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Commercial Regulatory Issues

Impact of Supreme Court Judgement on Litigation Funding for Insolvency

The full impact of the UK Supreme Court’s decision on litigation funding agreements (LFAs) may not be felt for some time, with industry commentators ranging in their forecasts from cautiously optimistic to extremely concerned. However, whilst much of the coverage has been directed at what the overall impact will be on the litigation finance industry, it is also useful to analyze how the judgement will affect individual sub-sectors within the market. In an article published on Lexology, Helena Clarke, director in the restructuring & insolvency practice group at Squire Patton Boggs, looks at where the Supreme Court judgement may impact the use of third-party funding by insolvency practitioners. Clarke notes that one key difference for insolvency funding is that outside of traditional LFAs, it is not uncommon for insolvency practitioners to assign their claims to litigation funders, who can then proceed with the litigation under their sole ownership. The Supreme Court’s decision may have a limited impact on many insolvency matters, as there is little suggestion that assigning claims would fall under the court’s definition of claims management services. However, Clarke emphasizes that insolvency practitioners still need to review claims more broadly to check that their enlistment of a litigation funder’s services does not fall within this category. Furthermore, in those cases where an LFA has been implemented, Clarke recommends that insolvency practitioners review these agreements to ensure compliance with the DBA regulations and where they are not compliant, must work swiftly with funders to amend these arrangements. As other analysts have suggested, there could still be unknown impacts on historical and previously concluded claims that involved an LFA, and therefore, it is important that insolvency practitioners also keep a close eye on any developments that may impact their past claims.
Commercial Deals

Bench Walk Funding Novel Competition Claim Against UK Water Companies

Collective action claims in the UK can be a powerful tool for those seeking legal redress from large companies, but are also an opportunity to explore untested areas of competition law that may allow consumers to receive compensation for anti-competitive behavior by those businesses that dominate individual sectors.  Reporting by The Law Society Gazette details a new opt-out competition claim being brought against UK water companies, which is notable for its unique quality as the first collective claim focusing on compliance requirements with regards to environmental legislation and reporting responsibilities. The claim, which is being brought under the 1998 Competition Act, alleges that multiple water companies failed to adequately report sewage and other incidents to the Water Services Regulation Authority (Ofwat). The claim is being funded by Bench Walk Advisors and led by Leigh Day, with Professor Carolyn Roberts, an environmental and water consultant, set to act as class representative. Roberts argues that because these water companies have used their local monopolies to under-report on these issues, they have avoided receiving penalties from Ofwat, which have led to their customers “being unfairly overcharged for sewage services.” Zoë Mernick-Levene, partner at Leigh Day, explained that it is the power of these monopolies that is at the heart of the issue, and that “if there was proper competition, others would come in and report.” Mernick-Levene stated that the aim of this collective action case was both to seek compensation for consumers and to “act as a deterrent to future misconduct”, which is fueled by such an anti-competition environment. The first of these claims has been filed against Severn Trent Water, but further claims are expected against Anglian Water, Northumbrian Water, Thames Water, United Utilities and Yorkshire Water. Leigh Day has stated its intention to have all six claims handled together, with the whole claim representing 20 million customers with the value of compensation payments being sought totaling more than £800 million. A statement by Severn Trent described the litigation as “a highly speculative claim with no merit which we strongly refute” and claimed that the company is “recognized as a sector leader by both regulators across operational and environmental measures.”
Commercial Fundraising

David Gallagher and Ajit Singh Launch The Litigation Fund

The litigation finance industry is once again showing signs of strength and continued growth, as another new startup funder has announced its entrance into the market. In a post on LinkedIn, David Gallagher announced the launch of The Litigation Fund, which he is founding alongside Ajit Singh.  David Gallagher comes to this new funder having previously spent five years at The D. E. Shaw Group, where he was Co-Head of Litigation Funding. Gallagher’s prior experience includes three years at Omni Bridgeway as an Investment Manager and Legal Counsel. Ajit Singh joins the venture having garnered significant experience in his 11 years at Law Finance Group, where his role included the positions of Vice President, Head of Engagement, and Legal Counsel.
Past Event

How Should Litigation Funders Respond to the UK Supreme Court Ruling?

