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Case Developments Commercial

Law Firm Backed by Funder Pledges to Donate Portion of Fees to Charity

Litigation funding is useful for both claimants and law firms who wish to offset the financial cost and associated risks of pursuing meritorious lawsuits. However, it can also provide added benefits for, as illustrated by a new set of claims in the UK where the funded law firm has stated its intention to donate part of its fees to charity. Reporting by Charity Today reveals the rather unique situation in which law firm Harcus Parker has stated its intention to donate a portion of its fees to charities, should the claims reach a successful resolution. The claims are being brought on behalf of energy customers who were allegedly saddled with inflated bills, as utility companies allegedly added broker fees to the unit cost for non-domestic energy consumers. Harcus Parker is able to pursue this plan to donate a percentage of fees to charity, partly because the firm has received over £10 million in litigation funding, which has allowed it to offer claimants its services on a no-win no-fee basis. Damon Parker, senior partner at the law firm, stated: “For many of these organizations and their dependents, the high price of energy has had particularly detrimental effects. With this in mind, we thought it would be appropriate to give part of our fees to charities.” Harcus Parker has selected 10 charities that the funds would go towards, which include Mummy’s Star, The Loss Foundation, and Support Through Court. Damon Parker explained that if the claims are as successful as they expect, the firm is “confident each charity will receive a six-figure sum.”
Consumer

Missouri Governor Mike Parson signs comprehensive legislation regulating Consumer Legal Funding

Missouri Governor Michael Parson signed an omnibus bill, SB 103, containing sweeping new regulations for the growing industry of consumer legal funding—bringing meaningful oversight of provider companies for the first time in the state’s history. Missouri now joins several states, like Oklahoma, Nebraska, Ohio, Utah, Nevada, Vermont, Tennessee, Indiana, and Maine, who have acted to enact consumer protections while preserving consumer choice. Consumer legal funding—also known as pre-settlement funding—is a specialty financial service that allows plaintiffs pursuing a legal claim to sell part of the potential proceeds of the claim for cash now. Unlike a loan, there is no obligation to the funding company if the consumer does not have a successful outcome in their claim. And because it's the sale of an asset, it can't affect a person's credit or put them into collections. This legislation ensured that it will be treated as a consumer asset. “Consumer legal funding is a financial lifeline to those engaged in civil litigation who lack savings. Governor Parson giving his approval to this legislation is a win for robust consumer protections and protecting access to legal funding in Missouri.” Stated Missouri State Representative Phil Christofanelli Missouri State Senator Sandy Crawford stated "I am pleased that we were finally able to take the Consumer Legal Funding legislation across the finish line. Although this process has taken several years, I am confident the finished product was worth the time it took. I was happy to play a role in passing this important legislation." “Consumer legal funding is different from a lot of other financial products. It allows a consumer to get the financial assistance they need while their claim is making its way through the legal system.” said Eric Schuller, President Alliance for Responsible Consumer Legal Funding, the Trade Association that represents the companies that offer Consumer Legal Funding. Missouri State Senator Curtis Trent stated: “I appreciate the Governor’s support. This measure will ensure that Missourians have better access to the financial resources they need to protect their rights in Court.” Schuller said, “this is some of the most well-researched legislation we’ve seen come out in the last few years. It’s sure to serve as a model for other states in the years to come. This is good lawmaking in action—a trend which should continue.”
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Commercial Regulatory Issues

California Business Owner Highlights How Litigation Funding Saved His Company

Calls for an increase in the levels of regulation and oversight of litigation finance across the United States have intensified in recent months, with states throughout the country introducing or passing legislation to enact stricter guidelines. However, in California where the proposed legislation has been put on hold for now, one business owner explains how third-party funding provided an invaluable lifeline for his business. An article in the San Fernando Valley Business Journal provides an account from Craig Underwood of Underwood Ranches, whose jalapeno pepper business had almost failed after a lengthy and costly dispute with a hot sauce manufacturer, Huy Fong Foods Inc. Viewers of the 60 Minutes piece on the Litigation Finance industry will remember the coverage of this case, which LFJ covered back in December of 2022.  A protracted lawsuit that began in 2017 saw Underwood awarded $23.3 million by a jury, only to be stymied by an appeal from Huy Fong. It was at this point where Underwood engaged Burford Capital for a $4 million loan that allowed the business to keep operating and fight the appeal, which resulted in the Second Appellate District Court affirming the award. Whilst Burford Capital doubled its money, taking $8 million from the final award, Underwood emphasized the vital role that the funder played in keeping his small business alive, and continues to argue against the proposed regulation in the California legislature. Underwood particularly opposes the disclosure requirements for plaintiffs using litigation funding, as it can disadvantage them against larger and wealthier defendants, stating that ““I wouldn’t want our opposition to know the position that we were in.” Andrew Cohen, director at Burford, explained the funder’s perspective on the case and why its return was so high, emphasizing that “there were real risks in the case,” and once due diligence had been completed, Burford had “negotiated terms with Craig based on that assessment.” Cohen echoed Underwood’s opposition to these enhanced regulatory measures, and pointed out that most arguments against litigation funding “are usually being put forth by folks who are upset that legal finance helps claimants get the result that they should be able to get.”
Case Developments Commercial

Defendants Request More Information as Sysco Moves to Make Burford Affiliate the Plaintiff in Antitrust Lawsuits

Although last week seemed to put the dispute between Burford Capital and Sysco Corp to bed, with both firms agreeing to drop all claims, it seems there may yet be another twist before the story reaches its end. Following Sysco’s resolution with Burford, the company had requested to transfer ownership of several antitrust claims to a Burford affiliate; a move which is now being questioned by more than one of the defendants. An article in Bloomberg Law provides an update on the ongoing saga that has kept Burford’s name in the headlines, as defendants including Tyson Fresh Meats Inc, JBS USA Food Co., and Triumph Foods stated that the proposed move by Sysco to substitute Carina Ventures LLC as the plaintiff needed more inspection. The defendants for the antitrust lawsuits have told the federal court that before the case can move forward, they require more information about this transfer of ownership, with Triumph Foods stating that Burford’s role is “shrouded in mystery.” Judge John F. Docherty in Minnesota has informed all parties that he will review Sysco’s plan to place two of the lawsuits under Carina Ventures’ ownership and hold hearings on the matter. Boies Schiller Flexner, the law firm that had originally represented Sysco until the dispute broke out with Burford, is set to return to lead the cases and represent Carina Ventures in the lawsuits.
Commercial Deals

