In this episode, we sit down with Stewart Ackerly and Matt Blumenstein, Head of Originations and Head of Underwriting at Statera Capital, respectively. Stewart and Matt discuss Statera's approach of funding both small and large claims, their diligence and underwriting criteria, how their originations are progressing, and what their expectations are for the future of the industry. [podcast_episode episode="12081" content="title,player,details"]
One of the key issues that commentators raised in the aftermath of the Supreme Court’s PACCAR ruling, was whether the judgement would lead to a series of disputes between funders and their clients over the enforceability of litigation funding agreements (LFAs). A recent decision from the High Court has demonstrated that these disputes are already underway, with funders keen to preserve their returns whilst the legal arguments continue to be tested.An article in The Law Society Gazette provides an overview of a High Court ruling in Therium Litigation Funding A IC v Bugsby Property LLC, where Mr Justice Jacobs granted Therium’s application for an asset preservation/freezing order against Bugsby. Therium’s application came about after Bugsby argued that, in the wake of the Supreme Court’s PACCAR decision, its LFA with Therium was no longer enforceable and it should therefore not have to pay the funder.In his judgement, Mr Justice Jacobs stated that “where the amounts claimed by Therium and Omni collectively exceed the proceeds received, there is every reason for all of the trust funds to be preserved.” He explained that both parties had made arguments that “require mature consideration and full argument”, which would need to be further examined in subsequent arbitration proceedings.This ruling in favour of Therium followed another application for an asset preservation order by Omni Bridgeway, who had also funded Bugsby’s original lawsuit. That application was granted by Mr Justice Cotter on October 2nd. Therium’s spokesperson explained that the company had pursued the application as a solution to the “series of failed attempts by Bugsby to avoid paying what is owed to litigation funders.” They went on to highlight that the High Court’s decision was highly relevant to “funders, law firms and their clients and discouraging to claimants such as Bugsby that wish to use PACCAR as a means to walk away from their obligations to their funders.”
Although 2023 has been a turbulent year for litigation finance, with disappointing court rulings and an increase in calls for further regulation of the industry, it is clear that there is still a strong appetite among investors to commit resources to the sector. An article from Bloomberg, shared by Investment News, revealed that Fortress Investment Group LLC is working on raising its second fund dedicated to investments in litigation finance opportunities. Bloomberg’s source indicated that Fortress was looking to build upon its legal funding portfolio, having already invested $6 billion into the sector. Whilst Fortress did not provide a comment in response to Bloomberg’s reporting, the article suggests that the private equity company has already been strengthening its litigation finance team. According to the same source, Fortress had added another 12 employees to its legal assets team in the last 18 months, bringing that department’s total strength to 32.As LFJ covered last week, Andrew Jones, director at Fortress, was present at the recent IMN International Litigation Finance Forum and led a panel discussion on ‘Developments in Class Action and Group Litigation’.
On October 19th, IMN hosted its second Annual International Litigation Finance Forum in London, bringing together thought leaders from across the litigation finance industry and showcasing perspectives from funders, lawyers, insurers and more across a packed day of content.Following on from the successful inaugural edition in 2022, this year’s event once again demonstrated the growing strength of the litigation funding market, both in the UK and across the globe. The agenda also managed to capture the broad diversity of perspectives within the industry, with lively discussion and debate across the panels and breakout sessions.The day began with a panel focused on the current state of litigation funding in Europe, which immediately demonstrated the changes in the regional market over the last 12 months. Whereas last year’s panel on this topic was dominated by discussion around the Voss Report and the looming prospect of further regulation, yesterday’s conversation was firmly focused on the increasing innovation in the market and an evolving landscape that has seen competing models of third-party financing develop.Litica’s Ed Yell emphatically stated that “the growth in Europe over the last year has been spectacular”, and Iain McKenny from Profile Investment described the current state of play as a “hot bed for evolution.” A core element of the panel’s conversation revolved around the growing formation of a secondary market for litigation finance transactions, with JBSL’s co-founder Sarah Lieber summarising it aptly: “Secondary trading is the hallmark of a maturing asset class, it’s necessary to think about from the beginning of every funding deal.”The second panel of the morning ventured into the economics of the market, looking at the different types of funder capitalization and the challenges faced by funders looking to raise capital in the turbulent market. The panellists explored the differences between the UK and US market, with Ted Farrell from Litigation Funding Advisers, highlighting the lack of portfolio funding deals in the UK and pointing out that “single case is always going to be super expensive.” Neil Purslow