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Announcements Commercial Legal Innovation

Community Fintech 11Onze Enters Litigation Funding for Housing Claims

On the back of its successful launch of 11Onze Recommends, Europe’s leading community fintech has added housing litigation to enhance its funding offer. 11Onze has also lowered the entry requirement for the product to € 10,000 (from € 25,000) to widen its access to more members. The housing claims are for housing disrepair, especially social housing disrepair. Explaining the new offer, 11Onze Chairman James Sène said, “11Onze Recommends is a social justice product and it lets us finance lawsuits against banks and institutions that have used illegal practices against their clients.” “In times of economic distress when conditions are uncertain, it makes perfect sense to diversify savings into safe-haven assets such as precious metals or investments that help fight inflation if we want to protect our capital. Although bank deposits are beginning to improve their yields as a result of rising interest rates, they are still not enough to compensate for the loss of purchasing power caused by high inflation.” “So, to offer our members and clients a sound return on investment (ROI), 11Onze launched 11Onze Recommends as it secures the short-term purchasing power of investors when there are no viable alternatives to maintain the value of money.” Sène added, “Right now, our UK provider is arranging litigation funding with a win rate of over 90%. This is because many large banks have been proven to have committed illegal practices against their clients and have had to provide more than 60 billion euros.” Litigation funding enables these claims to be pursued by financing the court cases of the pertinent law firm. In return, the profits are shared between the plaintiffs and those who finance the lawsuits. It achieves returns of between 9% and 11% for a minimum contribution of €10,000. On the back of success in litigation funding against banks, 11Onze decided to enter the litigation on housing claims. In the UK, if you live in rented social housing that is in poor condition, the law requires the landlord to make repairs to ensure a decent standard of living. For their part, councils who are responsible for maintenance of social housing, fail to do so sometimes, causing damage to tenants’ homes, who will have to be compensated. Explaining the popularity of the products, Sène added, “Litigation Funding is a product that in the short term, for 1 or 2 years depending on the amount, generates high returns, between 9% and 11%, well above the average of Spanish investment funds (1.91% average return in the last 15 years) or the returns of the accounts offered by Apple to its American clients. Apple offers 4.5% while the minimum return of Litigation Funding is double this amount. In any case, it is a low-risk product because the capital contributed by the litigation is insured with an AM Best insurance that fully covers it, regardless of the amount contributed. So, it has been very popular with our members and clients.”
Commercial Legal Innovation

LF Dealmakers Panel: Exploring Use Cases of Insurance Across the Litigation Landscape

A panel consisting of Rebecca Berrebi, Founder & CEO of Avenue 33, Daniel Bond, Senior VP of DUAL North America, Jarvis Buckman, Managing Partner at Leste, and Steven Penaro, Partner at Alston & Bird, discussed the intersection of insurance and litigation funding. The panel was moderated by Stephen Kyriacou, Managing Director & Senior Lawyer at Aon. Stephen Kyriacou opened by pointing out how litigation risk insurance began on the defense-side, yet plaintiff-side insurance solutions are now dominating the legal insurance space. Over 90% of Aon’s litigation policies are plaintiff side. He then began the discussion on the topic of judgment preservation insurance. Mr. Kyriacou introduced a hypothetical IP case where the funder and attorney each expect to earn $20MM, and the claimant will take home $60MM. The question was asked, why should funders or attorneys look to insure their award? Jarvis Buckman pointed out the risk mitigation strategy of protecting either part or all of his judgment, in order to take some chips off the table. Rebecca Berrebi added that having an insurance-backed return helps the company book those returns on the current books and not rely as heavily on the final outcome. So even when there is an expectation of collection, insurance can often make sense. Stephen Kyriacou then laid out the three components of a submission package (at least as far as Aon is concerned):
  • Case overview memorandum – Laying out counsel’s view of the strength of the judgment
  • The risk profile – What the risks of the claim are, and the likelihood of their outcomes
  • Aon’s perspective on the insurance – Explaining the motivations for seeking insurance, and the coverage being sought
Daniel Bond pointed out that there is alignment between how he approaches a claim with the process laid out by Stephen Kyriacou. He enjoys having that ‘new case feeling’ which you don’t often get as an attorney. The variability of outcomes provides multiple paths for underwriting, which is different than being an attorney and knowing that there is a binary outcome to your case. Mr. Bond noted that the process involves a lot of communication, to understand his counter-party and what their goals are, along with the business alignments and counter-party risks. Steven Penaro added that the matters have been heavily vetted by the time they get to his desk, as an underwriting counsel. So that implies that there is already a lot of clarification around where things stand. He studies the submission documents and develops an underwriting report and sets up an underwriting call, where the interested parties can discuss and ask questions. Typically, the process takes four to six weeks from when they get the first call until when the policy binds. Mr. Bond added that having people come in with a fresh set of eyes and ‘beat the hell out of the case’ at that juncture in its lifecycle is an extremely valuable process, even notwithstanding the insurance component. Just having experts evaluate the case is a powerful resource. The panel then covered how judgment preservation insurance might pay out, client interests around insuring legal claims, and how clients might pull proceeds from an insurance claim through insurance-backed judgment monetization. The panel offered a thorough deep dive into the insurance landscape—a topic that will no doubt be covered in future events, as these two industries continue to collaborate on mutually beneficial products and services.
Commercial Deals