Navigating the Complex Challenges Faced by Litigation Funders Today

In the dynamic landscape of litigation finance, funders are constantly navigating various challenges that impact their operations and profitability. This article delves into three key challenges faced by litigation funders today: high interest rates, the potential of a global recession, and the geopolitical issues stemming from escalating tensions between Western countries and Russia and/or China. Challenges from High Interest Rates One of the primary challenges faced by litigation funders is the impact of high interest rates. Litigation finance involves providing funding to claimants in exchange for a share of the potential settlement or award. The return on investment for funders largely depends on the successful outcome of the litigation. However, high interest rates can erode the profitability of these investments, especially in cases with prolonged litigation timelines. Litigation funders have benefits from a climate of low interest rates for years now. However those days are long gone. When interest rates are high, funders face the dilemma of balancing their desire for a reasonable return with the affordability of financing for claimants. Excessive interest rates can discourage claimants from seeking litigation finance, thereby reducing the pool of potential cases for funders to consider. Striking the right balance becomes crucial to maintaining a sustainable business model. Challenges from a Potential Global Recession The specter of a global recession poses significant challenges for litigation funders. During economic downturns, businesses and individuals often face financial constraints, leading to a surge in legal disputes. While this surge may present an opportunity for litigation funders to invest in potential claims, it also exposes them to increased risk. In a recessionary environment, the financial viability of potential defendants may be compromised, impacting the recoverability of potential judgments or settlements. Moreover, increased financial distress can lead to a rise in opportunistic claims or frivolous litigation, requiring thorough due diligence by litigation funders to identify viable cases. Furthermore, in times of economic uncertainty, funding sources for litigation finance may become scarcer and more expensive. This scarcity can limit the availability of capital for funders and make it harder for them to maintain a diversified portfolio of investments. Effective risk management and careful selection of cases become vital in navigating the challenges posed by a potential global recession. Challenges from Geopolitical Issues Caused by Increasing Tensions The escalating tensions between Western countries and Russia and China present unique challenges for litigation funders. Geopolitical issues, such as trade disputes, sanctions, or diplomatic conflicts, can directly impact the outcome of cross-border litigation cases, potentially hindering the enforcement of judgments or settlements. Litigation funders must navigate the complexities of different legal systems, regulatory frameworks, and political dynamics when investing in international cases. Tensions between countries can result in uncertainties and delays in the resolution of disputes, affecting the potential return on investment for funders. Additionally, geopolitical tensions can influence the perception of risk associated with investing in certain jurisdictions. Investors may become hesitant to finance litigation in regions where the rule of law is perceived to be weak or where political volatility raises concerns about the enforceability of judgments. Litigation funders must carefully assess these risks and employ robust risk mitigation strategies when considering international investments. Conclusion Litigation funders face a myriad of challenges in today's evolving landscape. High interest rates, the potential of a global recession, and geopolitical issues arising from escalating tensions between Western countries and Russia / China all pose significant obstacles to the success of litigation finance.  To overcome these challenges, funders must exercise prudence in their investment strategies, diligently assess risks, and adapt to the changing dynamics of the legal and geopolitical environments. By doing so, litigation funders can navigate these challenges and continue to play a crucial role in supporting access to justice and driving the growth of the litigation finance industry.
Commercial Legal Innovation

Insights from ILFA’s Annual European Conference

Last week saw the return of ILFA’s annual litigation finance conference, as leaders from the top funders, law firms, investors and insurers gathered to discuss the most-pressing issues in the industry. An article from CDR provides a recap of some of the key takeaways from the conference, particularly highlighting comments from Chris Bogart, Burford Capital’s chief executive, who criticized the Solicitors Regulation Authority (SRA) for hindering efforts by funders to take a more active stake the ownership of law firms. Bogart offered a scorching rebuke of the UK’s inability to adapt following the passage of the Legal Services Act in 2007, arguing that any progress “has been completely stymied by the bureaucratic ineptitude of the regulators here.” Neil Purslow spoke to the current environment of a stagnant economy and high inflation, Therium’s chief investment officer pointed out that the funding industry had previously benefited from “historically low interest rates” and must now adapt to the new normal.. Omni Bridgeway’s Andrew Saker argued that there were both benefits and risks in the current market, suggesting that whilst defendants may look at “the possibility of resolving measures more expeditiously”, funders would still be faced with the rising cost of capital impacting their business models. Meanwhile, independent litigation funding adviser Mikołaj Burzec provided insights on a new paper published by ILFA: “Resourcing the Rule of Law in Europe”, which analyses and critiques the European Union’s proposed regulations for the litigation finance industry. Burzec highlighted ILFA’s argument that the EU should wait for the full implementation of the Representative Actions Directive (RAD) and assess the resulting impact, before imposing further regulations on third-party funding.
Commercial Deals

Litigation Funding as a Powerful Tool for ESG Progress

The intersection of litigation finance and the drive towards progress in the ESG arena are often discussed as a great opportunity for the former, with numerous litigation opportunities arising from society’s shift towards a more responsible business culture. However, it can also be argued that litigation funding may prove to be one of the best tools available to realize a positive impact in terms of encouraging businesses to adhere to their proclaimed ESG strategies. An article in Reuters examines the utility of litigation finance in pursuing an ESG agenda, with insights from Lucy Glyn, director at Exton Advisors. Glyn highlights that funders are already engaged in ESG investments through a number of cases, with this provision of outside capital allowing claimants to pursue cases they usually couldn’t finance themselves, and thereby “enabling them to ultimately to hold companies to account for ESG failures.” Glyn points to investor-led lawsuits as a particularly strong avenue for ESG litigation funding, as investors recognise that it can be used to pressure unwilling boardrooms to make changes and at a strategic level, litigation funding can “serve as a catalyst for changes to promote responsible business practices.” Outside of targeting businesses who are not meeting ESG standards, third-party funding will also hopefully be an asset for those groups who wish to see meaningful changes from governments on a policy or regulatory level through targeted litigation.
Announcements Case Developments