explained that from Therium’s perspective, portfolio deals in the UK “usually don’t work well and fail”, resulting in a pivot back towards single case funding.The first of two panels focusing on the role of litigation insurance saw a wide-ranging discussion that covered everything from the type of cover available, to the increasingly varied ways that funders, law firms and insurers are collaborating on deals. On this topic, Robin Ganguly from Aon, stressed the need for funders and insurers “to work together to make the industry sustainable,” emphasising that “deals have to be attractive to everyone or deals won’t get done.” All the panelists agreed that those seeking insurers needed to be more proactive and prepared, with Tom Davey of Factor Risk Management putting it in clear terms: “Get insurance when it’s available, not three weeks before trial.”Unsurprisingly, the following panel discussion on class actions and group litigation immediately turned to the subject of the Supreme Court’s PACCAR ruling. Echoing similar sentiments from speakers earlier in the day, most of the panelists agreed that funders and law firms were taking a pragmatic approach and exploring a variety of alternative structures for funding agreements and working closely with clients to find an optimal solution. Brown Rudnick’s Elena Ray provided the clearest overview of the situation, saying that firms “are not seeing a negative impact on the litigation funding space, so the parties have adjusted well to the PACCAR judgement.”Lara Melrose from Orchard Global described the UK’s group action market as “a very buoyant one” and noted that funders are benefitting from the courts’ flexible approach as demonstrated in recent decisions including the first amalgamation of claims in the CAT and the first application for a collective settlement. Alex Garnier of NorthWall Capital also pointed out that part of funders’ interest in class actions stems from the fact that “they’re not just fought in the courtroom they’re also fought in the court of public opinion”, thereby creating added pressure on large corporates to settle rather than “having their dirty laundry aired in court for months.”After a break for lunch and networking, the agenda once again returned to the topic of insurance, but with this panel putting an added emphasis on the lawyers’ perspective. Prompted by the panel’s moderator, Rocco Pirozzolo, the lawyers on the panel discussed some of the difficulties and frustrations they’ve faced when looking to secure insurance for a case. HFW’s Nicola Gare turned the question on its head, instead pointing out some best practices, with a particular emphasis on those funders who are able to give a prompt decision and explain their reasoning. Meanwhile, Jamie Molloy from Ignite Insurance, and James Gowen-Smith from Miller, both said that it was important for all parties to remember it was a collaborative relationship and that it always worked best where there was adequate transparency, and where insurers were involved in the strategy discussions as early as possible.The agenda turned from the present to the future in the next panel, with an insightful discussion around new models of delivering legal finance and how new technology, such as emerging AI tools, can be incorporated to fuel future growth. Nick Rolwes-Davis from Lexolent led the calls for more innovation and change in the funding process, arguing that the industry was “probably overdue a change” and that increased efficiency could be achieved by “using technology as a triage tool.” Ben Knowles of Clyde & Co. offered similar support for evolution within litigation funding, pointing out that from a law firm’s perspective, “if technology could improve that due diligence process, then hopefully more cases could be funded.”In the penultimate session of the day, Louise Trayhurn from Legis Finance, and Carlos Ara Triadu from Cuatrecasas, led the room in an engaging and entertaining interactive session. Trayhurn turned the tables on the audience, seeking out the varying perspectives of lawyers and funders on the evolving relationship between funders and law firms. Whilst some attendees were more hesitant than others, the live Q&A format provided an excellent change of pace and allowed for a free-flowing discussion about the unique challenges and opportunities around the lawyer-funder dynamic.For the final panel of the event, the focus shifted to developments in continental Europe and the ongoing implementation of the EU’s Directive on Representative Actions. The discussion, moderated by Joanna Curtis from Brown Rudnick, looked at the differing approaches to implementation across Europe, focusing on the panelist’s local jurisdictions of Germany, Ireland, and Spain. Whilst all the speakers agreed that the directive was a positive development overall, they also pointed out that in terms of enhancing access to litigation funding in Europe, it may not produce significant changes. Elaine Whiteford from Wilkie Farr & Gallagher highlighted that there are still “a number of critical issues that the initiative doesn’t address for funders” in Europe, with the use of funding still primarily limited by each country’s national laws on its permissibility.Overall, IMN’s second UK event managed to provide an insightful exploration of the litigation funding industry and provided attendees with a comprehensive view of the market, bolstered by insights from stellar thought leaders. Across a busy day of content, the forum offered a platform for a variety of perspectives, generating debates and discussions that will no doubt continue long after the event.LFJ looks forward to seeing how IMN continues to build on the success of the 2023 forum in the future.