LF Dealmakers Panel: Ask the Experts: An Insider’s Approach to Getting the Best Deal

Ted Farrell, Founder of Litigation Funding Advisors moderated a panel which included Fred Fabricant, Managing Partner of Fabricant LLP, Molly Pease, Managing Director of Curiam Capital, and Boris Ziser, Partner at Schulte Roth and Zabel. The topics covered in this panel discussion were:
  • Getting up to speed on funding & insurance products
  • How to fast track diligence and deal with exclusivity
  • Negotiating key terms and spotting red flags
  • Benchmarking numbers & making the waterfall work for you
The topic of insurance came up first. Molly Pease began the discussion by noting that it isn’t always the case that funders are looking to lower risk in every situation. “It’s not always the case that we’re looking to minimize risk with insurance, because that comes with a cost,” Pease noted. “We don’t necessarily want to cut into our return, so there has to be a good fit for the insurance product.” The moderator, Ted Farrell then pointed out that starting a litigation funder isn’t exactly about lowering risk.  So, risk mitigation is important, but not the primary driver of investment decision making. Boris Ziser agreed, yet noted how insurance opens the door to lot of other investors.  “More than half of our mass tort deals have insurance,” said Ziser, “with either the entire deal or a tranche of deals being insured.” Getting wrapped by a single A-rated carrier allows certain investors to participate in the investment. On the issue of judgement preservation in the IP space, Fred Fabricant explains that in the patent space, he hasn’t seen a lot of insurance products in the pre-judgement section of the case. “There are too many uncertainties, and it is very hard to assess the risk in this phase of the case.”  Fabricant is looking forward to insurance products in this phase. “In post-judgement, much easier for insurance to assess the risk, because you’ve eliminated lots of uncertainties.”  For his part, Fabricant is interested in insurance products to mitigate risk, especially in portfolio funding cases, though he hasn’t had much experience with insurance products yet. Further topics discussed included exclusivity (Fred Fabricant noted he doesn’t shop deals between funders, in order to maintain long term relationships), funder communication with clients (funders want to move just as quickly or even more quickly than lawyers and claimants—the process can be slow sometimes if claimants need to vet whether the terms are appropriate), and funder due diligence (it’s always better to be upfront about the risks of a case, since the funder will find those out eventually anyway—and every case has risks, no sense in pretending you have a panacea of a legal claim). In the end, it was an expansive panel discussion that covered a range of topics pertinent to securing a litigation funding deal.
Commercial

Understanding the Intersection Between Litigation Funding and ATE Insurance

The combination of third-party litigation funding and After The Event (ATE) insurance can be a powerful tool for lawyers and clients, allowing them to pursue meritorious cases whilst lowering their overall litigation risk. However, in order for these partnerships to succeed, it is vitally important that each party understands the others’ priorities and concerns. A post from Harbour Underwriting provides a recap of a recent panel discussion on ‘The litigation funding and ATE insurance lifecycle: A roadmap to success for lawyers and clients’, hosted at Miller Insurance’s London office. The panel included Harbour’s own managing director and underwriting director Rocco Pirozzolo, joined by Nick Pontt, managing director at Locke Capital, and James Gowen-Smith, head of ATE insurance for Miller Insurance. Discussing the importance of commerciality when it comes to selecting cases, Pontt explained that funders are likely to reject an opportunity based on “enforcement, duration and an alignment between budget and quantum.” Gowen-Smith built on this point from the broker’s perspective and emphasized that “proportionality is the key word: the cost to quantum ratio”, meaning that smaller cases can create difficulties. Harbour’s Pirozzolo highlighted that an undervalued aspect is understanding the level of risk a client is willing to expect, noting that he finds it to be a “struggle when a lawyer says their client doesn’t need litigation insurance or funding.” In his view, this is one of the areas where utilising a broker’s services can be incredibly useful. Furthermore, Pirozzolo argued that there is a false assumption that clients only use outside funders when they lack capital, whereas it is often the case that “many clients have the money but are happier using someone else’s as it’s an efficient way to run their business.” The panel’s participants also discussed the importance of planning and preparation when it comes to the use of litigation funding and insurance, with each party needing to understand every aspect of the case before deciding whether it is the right opportunity to pursue. Pontt highlighted that this also works in reverse for lawyers when approaching funders and insurers, as they should have a solid understanding of their own priorities and processes.
Commercial Regulatory Issues