LegalPay announces 2nd interim finance exits with 23% returns in SARE Gurugram

LegalPay, India’s first and largest third party litigation funding platform, has announced its second successful exit in the interim finance segment in last one year with 23% IRR (internal rate of returns).
The interim financier based in Delhi-NCR has achieved a successful exit from its investment in SARE Gurugram Pvt Limited (Sare Gurugram) within a short span of 11 months. In August of the previous year, the financier had provided undisclosed interim finance to the debt-laden real estate company.
Interim finance is a short-term lending granted  granted to the debt-ridden companies undergoing corporate insolvency resolution process (CIRP). Sare Gurugram, the unit of Sare Homes, had defaulted on dues to creditors for a construction of a township in outskirts of Delhi.
SARE Gurugram was admitted under Corporate Insolvency Resolution Process (CIRP) in March 2021 following a petition filed by Asset Care and Reconstruction Enterprises Limited. In April of this year, the National Company Law Tribunal (NCLT) approved a debt resolution plan to revive SARE Gurugram Private Limited, located in the NCR region. The plan was proposed by a consortium consisting of KGK Realty (India) Private Limited and Dhoot Infrastructure Projects Ltd.
Commenting on the exit, Kundan Shahi, Founder and CEO of LegalPay said, “This successful resolution of SARE Gurugram underlines LegalPay's commitment to providing innovative financial solutions that not only revive such businesses under insolvency but also contribute to the growth and development of the legal & insolvency industry.”
“We are grateful for the trust and collaboration of all stakeholders involved, and we remain dedicated to driving positive change and creating a thriving ecosystem for all,” he added.
LegalPay's ability to deliver exceptional returns while safeguarding the corporate debtor’s interest underscores the company's meticulous due diligence, comprehensive risk assessment, and strategic decision-making.
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Founded by Kundan Shahi in 2019, LegalPay is a leading player in the insolvency financing domain & India’s largest provider of litigation financing. It consistently navigates the complexities of the legal financing landscape to generate impressive results for its investors and helping such companies maximize their asset value.
Backed by 9Unicorns, Ambarish Gupta and well-known entrepreneur-turned-investor and global philanthropist Ashwini Kakkar, LegalPay operates on a ‘No Win No fee model’ which means that parties are only required to pay upon successful realization of the claim amount.
At present, the company manages over ₹ 2,500 crores in claims under management through its AI and technology-enabled platform and expects to raise it to ₹ 5,000 crores in CY 2024.
It's first interim finance exit was from Yashomati Hospitals in February last year.
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Announcements Commercial People Moves

Omni Bridgeway announces U.S. legal industry leaders appointed to its Investment Committee

Omni Bridgeway is pleased to welcome Leora Ben-Ami and the Honorable Winifred Y. Smith (Ret.) to its Investment Committee. These nationally regarded legal industry professionals bring decades of experience and a wealth of knowledge to Omni Bridgeway's investment process. Ms. Ben-Ami will leverage her extensive background in intellectual property to review and evaluate cases relevant to the company's global IP portfolio. Judge Smith joins the US Investment Committee, where she will consider a variety of complex commercial cases. Ms. Ben-Ami is a renowned intellectual property attorney with a focus on biotechnology, life sciences and pharmaceuticals. She has extensive trial experience as lead counsel including arguing before the U.S. Court of Appeals and within the Federal Circuit. In addition to taking on leadership roles at various AmLaw Global 200 firms, Ms. Ben-Ami sits on the board of the New York Intellectual Property Law Association. The Honorable Winifred Y. Smith (Ret.) is a distinguished jurist, having served on the bench of the Alameda County Superior Court for over two decades adjudicating complex civil litigation matters and numerous questions of first impression. She was selected as Presiding Judge in 2015-2016 and later retired following her service in the Complex Civil Litigation division. Judge Smith also lent her experience as a Justice Pro Tem for the California Court of Appeal, First Appellate District, Division Four. In 2021, she was awarded Trial Judge of the Year by the American Board of Trial Advocates. Prior to her career on the bench, Judge Smith was a Deputy Attorney General with the California Department of Justice's Office of the Attorney General for 26 years. "We are thrilled to have these top legal minds on our Investment Committee," said Matt Harrison, Managing Director and co-Chief Investment Officer for the US. "With the addition of Ms. Ben-Ami and Judge Smith, claimants, sophisticated litigators, and companies seeking dispute and litigation funding can be confident our investment process continues to establish the highest standards in the industry." Managing Director and co-Chief Investment Officer for the US, Jim Batson, said "We are delighted to welcome the decades of experience from Ms. Ben-Ami and Judge Smith. It is important to continue to add members to the Investment Committee who bring diversity of thought from a range of experiences and backgrounds." "Ms. Ben-Ami has the ideal background for our global portfolio of intellectual property matters. Her experiences as a practice leader and trial attorney give her a unique perspective which will be invaluable to our internal and external stakeholders," commented Sarah Tsou, Portfolio Manager - Global Intellectual Property and Senior Investment Manager.
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Commercial Deals

Lansdowne Oil & Gas Exploring Funding for Claim Against Irish Government

Litigation and arbitration pursued against national governments has a mixed history, with successful claims brought where governments have harmed companies’ interests through unlawful action, such as the ongoing Sulu dispute. However, what is clear in many of these cases, is that litigation funders can play a powerful role in supporting individuals or companies to seek legal redress against the otherwise immense power of the state. An article in The Times highlights another potential example of litigation funders backing claims against national governments, as the exploration company Lansdowne Oil & Gas announced that it is in talks with funders over the possibility of financing a case against the Irish Government. The claim, which is being brought through international arbitration, alleges that the Irish government “failed to act in a fair and reasonable manner” under the Energy Charter Treaty (ECT), when it withdrew an exploration license for the Barryroe prospect. Lansdowne, which owns a 20 per cent stake in the prospect, announced that it had been approached by several funders and that early discussions were met “with positive feedback”. Lansdowne has enlisted Ashurst to lead the arbitration proceedings, with the law firm having provided a settlement offer that the Irish government must respond to within three months.  Eamon Ryan, Minister for the Environment, Climate and Communications, stated that the government had concerns about the “financial capability” of Lansdowne and Barryroe Offshore Energy, with the latter controlling the other 80 per cent stake in the prospect.
Case Developments Commercial