Whilst much of the discussion at today’s IMN Forum has been focused on the current state of the litigation finance market, there was equal interest in the future of the industry and what ways the industry could create new improvements and efficiencies. Moderated by Jonathon Davidson, head of Middle East & Asia at Lexolent, the panel on ‘a new landscape in the delivery of legal finance’ explored how new technologies and new models for litigation funding could transform the market.The discussion began with the panelists exploring some of the systemic challenges that still exist in litigation funding, particularly around the difficulties for those seeking funding and the inefficiencies around the origination of funding opportunities.Ben Knowles, partner & chair of the global arbitration group at Clyde & Co., explained that the vast majority of funders are all concentrated on a small subsection of cases. This results in frustration for those seeking funding for smaller or less valuable cases, with Knowles explaining that “for anything that’s not right in that sweet spot it’s difficult to get those funding discussions going.” He also pointed out the experience of seeking funding is often “a grim process”, citing many times where lawyers can spend over a year working up a case and engaging with funders, only for nothing to come of it and then “it’s too late for the case to be picked up by someone else.”Following on from Knowles’ commentary on the frustrating nature of accessing funding, Nick Rowles-Davis, CEO of Lexolent, agreed with this assessment and expressed his frustration saying that “it is an incredibly torturous process, there doesn’t seem to a huge element of urgency on the part of funders to get things done.” He went out to explain that from a funder’s perspective there is a “need to streamline origination”, as funders will often spend huge amounts of time and resources to consider a hundred cases only to actually invest in three of them.Offering new strategies to improve these processes for all parties, Ludwig Bull, CEO of CourtCorrect, put forward the utility of large language models (LLMs) and AI tools to assess cases and streamline many of the due diligence processes, arguing that “we are seeing a paradigm shift when it comes to using this technology.” He went to illustrate CourtCorrect’s experience providing these tools to clients and how quickly people get used to the technology and can improve the efficiency of their own work, emphatically stating that “We’re not talking a 2x increase in productivity, we’re talking 3x productivity.”Providing insight into the unique challenges faced by insolvency practitioners seeking funding, Kristina Kicks, managing director at Interpath Advisory, once again stressed the need for efficiency in funding proposals as, from the perspective of an insolvency professional, “having decisions on funding more quickly means I can get better returns for creditors.” She also called for increased clarity and uniformity in the funding proposal process, as insolvency practitioners “need to demonstrate that we’re entering into a funding agreement with the best possible deal for creditors.”
