the "Securities Act"), or the laws of any other jurisdiction and may not be offered or sold within the United States or to, or for the account or benefit of, US persons absent registration or an applicable exemption from registration under the Securities Act or any applicable state securities laws. The Securities will be offered only to persons reasonably believed to be "Qualified Institutional Buyers" within the meaning of Rule 144A under the Securities Act or non-US persons outside the United States pursuant to Regulation S under the Securities Act, in each case, who are "Qualified Purchasers" as defined in Section (2)(a)(51)(A) under the US Investment Company Act of 1940, as amended.
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Consumer

Louisiana Governor Vetoes Third-Party Funding Disclosure Bill

The first half of 2023 has been notable for the frequent appearance in states across the US of legislation seeking to increase the regulatory oversight and scrutiny of third-party litigation funding. Whilst some bills have found success in states like Montana, just last week, one of the most ambitious bills seeking to impose disclosure requirements was vetoed in Louisiana. Reporting in Bloomberg Law provides the details on Thursday’s announcement from Louisiana Governor John Bel Edwards, that he decided to veto Senate Bill 169. The draft bill had gone further than similar legislative attempts in other states, having required those involved in third-party funding to disclose a copy of their funding agreement. In his veto letter, Governor Edwards explained his reasoning, and stated that the bill “is clearly a pretense designed to gain a litigation advantage under the guise of promoting transparency in litigation and protecting national security.” He also highlighted that these measures would create an imbalance in the judicial system, as “the bill only requires plaintiffs to unilaterally disclose their commercial legal financing arrangements.” The bill’s sponsor, State Senator Barrow Peacock expressed disappointment that the Governor had not reached out to discuss the legislation with him, and will be considering whether to attempt to override the veto. However, Gary Barnett of the International Legal Finance Association (ILFA), praised Governor Edwards’ actions and argued the veto would protect Louisiana companies “from losing a vital financing tool used to mitigate risk and maintain sufficient operating capital in their business.”
Commercial Regulatory Issues

Nivalion Receives License from Swiss Regulator

As the litigation finance market continues to grow and mature, established funders are keen to set themselves apart from newer startup funders, with recognition by official regulators playing an important role.   An article in finews.com reveals that the Swiss litigation funder Nivalion has received its license as an administrator of collective assets from the Swiss Financial Market Supervisory Authority (FINMA). This license allows Nivalion to manage these collective assets, whilst also providing risk management for investments, and being able to offer shares in litigation financing investments to both professional and institutional investors in Switzerland. Nivalion’s CEO Marcel Wegmueller stated that this was ‘an important milestone’ for the litigation finance company, as it is the first funder to receive such a license from FINMA. This new access to institutional investors in Switzerland will allow Nivalion to tap into a capital pool that other funders are not currently able to access in the country.  The article also states that Nivalion plans to obtain additional fund distribution licenses in other jurisdictions, including Germany.