Legal Battle Between Burford and Sysco Ends as Both Parties Dismiss All Claims

Whilst funders and claimants almost always have a harmonious and mutually beneficial relationship, there are rare occasions where that partnership breaks down and contentious disputes emerge during the course of litigation. One such dispute that broke out in March of this year between Burford Capital and its client Sysco Corp has come to an end, with both parties mutually agreeing to drop all litigation and arbitration against one another. Reporting by Bloomberg Law provides insight into new court filings which have revealed that Burford and Sysco have dismissed all claims with prejudice, with neither party providing a comment or statement on this development. As for the original antitrust lawsuits Sysco had brought against poultry suppliers, the court filings reveal that all these claims have been assigned to Carina Ventures LLC, a Burford affiliate. The ongoing dispute between Burford and Sysco had proven to be a lightning rod for critics of litigation finance, as Sysco had alleged that Burford had blocked settlements in two lawsuits and seemingly accused the funder of unduly controlling the litigation. Burford had refuted these allegations and asserted that Sysco had violated the terms of the original funding agreement, thereby giving the funder the power of veto over the settlements.
Commercial Deals

TikTok Confirms it is Funding Users’ Lawsuit Against Montana

There are occasions when we see novel approaches to litigation financing, as has been demonstrated by a global social media company providing the financial backing for a lawsuit brought by its own users against the government. An article by The New York Times outlines a development in the case of five TikTok creators who filed a lawsuit against the state of Montana last month, alleging that Montana’s legislation banning TikTok violated their First Amendment rights. However, it has now been revealed in a statement by TikTok, that the company is covering the costs for this lawsuit, with spokeswoman Jodi Seth stating: “We support our creators in fighting for their constitutional rights.” The TikTok creators were approached by lawyers from Davis Wright Tremaine, who are now representing the claimants, and informed the individuals that TikTok would support them in both filing and funding the lawsuit. Ambika Kumar, partner and co-chair of Davis Wright Tremaine’s media law practice, pushed back on any suggestions that the social media giant’s involvement was an issue, arguing that “the fact that TikTok is paying for the suit is irrelevant to the legal merits of the case.”
Commercial

Chambers & Partners Release its Litigation Support Guide for 2023

The Chambers & Partners rankings provide an annual guide to the top firms in each region and practice area, as well as highlighting the established industry leaders alongside the rising stars to watch in these companies. This week, Chambers & Partners released its Chambers Litigation Support Guide for 2023, which includes rankings for over 250 individual practitioners and more than 340 firms, including practice areas such as litigation funding, forensic accounting, business intelligence and investigations, and PR and communications. In the Global-wide ranking covering litigation funding for international arbitration, Chambers ranked Harbour, LCM, Therium, Burford Capital, Fortress Investment Group and Omni Bridgeway as Band 1 firms. Nivalion, Parabellum Capital, and Profile Investment were also recognized as strong funders in Band 2. Chambers also provided rankings by region with guides available for Australia, Canada, Europe, Latin America, the Middle East, South-East Asia, the United Kingdom, and the United States. Within the most active markets such as the UK and US, Chambers provides guides to firms specifically involved with litigation funding for insolvency or for litigation funding brokers. All the rankings can be accessed through the Chambers Litigation Support Guide hub.
Consumer Special Features

Fair Pre-Settlement Funding – An Oxymoron or a Viable Alternative?

The following article was contributed by Julia DiCristofaro, program administrator at The Milestone Foundation. “I have a good client who is in need of pre-settlement funding, which I almost always advise against. But she is desperate, and this case will settle soon. Do you think you can help?” As program administrator of The Milestone Foundation, the only nonprofit providing pre-settlement funding to plaintiffs in need, I often hear this sentiment. Non-recourse, pre-settlement funding companies market themselves as quick cash options for plaintiffs who are awaiting their settlements.  It’s an easy lure for an individual who has undergone a catastrophic incident, one that has likely left them injured and unable to work, or facing mounting medical bills; someone who knows they will eventually receive a sum of money to live off of, but in the meantime, might not be able to afford groceries or rent. Pre-settlement funding, also referred to as litigation finance, has grown exponentially in the past decade and is now estimated to be a nine-figure industry. For many plaintiffs, this funding is a necessary lifeline to financially stay afloat as their case resolves. Yet, there are few regulations for this type of funding, often referred to as the “Wild West” of the lending industry. Murky contracts comprised of complex language, confusing terms, hidden fees, and complicated interest calculations are common features of these advances. When an individual is desperate to make ends meet, terms like “compounding interest,” “quarterly fees,” and “capped at three times the principal” fade into the background, as “cash in less than 24 hours,” “no credit checks,” and “if you don’t win your case, you don’t owe anything” catch their attention and provide a glimmer of hope. As many attorneys can attest, once a case settles and the payment is due to the lender, this lack of transparency often renders plaintiffs shocked to see that they now owe as much as $30,000 on the $10,000 advance they received. Plaintiffs can feel duped or betrayed, and oftentimes look to their attorneys to solve the problem by negotiating “haircuts” with the funder, or even waiving their own fees. An attorney practicing in New Mexico shared: “I had a client who recently received a $50,000 settlement. She owes $16,000 on a $5,000 advance she took out, and is panicking at how little money she’s actually going to receive. I think I am going to have to waive my fees on the case just to help her stay afloat.” It’s no wonder so many attorneys discourage their clients from taking these advances, though for many individuals, these funds are more critical now than ever. Plaintiffs have long been at a disadvantage when pursuing justice against deep-pocketed corporations that can make lowball offers in mediation, or await the time it takes to go in front of a jury. As with many facets of life, the Covid pandemic has played a role in shaping the civil justice landscape, as social distancing guidelines resulted in overloaded dockets and delayed court dates for civil cases. As a result, the advantage held by insurance companies and other defendants in personal injury cases has increased, as they continue to accept premiums and pay out less in settlements. Meanwhile, as government programs such as stimulus checks and eviction moratoriums expire, inflation continues to skyrocket, and savings dwindle, the majority of Americans are barely making ends meet; at the end of 2022, 64% of the U.S. population was living paycheck to paycheck, an increase from 61% in 2021 according to a recent LendingClub report. Much to the dismay of many experienced attorneys, these contrary factors - lengthened trial timelines and increased financial need - make non-recourse funding a necessary component of the civil litigation landscape. Given the oftentimes exploitative nature of non-recourse advances, many states have introduced legislation or enacted regulations to rein in the industry. For instance, in Colorado, some courts have voided or re-written individual litigation financing agreements as traditional loans subject to low-interest rate ceilings. While this helps plaintiffs avoid unfair and predatory rates, it also discourages many funders from assuming the risk that is inherent in non-recourse funding, leaving few options for these injured parties, who will then pressure their attorneys to settle their lawsuits – often to the detriment of their awards. Trade organizations such as The Alliance for Responsible Consumer Legal Funding (ARC) and American Legal Finance Association (ALFA), often lobby state legislatures to prevent restrictions on the litigation finance industry. They argue that the non-recourse nature of the lending requires their members to assume a high level of risk that justifies their practices, as the plaintiffs are only required to repay these advances using the proceeds from their lawsuit; in the instance of an unfavorable result, the lender does not recoup their advance. ARC states that they support legislation that “enacts robust consumer legal protection for consumer legal funding and maintains consumer access, because good legislation does both.” Both ARC and ALFA champion industry best practices and sponsor legislation to reflect these practices. ARC’s best practices range from recommending that contracts reflect all costs and fees - showing how much the consumer will owe every six months, and the maximum amount a provider may ever own of a recovery - to prohibiting attorneys from receiving referral fees or commissions from the companies their clients receive their funding from. To date, six states have enacted ARC-backed legislation, while other bills are being reviewed in states like Kansas and Rhode Island. While the activities undertaken by ARC and ALFA are adding regulatory measures to the industry, some might argue that they are not going as far as necessary to truly benefit plaintiffs who are utilizing this funding. Maximum payments and fees are listed in contracts, but they are generally not easily found on websites, making it difficult for plaintiffs to compare shops, or truly understand what they will owe until they go through the strenuous application and underwriting process. Additionally, these trade organizations do not make recommendations on interest rates or maximum repayment amounts, which enables their members to continue to charge exorbitant rates and fees. But that’s not to say there are no ethical lenders in the space. Some companies are instituting policies such as capping repayment amounts at two times the principal, offering advances with simple interest that is applied every six months, helping to identify government support, and introducing innovations like debit cards that enable borrowers to pay for basic necessities. Another viable alternative to unethical lending is The Milestone Foundation, formerly known as the Bairs Foundation, which was created six years ago to provide a plaintiff-focused option in the pre-litigation space. The only nonprofit providing low, simple interest pre-settlement advances, the foundation has helped more than 600 plaintiffs by advancing more than $4.8 million and is looking to expand its reach to serve more clients across the country. Steven Shapiro, partner at Ogborn Mihm LLP in Colorado, has seen firsthand the benefits, as well as the pitfalls, of pre-settlement funding. “My job as an attorney is to get my clients the award they deserve. If they don’t have the resources to pay their rent or buy their groceries, they are going to feel pressured to settle, and I won’t have the time I need to bring the case to a fair resolution.” Shapiro has at times seen clients with no alternative other than to take out advances with 30 to 40 percent interest rates; while painful at the time, these clients were able to see their cases through to a reasonable conclusion. He’s also seen The Milestone Foundation at work. He recounts his client Olga, a Russian-American woman disabled in a car accident, who was in need of funding. He referred her to The Milestone Foundation. “The foundation was able to provide Olga a reasonable advance at a reasonable rate, that enabled her to afford her living expenses for the duration of the case, which took about two years to settle and resulted in a seven-figure award. The contract was transparent and really the most wonderful thing. I would always opt to refer my clients to The Milestone Foundation rather than other lenders whose practices tend to be much more opaque.” While pre-settlement funding is often condemned by principled attorneys working to protect the best interests of their clients, ethical lenders like The Milestone Foundation are working to give the industry a new reputation. As the only nonprofit in the industry, The Milestone Foundation protects the interests of plaintiffs over profits, and hopes to inspire other entities to implement a similar approach toward pre-settlement funding.
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Commercial Deals