As expected, the thriving class action landscape has been a prominent topic at IMN’s International Litigation Finance Forum, with the final panel of the morning focusing on developments in class action and group litigation. The discussion was led by Andrew Jones, director at Fortress Investment Group, who guided the conversation across everything from recent changes in the class action process, to the ethical considerations for funders and lawyers, and managing origination risks.John Astill, managing director at Exton Advisors, kicked off the discussion with a detailed overview of the differing approaches taken by funders as they have been responding to the Supreme Court’s PACCAR decision. He noted that whilst there has been some divergence in pricing, most increases in multiples have been very reasonable and that when reviewing new structures, “we have to be very careful on the impact that has on the stakeholders.” Astill went on to explain that whilst there are already several different approaches being taken in restructuring LFAs, such as introducing IRRs as a floor for duration risk, he suggested that “we will see more divergence as the market matures.” Furthermore, Astill stated that PACCAR hadn’t resulted in a downturn in demand for finding, instead they have been “seeing more appetite for law firm arrangements.” Elena Rey, partner at Brown Rudnick, offered an optimistic perspective on concerns that had been raised that the PACCAR ruling would lead to a series of client-funder disputes. Rey explained: “We are not seeing a lot of disputes, we are working one or two coming out of PACCAR, but mostly our clients (law firms or funders) were able to mutually agree on new arrangements. We are not seeing a negative impact onto the litigation funding space, so the parties have adjusted well to the PACCAR judgement.”Moving to a more general discussion of the opportunities and challenges involved in funding class actions, Alexander Garnier, founding partner at NorthWall Capital, highlighted that it remains “a high risk space compared to some of the assets we invest in.” He described it from the investor’s perspective by saying “it’s often sailing uncharted waters, so the returns need to reflect that”, but he also noted that “it’s not just about financials, this is about levelling the playing field for people who have been wronged.”Looking at the changing environment for the funding of class actions, Lara Melrose, co-head litigation finance at Orchard Global, said that “the fundraising environment is challenging, the cost of capital is going up, there are other asset classes which are more attractive to investors than these long duration, high risk claims.” However, she also countered this by asserting that it was not a wholly treacherous climate for class action funding and said, “on the positive side, the courts are demonstrating a flexible and pragmatic approach to facilitating these claims.”Bringing the perspective of law firms back into the discussion, Becca Hogan, partner at Signature Litigation, suggested that one of the most noticeable trends was a recent but noticeable cultural change within the UK that has seen people become more comfortable with participating in claims compared to previous years. Hogan added that this has been supported by the “courts’ willingness to take a more pragmatic approach to group claims, which has driven the increase in class actions.”
As the Co-Founder and CEO of DealBridge.ai, Jon Burlinson has over 25 years of experience in information management, software engineering, and technical management. He is passionate about delivering advanced SaaS solutions that leverage AI and data analytics to automate tasks, optimize decision-making, and provide valuable insights, ultimately enhancing efficiency and driving better deal outcomes. Company Name & Description: DealBridge.ai is the first Deal Relationship Management (DRM) platform, revolutionizing the way private market deals are handled. Harnessing the power of Generative AI and other advanced algorithms, DealBridge.ai automates the complexities and non-linearity of deal-making. The platform streamlines origination, due diligence, and distribution of private assets, eliminating traditional, labor-intensive processes. DealBridge.ai empowers sellers and buyers of alternative products to connect effortlessly at the deal level, enhancing the overall human experience and allowing users to focus on building and nurturing valuable relationships. With automation at its core, DealBridge.ai maximizes revenue potential and elevates deal-making capabilities in private markets. Company Website: https://DealBridge.aiYear Founded: 2021 Headquarters: New York Area of Focus: Building solutions for the litigation finance community. He aims to solve core issues that have plagued the space for years, facilitating more efficient and effective deal management for all stakeholders. Member Quote: "Litigation finance evens the odds, granting access to legal recourse for parties who might otherwise be outmatched. Advanced technologies such as AI and blockchain are becoming game-changers in the litigation finance sector. They are instrumental in transforming the way we handle legal transactions, making them more transparent, streamlined, and accessible to all stakeholders involved."