Recorded in August 2023, shortly after the UK Supreme Court's pivotal decision on litigation finance agreements, this webinar provides expert analysis of the ruling and its consequences. In a landmark decision, the Supreme Court ruled that certain litigation finance agreements are subject to the Damages-Based Agreements Regulations 2013, potentially impacting their enforceability. Our expert panel discusses the key questions facing the industry:
  • Where do we stand today in the aftermath of the ruling, and what lies ahead?
  • What is the potential impact on funders, investors, claimants, and law firms?
  • What should stakeholders be focused on in the short and long term?
Gain valuable insights into the ruling's implications, including:
  • Short-term and long-term impacts on the UK litigation finance market.
  • Stakeholder implications and strategic considerations.
  • Parallels with Brexit and potential global effects.
Listen to Replay
Announcements Consumer

Pegasus Secures Warehouse Facility with a Leading Bank

Pegasus Legal Capital, LLC ("Pegasus") (mylawfunds.com), one of the preeminent pre-settlement legal funding companies in the U.S., announced today that it has recently closed a senior debt transaction with East West Bank. This marks another significant capital market transaction for the company and proceeds from the transaction will enable Pegasus to continue its growth across the United States. Pegasus Managing Director, Max Alperovich commented, "With the addition of the new facility Pegasus will now be able to further expand its business in the personal injury market all while maintaining its industry leading service." East West Bank Managing Director, David Hough, commented, "As the leading bank lender to the litigation finance market, East West Bank is pleased to engage with the Pegasus management team, and provide a senior, secured capital facility that will fuel their continued future growth. The entire Pegasus management team has a deep, demonstrated commitment to their customers and to the broader personal injury market." GreensLedge Capital Markets LLC acted as financial advisor to Pegasus in connection with the transaction. Pegasus is a proud member of the American Legal Finance Association (ALFA), which is comprised of companies nationwide that provide non-recourse funds to personal injury victims. One of the goals of ALFA was to create industry standards within the legal funding industry regarding transparency in each funding transaction with upfront clear disclosure to consumers. East West Bank provides financial services that help customers reach further and connect to new opportunities. East West Bancorp, Inc. is a public company with total assets of $68.5 billion. The company's wholly-owned subsidiary, East West Bank, is the largest independent bank headquartered in Southern California, and operates over 120 locations in the United States and in Asia. The Bank's markets in the United States include California, Georgia, Illinois, Massachusetts, Nevada, New York, Texas, and Washington. For more information on East West, visit www.eastwestbank.com. Max Alperovich can be reached at Max@mylawfunds.com.
Case Developments Commercial

Apple Lawsuit Raises Familiar Issues Around Third-Party Funding

The disputes over disclosure in patent litigation funding continue to roll on, with certain judges taking steps to proactively requiring disclosure, and individual state legislatures enacting legislation that mandates a level of transparency for funders. An ongoing case involving Apple in California has once again shown the many issues that may arise where the court feels that funders are not sufficiently forthcoming about their involvement in cases. An article in the Northern California Record looks at the increasingly prominent issue of disclosure for third-party funding, and highlights an interesting development in the case of Taction Technology, Inc. v. Apple Inc. in the US District Court for the Southern District of California. Whilst the Southern District, unlike the Northern District, does not have any standing orders regarding the disclosure of third-party funding, the involvement of funders in Taction’s patent infringement lawsuit has become a prominent issue.  On July 18, District Judge Jill Burkhardt ordered Kenosha Investments LP and Gronostaj Investments LLC to offer explanations as to why they should not be sanctioned for allegedly misleading the court about the scope of their involvement in the litigation. Judge Burkhadt stated that both funders, who are affiliates of Burford Capital, may have broken their “duty of candor” to the district court, with a follow-up hearing scheduled for August 15.  Dennis Abdelnour, IP partner with Honigman LLP, highlighted the issues at stake in the Taction case as an example of a common problem stemming from funder involvement in patent litigation. Abdelnour explained that: “Discovery relating to third-party litigation funding presents difficult privilege questions, which means that disputes will often end up in motion practice and before a Court for resolution.”
Commercial Legal Innovation