IMN Announces Date for 2nd Annual Litigation Finance Forum in London

The Information Management Network (IMN) has announced the date for its 2nd Annual International Litigation Finance Forum, which will return to London on 19 October 2023. The event’s inaugural showing last year brought over 375 attendees together, representing senior executives from some of Europe’s leading funders, law firms, institutional investors and more. Along with the announcement of the date, IMN released the outline of the agenda for this year’s forum, with a wide variety of topics being covered across a full day of panel discussions and live Q&A. Recognizing the evolving discourse around litigation finance over the past year, this year’s conference will include a discussion on ‘Ethics, Disclosure, Regulation and Outside Equity Investments’ and a deep dive into ‘Tax Implications of Deal and Fund Structuring’. The sponsors for the 2023 event include Harbour Underwriting, Schulte Roth & Zabel, AON, the Consumer Attorney Marketing Group (CAMG), Factor Risk Management, and Exton Advisors. Those looking to attend the event are advised to register early, with Super Early Bird Registration being available until 25 August, with a discounted price of £895. To register for the event, click here.
Case Developments Commercial

Coinbase Scores Victory with Supreme Court Ruling on Federal Arbitration Act

Litigation Finance Journal recently reported that Coinbase became the first US-based cryptocurrency company to argue a case in front of the Supreme Court. The June decision has been announced, and with a 5-4 majority in favor of Coinbase, the high court ruled "that an interlocutory appeal about one matter (arbitrability) bars the district court from proceeding on another (the merits)." CoinDesk says the ruling is a distinct legal victory for Coinbase, one that could impact future lawsuits against all companies in the United States. For over a century, the Federal Arbitration Act (FAA) has been part of user agreements to protect corporations from risk and expense associated with court battles to resolve customer claims. The decision does not represent any high-court conclusions on cryptocurrencies, outside of Coinbase being one of the associated parties.   A lower court decision from the U.S. District Court for the Northern District of California denied Coinbase's arbitration agreement approach. On appeal, the Ninth Circuit denied Coinbase's motion to halt hearings while appeal is in progress.  The Supreme Court's decision in favor of Coinbase effectively stays any trial proceedings while appeal is in progress. 
Case Developments Commercial

Malaysian Government Acknowledges Need for Legitimate Litigation Funding Whilst Calling for Accountability 