IMN’s agenda continued with a panel focused on the role of litigation insurance in the funding market, with the panelists attempting to answer the question: ‘how can litigants and funders use insurance to de-risk and monetize litigation and arbitration?’ Moderated by Simon Warr, lead underwriter for legal expenses at AmTrust International, the panel discussion explored the range of products being used in the industry, which types of insurance policies are seeing growth, and how funders, insurers and lawyers can continue to enhance their collaborations.Beginning with a discussion of the different types of litigation insurance that is available, the panelists focused on the prevalence of after-the-event (ATE) insurance in the UK market, whilst also putting a spotlight on the explosive growth of judgement preservation insurance (JPI) in the US. Robin Ganguly, executive director, UK & EMEA for Aon, highlighted the “huge explosion in the JPI market” and explained that as that market has matured, they are seeing a shift from “pure JPI” and towards “working with funders on a diversified portfolio basis.”The panelists also discussed the warning signs that insurers look for when receiving enquiries, with Tom Davey, co-founder of Factor Risk Management, providing the audience with some straightforward advice: “Do your homework, prepare well and take your broker’s advice.” Nathan Hull, director at VALE Insurance Partners, emphasised the importance of timing and citing situations where they receive “enquiries where the hearing has taken place and then they want to take out insurance before the judgement has come out.” The other panelists focused on the issue of due diligence during these enquiries, as Rocco Pirozzolo, underwriting director at Harbour Underwriting, highlighted that there are real issues where clients fail to give adequate responses to supplementary questions. He encouraged prospective insurance buyers to not “be shy about the fact that there might be issues with the case.” Boris Ziser, partner at Schulte Roth & Zabel, also emphasised that there can be related risks for the insurer depending on the client, as he said that “depending on who you’re insuring, there can be a moral hazard.”Moving on to the future of the industry, Ziser highlighted that they are seeing “a lot of insurance for mass tort or collective actions cases.” Davey built upon this point and suggested that one possible reason for this increase in activity is due to the fact that “collective actions in the UK are effectively stepping into the shoes where regulators should be, the law is filling the gap.” In the US, Hull returned to the topic of JPI and stated that its popularity in the US was “because you can not only insure the judgement award but you can monetise it.” Ending with a note of caution for the industry, Pirozzolo expressed concern that there was still not enough education and communication between lawyers and their clients about the use of insurance to manage risk. He stated that he was “not convinced those conversations are happening at a high level,” and suggested that “this is where the value of a broker comes in, when solicitors don’t feel comfortable having to explore the risk appetite of their clients.”
The opening panel of IMN’s Litigation Finance Forum in London provided a lively discussion around the topic of ‘The Current State of the European Litigation Finance Market’. The panel, which was moderated by Rosie Ioannou, director – legal assets at Fortress Investment Group, covered everything from the ongoing drivers of change in the market, to the innovation and competition between competing models of third-party financing.Tackling the question of what is fueling the pace of change in the market, Sarah Lieber, co-founder of JBSL, explained that “the primary driver of change is the institutionalisation of the asset class”, with the growing diversity of types of investor and capital involved leading to changes in deal structuring. Iain McKenny, director and co-founder of Profile Investment, highlighted that funders are facing pressure from both “internal and external sources”, which has led to a “hot bed of evolution […] and as a consequence you get these competing models” for litigation funding.Turning to the role of insurance in the European market, Edward Yell, managing director at Litica, stated that “the growth in Europe over the last year has been spectacular”, but emphasised that “there isn’t a single European approach” due to the differing requirements across individual jurisdictions. Yell also pointed to the entrance of new participants to the market resulting in growing sophistication in deal types, explaining that as “it’s harder to deploy capital into Europe, funders have had to be more creative to make the deals worthwhile.”Speaking from the perspective of law firms who work on the defence side of litigation, Alice Darling, senior associate at Clifford Chance, explained that there are numerous barriers to entry for defendants including a lack of awareness and a lack of desire to engage with funders. In particular, Darling said that there is a “hesitancy about bringing a third party into the case if they don’t need to”, especially where a corporate doesn’t necessarily need the capita,l and where reputational risks are high. When it comes to that issue, Darling noted that the “Burford-Sysco case did not help the narrative” around litigation funding.Looking at potential future developments for the European market, Lieber stated that “secondary trading is the hallmark of a maturing asset class,” and that moving forward it will be “necessary to think about from the beginning of every funding deal.” Yell returned to the relationship between insurers and funders, asserting that whilst the two businesses are not direct competitors at the moment, “there are products coming onto the market where you could achieve the same effect with an insurer as you would with a funder.”Darling closed the panel with an overview of developments in regulation and case law, highlighting that we would not see the real impact of PACCAR for a while, whilst the Voss Report has “gone into the long grass of the European Commission.” McKenny also suggested that a lot of the calls for regulation of third-party funding in Europe “are actually really about concerns with the litigation system rather than about funding itself.”
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