Four Ways Law Firms Can Use Litigation Finance

Expanding beyond the traditional scope of single case funding is a key priority for many litigation funders across the globe, with both portfolio financing and law firm funding becoming a key part of these business models. When it comes to discussions of law firm financing, it can often seem as if this is a broad and nebulous term, but there are several ways which law firms can benefit from, and make use of, third-party funding. In a blog post from Omni Bridgeway, Naomi Loewith, director of strategic partnerships – Canada, offers an overview of four ways that law firms can take advantage of litigation finance to grow and strengthen their businesses. Firstly, Loewith raises the common issue of firms who are burdened by large sums of unpaid WIP matters, where clients have been unable or late in paying their bills. In such scenarios, outside funding can be a useful remedy, benefitting the client who can now alleviate financial obligations, and ensuring that the firm is able to continue acting in these cases whilst still ensuring cash flow. Outside of clients failing to pay their bills, Loewith also raises the opportunity for firms to expand their businesses by acquiring a new line of business. Funders can provide the capital to kickstart these new operations until they are self-sustaining, with the additional benefit that funding requires firms to repay only once revenue is being generated. As a third use case, Loewith highlights that as law firm mergers are expected to increase in frequency post-pandemic, a firm that uses portfolio financing can demonstrate to partners that it has guaranteed revenue and a lower risk portfolio. This pre-existing financing option can make the merger process more efficient and even position the firm as a more attractive merger target. Finally, Loewith suggests that for those firms looking to geographically expand, the same kind of portfolio financing can act as a powerful catalyst to support expansions which are naturally capital intensive. As with the previous examples, third-party funding can provide the needed financing without forcing the firm to take on more debt.
Case Developments Commercial

Details of Nanoco Settlement Distribution Revealed

The nature of the litigation finance industry means that it is often difficult for outsiders to gain insight into the particulars of individual funding arrangements, or the intricacies of any returns on investment. However, there are rare occasions where we can find glimpses into the underlying fundamentals of the industry, and how funders find value in the long-term investments they pursue.  An article in DirectorsTalk Interviews, sheds light on one such investment as it provides an overview of Nanoco Group’s latest trading update, which includes details of highlights for the financial year.  As LFJ reported in February of this year, Nanoco reached a $150 million settlement agreement with Samsung Electronics to end the long-running patent infringement lawsuit that Nanoco had brought against the tech giant. The February announcement also confirmed that GLS Capital had been funding the case, after Nanoco had first announced its use of an anonymous third-party funder in July of 2020. However, through this update, we can now see a rough approximation of how that settlement will be distributed. Nanoco revealed that a £62.1 million tranche of the settlement was received in March 2023, with the “majority used to pay funders and advisors”. Whilst there are no details of how this sum will be divided between the funder and other parties, it is notable to see that a significant portion of the final settlement will be returned to third parties. Nanoco also stated that the second tranche of the settlement payment, totaling $75 million, will be received solely by Nanoco by 3 February 2024. This total is less $3.25 million due to Korean withholding tax.
Case Developments Commercial

Woodsford-Funded Class Action Targets Three UK Lenders

Despite the recent Supreme Court decision, class action cases still represent a prime opportunity for litigation funders in the UK, with another lawsuit having recently been filed that seeks accountability from three financial institutions over their alleged anti-consumer practices. An article by Proactive Investors provides a summary of the class action case being brought against three British lenders, who allegedly charged higher rates for motor finance customers in order to fund brokers’ commissions. The lawsuit is targeting Black Horse (a Lloyds’ subsidiary), Santander UK and MotoNovo Finance, stating that these lenders overcharged their customers between 2015 and 2021, with total excessive charges approaching £1 billion. The class action is being funded by Woodsford and is being led by the law firm Scott + Scott, who stated that the litigation would seek to “hold large companies to account” over these practices. Doug Taylor, the class representative for the action, alleged that these lenders used the commissions to “incentivise dealers” and as a result, “Customers unknowingly paid more for their car loans.” Although MotoNovo Finance and Santander UK did not comment on the case, a spokesperson for Black Horse stated that the company “continue to comply with regulatory requirements that apply in relation to the payment of commission and the disclosure of commission to customers.” After the lawsuit was filed in the High Court last month, the Competition Appeal Tribunal will now decide whether the claim can move forward.