The ongoing saga of the Sulu heirs arbitration case against the Malaysian government, which stands out as one of the high-profile cases of litigation funding in an international dispute, continues to evolve. After the Paris Court of Appeal ruled that the previous arbitral panel did not have jurisdiction to make its award, top officials from the Malaysian government have continued to speak in public about the perceived injustices of the arbitral process and the role that third-party litigation funding has played in it. An article by New Straits Times reports on the latest comments by Azalina Othman Said, a government minister for law and institutional reform, who continued to criticise the perceived failure of arbitrations and stated that "a strict code of ethics for arbitrators will cut any sham arbitration - that could go so far as to try to cripple sovereign nations - at its knees". Azalina also raised the issue of forum shopping, stating that claimants are able to do this and engage in an “endless pursuit” because “they are funded by a litigation fund with seemingly deep pockets and investors backing their pursuit.” In a separate interview with El País, Azalina Othman Said elaborated on her position regarding third-party funding and the need for more regulation of the practice, stating that whilst she appreciated there was a need for “legitimate funding”, it is also true that “there must also be accountability.” Regarding previous statements that the Malaysian government would pursue legal action against Therium for its role in funding the Sulu claimants, Azalina clarified that they were not threatening the funder, but if they find “an intention to subscribe to unlawful strategies or activities” then the government will “do what we need to do to defend our reputation.”
Commercial Regulatory Issues

Dutch Implementation of the EU Representative Actions Directive Sets Criteria for Litigation Funding

Analysis of new regulations which affect litigation funding in the European Union has largely focused on the negative impact of potential reforms that may be implemented as a result of the Voss Report. However, in the more immediate future, we will no doubt see how different countries within the EU will implement the Representative Action Directive, which may have an equally significant impact on the proliferation of third-party funding on the European continent. In a piece of analysis published in Lexology, Jeroen van Hezewijk, Jelle Drok, and Marco Vogels of Freshfields Bruckhaus Deringer, analyse the Netherlands’ implementation of the Directive through the ‘Dutch Implementation Act’. Having entered into force on 25 June 2023, the Freshfields authors examine the scope of the Netherlands’ implementation, as well as its specific regulations around issues such as qualified entities and litigation funding. With regards to litigation funding, the authors note that the new act has expanded upon previous legislation that governed the criteria for third-party funding of collective actions. These include prohibitions on actions brought against “a defendant that is a competitor of the funder or against a defendant on which the funding provider is dependent.” From a disclosure and transparency standpoint, the implementation act requires that when funding is involved in cross-border representative actions, the qualified entity must disclose its funding source on its website. Further disclosure of information around third-party funding may also be requested.
Announcements Commercial Regulatory Issues

New report warns: Restrictions on legal finance would leave EU businesses and consumers more vulnerable

European businesses and consumers could be left without access to a vital financing tool providing access to justice, experts warn today.

A report by the International Legal Finance Association (”ILFA”), which analyses proposed regulation on legal finance recently endorsed by the European Parliament, warns that if implemented, this could create a legal environment in Europe that would prevent many meritorious cases from being pursued.

This would be to the detriment of businesses — including startups and SMEs — and consumers alike, and it would only grant a licence for wrongdoers to continue to harm EU citizens and smaller, less well-resourced SMEs.

Legal finance provides the necessary resources in what are often lengthy and expensive legal endeavours, which empowers consumers and businesses, large and small, to seek the remedy they are due. Many funded matters are “David vs. Goliath” in nature, in which a smaller company is engaged in litigation against a larger well-resourced adversary. For EU citizens, it has helped bring cases in Europe on behalf of individuals and collective rights’ claims against a number of corporate entities.

However, in October 2022, an own-initiative report from Member of the European Parliament (MEP)  Axel Voss made recommendations which would significantly undermine the availability of legal finance within the EU.

The proposal put forward by Axel Voss MEP would make it more difficult for small and medium-sized enterprises (SMEs) to mitigate risk and keep capital in their business, and for consumers to have the necessary resources to seek redress and defend their rights. It includes the introduction of a fee cap for funders and a controversial forced disclosure provision for claimants, all of which would drastically reduce the economic viability of legal finance.

Now, experts in legal finance, collective redress, and consumer rights speak out about the dangers of the EU turning Voss’ recommendations into law. ILFA challenges the assumptions in the Voss proposals, as follows:

  • Lawmakers across EU member states are already struggling to implement the Representative Actions Directive (RAD) - aimed at strengthening the collective interests of consumers and ensuring a right to redress via representative actions. Limiting legal finance risks undermining the positive steps being made to create a collective redress regime that works for consumers.

  • Legislating the recommendations of the Voss Report would embolden large companies to engage in intellectual property (IP) theft from Europe’s SMEs. Without legal finance, Europe’s SMEs cannot defend themselves against malfeasance by multinational corporations or well-resourced Chinese companies.

  • Legal finance could be a vital component in the future battles on data, artificial intelligence, and new technologies involving analysis of complex issues and new legal concepts which will require resourcing to ensure that the EU’s “Brussels Effect” is realised. There are currently few, if any, resources available to fund meritorious litigation with scant evidence in the Voss Report that public funding or bank loans could assist.

  • Legal finance is an emerging market in Europe. The steady growth of legal finance in Europe is not only beneficial to European companies and consumers, but to the European economy.  Sophisticated and well-established investors, including pension funds and institutional investors, are continuing to see investments in legal finance as a worthy addition to their portfolios, driving important investment into the European economy during turbulent times.

Gary Barnett, Executive Director of ILFA, says: “Legal finance empowers businesses, large and small, to mitigate risk and maintain sufficient capital so they can grow and innovate. Without access to this financing, many meritorious claims, including those brought by small and medium-sized enterprises (SMEs) and consumers, would not go forward. Legal finance providers are experts in finding the most meritorious, and often important, cases that the courts need to hear and are willing to invest the time and money into issues that serve the public good.  The EU should be finding ways to increase access to this vital resource that benefits the EU legal system and its citizens.”

Prof. Dr. Ianika Tzankova, First European Chair of Mass Claim Dispute Resolution, partner at Birkway, says: “One of the big advantages of the Representative Actions Directive in my view, is that it explicitly recognises the importance of the principle of equality of arms, meaning a fair balance in the opportunities given to both parties. Legal finance takes seriously the idea that financial equality of arms is required for effective collective redress and consumer protection. In fact, without the availability of that funding source I doubt there would be any meaningful collective redress in the EU right now.”

Thomas Kohlmeier, Co-founder and co-CEO of Nivalion AG, a provider of Legal Finance Solutions in Europe, says: “The Rule of Law in Europe needs the support of funders who understand the law and are willing to share in the risk and invest in meritorious cases. The question that has not been answered to date is what happens to all those important cases that will go unheard in the courts if the special interests get their way? It seems almost cynical to restrict access to justice on the basis of unproven allegations and misunderstanding of key economic principles.”

The report is released as the deadline for European Member States to implement the Representative Actions Directive has passed on 25 June. The EU Commission will begin enforcement action against a number of member states given their failure to transpose the RAD after a two-year hiatus meaning important cases against corporate malfeasance could be jeopardised.

ILFA recommends that any further EU legislation should await the full implementation of RAD and comprehensive consultation with key stakeholders, such as consumer rights groups and SMEs Executive Agency, and ensure that any regulatory proposals are based on facts, data, and real-world experience.

Consumer rights experts are concerned that further legal finance regulation will affect the realisation of the Representative Actions Directive (‘RAD’), Europe’s first class action law.

The full report from ILFA, Resourcing the Rule of Law, is available here.

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Commercial Regulatory Issues

Law Professors Argues Funders are Not “Passive Partners” in Mass Tort Lawsuits

Critiques of third-party litigation funding tend to focus on two main issues: the perceived lack of transparency around funders’ involvement, and the potential for these funders to unduly influence the litigation process. A new academic paper suggests that a major issue is the involvement of litigation funding in mass tort lawsuits, arguing that funders will control the litigation in order to drive up their own financial returns whilst leaving the actual victims worse off. An article by Bloomberg Law features an interview with Samir Parikh of Lewis & Clark Law School, who recently published a paper entitled ‘Opaque Capital and Mass Tort Financing’ on the Yale Law Journal Forum.  In the interview, Parikh claims that there are no real restrictions on outside capital taking control of mass tort lawsuits, despite the fact that litigation funders almost unanimously assert that they do have control over the litigation process or on settlement decisions. Parikh’s essay states that funders are never “passive partners” and that the reason these investors are pursuing mass tort cases so actively, is because they are aiming “to dictate outcomes.” Parikh compares the situation to other investment markets, claiming that “it’s a playbook we’ve seen private equity funds run in distressed debt situations all the time. And the truth is it could be happening in cases that we don’t know about.” Parikh’s theory centers around his concept of “the Alchemist’s Inversion”, where funders will look to create mass tort cases without doing proper due diligence on all the claimants, then they will look to increase the value of the claims before dictating the timing and details of any settlement. Parikh believes that these kinds of situations already exist, but with the alleged danger posed to the actual claimants in mass torts, he argues that “even if it’s happening on a small scale, the point is the explosion of the practice should be anticipated.”
Announcements Commercial

Manolete Partners Releases Audited Results for FY23

Manolete (AIM:MANO), the leading UK-listed insolvency litigation financing company, today announces its audited results for the year ended 31 March 2023.  Steven Cooklin, Chief Executive Officer, commented: "The annual results for FY23 mask a picture of two very different six-month periods for the Company: the first half of the trading year was subdued, as the Company had only just begun to emerge from the ending, in April 2022, of the temporary suspension of certain important insolvency laws that the UK Government had instigated in June 2020 in response to the COVID-19 pandemic. While normal insolvency laws resumed at the start of the financial year, there is always a natural time lag between insolvencies commencing and the associated litigation claims being referred to Manolete, as Liquidators and Administrators need time to conduct their regulatory investigations before they can assemble cases for consideration by us. The second half saw a strong resumption of the growth that the Company had exhibited prior to the pandemic, as the UK Insolvency Market returned to normal operations with a strong recovery in cases being referred to us.  Given the fact that we enjoyed only the latter six months of more "normal" trading, the results are highly commendable given the loss made in H1 and recovery in H2. We had a record number of 798 new case enquiries and a record number of 263 new case investments; gross cash receipts from completed cases were at a record level of £26.7m and a new record was also set with 193 cases being legally completed in the 12-month period. We ended the year with another record number of 351 live cases in progress and the Company returning to profitability in the second half. These positive KPIs have continued into the current FY24 - with signed cases for the first two months of FY24 being 154% higher than the first two trading months of the FY23. Consequently, we have added, and continue to add, to our expert in-house legal and financial analyst teams to address the increased level of demand for our insolvency litigation solutions. With prevalent headwinds of inflation and significantly higher interest rates facing the UK economy, the Company is well set for continued growth over the foreseeable future". Financial (statutory and non-statutory) highlights:
  •     Realised revenues on completed cases were £26.8m, an increase of 76% (FY22: £15.2m) although FY23 contained an exceptionally large funded case completion of which £4.9m was recorded in realised revenue (total settlement £9.5m).
  •     129% of total revenues represented by realised revenues on fully completed cases (FY22: 77%) offset by negative unrealised revenues.
  •     Increase in the valuation of the cartel cases contributed £1.2m to gross profit in FY23 (FY22: £5.1m).
  •     EBIT reduced by 159% to a loss of £(3.1)m (FY22: £5.3m) a result of pressure on valuations in H1 FY23 on existing cases and a single rare larger case loss at trial.
  •     The Company made a loss before tax of £(4.0)m (FY22: £4.5m profit).
  •     Gross cash receipts from completed cases were £26.7m, an increase of 72% (FY22: £15.5m).
  •     The Company's retained share of gross cash receipts from completed cases (after all legal costs and payments to Insolvent Estates) was £13.1m, an increase of 47% (FY22: £8.9m).
  •     Cash generated from operations (after all completed case costs and all overheads but before new case investments and taxation) was £8.0m (FY22: £4.4m).
  •     Gross cash of £0.6m and borrowings of £10.5m (FY22: £2.2m and £13.5m) as at 31 March 2023 and £14.5m unutilised funds available on the Revolving Credit Facility with HSBC.
  •     Final dividend of nil per share. 
Operational highlights:
  •     New case investments in UK insolvency cases, an increase of 65%: 263 in FY23 (FY22: 159).
  •     Based on unaudited internal management information: ROI of 125% and Money Multiple of 2.2x from 689 completed cases since inception
  •     Based on unaudited internal management information: 193 cases were completed in FY23 (FY22: 139 cases), with an average duration per case of 15.5 months (FY22: 13.2 months), generating a Money Multiple of 1.9x (FY22: 1.87) and an IRR of 131% (FY22: 132%)
  •     Average case duration across the full portfolio of 689 completed cases is 12.8 months
  •     29% increase in live cases: 351 in process as at 31 March 2023 (272 as at 31 March 2022)
A copy of the annual report and accounts will be available on the Company's website shortly and will be posted to shareholders in due course.
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Consumer

Supporters of Louisiana Litigation Finance Disclosure Bill Discuss Route Forward After Governor’s Veto

Efforts to increase the amount of regulation around litigation financing within individual states has been on the rise throughout the last year, with state legislatures across the US introducing new legislation. A recent attempt in Louisiana, which placed a large emphasis on increasing transparency requirements for third-party funding, suffered a major setback as the Governor vetoed the bill which had been approved by the legislature. Reporting by the Louisiana Record provides an update on efforts by supporters of Senate Bill 196 to push forward with seeing these increased disclosure measures implemented. Lauren Hadden, general counsel for the Louisiana Association of Business and Industry (LABI), stated that if the state legislature is able to reconvene later in June, “we would obviously love to see SB 196 among the list of bills taken up.”  However, as it is currently uncertain whether the legislature will come back for a veto-override session, Hadden suggested that the bill’s supporters “stand ready to work with all interested parties to once again develop legislation that addresses this issue during next year’s legislative session.” Hadden argued that SB-196 was not an attempt to outlaw or restrict third-party litigation funding, instead it was designed to be “a balanced transparency measure that would have simply balanced the ledger in litigation.” The decision as to whether or not the legislature will hold a veto-override session will likely not be motivated by the litigation financing bill itself, as Republican lawmakers in the legislature have discussed it primarily in relation to the Governor’s plans to veto a more contentious bill passed by House Republicans.
Announcements Commercial

New research offers inside look at how businesses are managing litigation in uncertain economy

Burford Capital, the leading global finance and asset management firm focused on law, today releases new independent research on how in-house lawyers are adjusting their strategies in a period of sustained uncertainty. Businesses are seeking to manage risks and costs, and in turn, legal departments—and the outside law firms that work with them—have the opportunity to position themselves as part of the solution, with legal finance expected to play a role.

To better understand how macroeconomic trends impact senior in-house lawyers’ thinking about litigation, managing risk and their expectations for their law firm partners, Burford commissioned independent research that was conducted via extensive one-on-one interviews with 66 GCs, heads of litigation and other senior lawyers responsible for litigation at companies in the US, Europe, Asia and Australia.

Nearly three in four (74%) senior in-house lawyers expect to see an increase in the volume of disputes over the next two years due to the current geopolitical, economic and regulatory environment. Four in five (80%) say the current economic uncertainty will have knock-on effects for the legal department. Not surprisingly, a solid majority (62%) expect their law firms to offer more cost and risk-sharing solutions, and over half (51%) expect their firms to be knowledgeable about legal finance.

Christopher Bogart, CEO of Burford Capital, said: “We at Burford have been at the forefront of legal finance since 2009, working with lawyers in good and bad economic times. What remains constant is that in-house lawyers are always looking for ways to maximize corporate value and share risk. Burford’s latest research confirms that legal finance has taken on greater importance for businesses, especially as uncertainty in the global economy remains. We stand ready to partner with clients to solve their pressing needs, and to equip their outside counsel to be as nimble and innovative as their clients expect.”

Key findings from the research include:

  • The economy is increasing the volume and potential budget challenges of commercial litigation and arbitration.
    • Senior in-house lawyers expect to see an increase in the frequency of commercial disputes in the next two years, and the economy is exacerbating the challenges in-house lawyers face in paying for litigation and arbitration.
    • Cost causes some businesses to forgo meritorious claims and awards, while others are becoming more proactive in safeguarding claims as valuable business assets.
      • “[I]n an economic downturn, we may not be as motivated to pursue some litigation or transactional matters without creative billing options. Law firms want to be sticky with their clients, and companies are increasingly narrowing down who they work with to add more favorable terms with a select group of firms,” said an associate general counsel of a media and entertainment corporation.
  • GCs believe it is important for the legal department to show it can not only manage costs, but also add value to the business.
    • Cash flow and liquidity remain very important factors for GCs when they consider pursuing meritorious claims.
    • While GCs don’t use quantitative financial modeling of commercial claims, most say it would be valuable to be able to predict potential returns.
    • The availability of legal finance increasingly plays a role in deciding whether or not to pursue meritorious litigation or arbitration claims.
      • “[Legal finance] gave the CFO the opportunity to time recoveries as he needed them and use that funding to invest in the company,” said a general counsel of a global food and beverage company.
      • “I have explored the use of legal finance and would do so again. The liquidity aspect is a big needle-mover for many companies, especially because it could provoke a settlement earlier, bring in money earlier and de-risk litigation,” said corporate counsel and director of a global retail corporation.
  • GCs expect more financial innovation from outside counsel.
    • GCs expect their law firms to offer more cost and risk-sharing solutions, particularly in a down economy, which also means that law firms are expected to be knowledgeable about legal finance.
      • “I want my outside counsel to be aware of and advise on every option available to us in setting a strategy,” said a chief litigation counsel of a manufacturing corporation.

The 2023 GC Survey can be downloaded on Burford’s website. Extensive one-on-one interviews were conducted by phone between March and May 2023 by Ari Kaplan Advisors.

About Burford Capital

Burford Capital is the leading global finance and asset management firm focused on law. Its businesses include litigation finance and risk management, asset recovery and a wide range of legal finance and advisory activities. Burford is publicly traded on the New York Stock Exchange (NYSE: BUR) and the London Stock Exchange (LSE: BUR), and it works with companies and law firms around the world from its offices in New York, London, Chicago, Washington, DC, Singapore, Dubai, Sydney and Hong Kong.

For more information, please visit www.burfordcapital.com.

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Case Developments Commercial

Dieselgate Claims Demonstrate Power of Litigation Financing

Consumers who have been the victim of corporate negligence or fraudulent practices by large multinationals have always been at a disadvantage when it comes to seeking justice, overwhelmed by the sheer scale of legal and financial resources that companies have in reserve. However, recent years have demonstrated that litigation funding can make a significant impact in leveling the playing field between consumers and corporations. In a blog post on LinkedIn by Sparkle Capital Limited, a UK litigation funder, this exact dynamic is explored in relation to the ‘Dieselgate’ emissions scandal which has illustrated the power of litigation financing. The article highlights the staggering number of consumers that approached law firms in the UK to pursue claims against vehicle manufacturers, noting that without third-party funding, very few of these claims against well-resourced companies could have been pursued.  Sparkle Capital goes on to point out that these partnerships between funders, law firms and claimants has achieved notable progress in securing compensation for consumers, with manufacturers forced to reach significant settlement agreements in the face of these funded claims. They also suggest that the successes of the Dieselgate claims lay out a perfect example for how litigation funding can be used in future situations where a very high volume of consumers are looking to bring claims against multiple large corporations.
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.