Law Professor and Funder Offer Response to House Hearing on Litigation Funding

Although calls for the regulation of third-party litigation funding are neither new nor uncommon, as LFJ reported earlier this month, a hearing in the US House of Representatives placed these familiar critiques within an explicitly political lens. In an op-ed for The Hill, Suneal Bedi, assistant professor of business law and ethics at Indiana University’s Kelley School of Business, and William C. Marra, director of litigation funding at Certum Group, provide a response to the recent Congressional committee hearing on litigation funding.  At its latest hearing, the House Committee on Oversight and Accountability’s leading members suggested that third-party funding posed a threat to the American legal system and encouraged frivolous lawsuits. However, Bedi and Marra suggest that litigation funding is actually “more likely to expedite case resolution, reduce litigation spend, lower the cost of legal services, and deter frivolous lawsuits.” The authors argue that this position is reinforced by the latest scholarship, citing a recent paper titled ‘Financing the litigation arms race’, which was published in the Journal of Financial Economics.  Bedi and Marra explain that the paper’s ‘game theoretic model’ found that the presence of third-party funding would discourage defendants from trying to prolong the litigation or pile up exorbitant costs, because the funder ensures that a plaintiff cannot be bullied into submission due to a lack of funds. Furthermore, they argue that increased competition from litigation funders should lead to an overall decrease in the cost of legal services.  Addressing the idea of funders backing frivolous lawsuits, Beddi and Marra highlight that the same paper backed up the natural conclusion that a funder who focused on frivolous cases would quickly go out of business.  In the conclusion to the op-ed, Beddi and Marra also reference their own paper in the Vanderbilt Law Review, which found that “litigation funding likely results in a net increase in welfare”. They argue that lawmakers should properly evaluate the existing research and scholarship into litigation funding, before enacting regulation that harms the very legal system they are looking to protect.
Commercial

Burford Co-COO Discusses the Evolution and Future of Litigation Funding

The frequent calls for more stringent oversight and regulation of litigation funding across various jurisdictions can be viewed as a recognition of the fact that the industry is increasingly becoming a staple feature of the legal market. This view has been reflected in a recent discussion with one of Burford Capital’s most senior leaders, emphasizing that legal finance is continuing to move towards ubiquity. In an interview with the ABA Journal, David Perla, co-chief operating officer at Burford Capital, discussed the evolution of the litigation finance industry over recent years, as well as Burford’s recent research into in-house counsels’ litigation strategy, and the recent victory for Burford in the YPF-Argentina case. Looking at the transformation of legal funding during his time at Burford, Perla noted that it has moved from being a niche part of legal services, to now “being more mainstream and part of the conversation in the broader legal market.” Even though litigation funding still retains many detractors and those who call for increased regulation of the practice, Perla argues that overall, it has become “significantly less controversial or contentious” Perla suggests that this broadly more mainstream view of third-party funding has also transformed the way clients look at Burford and other funders, seeing them not just as a source of capital, but providing clients with “a trusted partner, the same way they have bankers and financial advisors.” As a result of this wider understanding and adoption of litigation finance, Perla predicts that in the future we will see “legal finance moving into ubiquity, where CFOs, GCs and heads of litigation in any case that is complex and expensive will consider the use of financing.”
Case Developments Commercial

Burford Capital Moves to Secure $16 Billion Award from Argentina

The case of Petersen Energia Inversora SAU. v. Argentine Republic has already become one of the biggest stories in litigation finance this year, with Burford Capital’s financing of the lawsuit against Argentina leading to a $16 billion judgement from the US District Court. However, as many speculated at the time of the award, one of the biggest challenges in this case was yet to come, as Burford would be faced with the enormous difficulty of collecting on this massive award.  Reporting by Bloomberg Law reveals that Burford Capital is indeed moving quickly to secure the collection of its $16 billion judgement from the Argentine government. The article explains that just last week, Burford sent a letter to US District Judge Loretta Preska, asking the court’s permission to begin attaching Argentine assets and collect on the multi-billion-dollar award, starting from October 16th. In their explanation for this swift move to attach assets, Burford’s lawyer, Randy Mastro cited a recent interview with a government official to argue that Argentina has made it clear that it “has no intention of paying the judgement, and it would be spurious for Argentina to suggest otherwise.” In an interview conducted earlier this month with Bloomberg Television, Burford’s chief investment officer, Jonathan Molot claimed that they appreciated “the challenges that Argentina faces” in paying the $16 billion award.
Commercial Legal Innovation

Sarah Lieber and Justin Brass Announce the Launch of JBSL Legal Finance

A post on LinkedIn announced the launch of a new legal finance company, JBSL, founded by Sarah Lieber and Justin Brass. The co-founders bring a wealth of experience to JBSL, as both Lieber and Brass have previously served as co-heads of Stifel’s Litigation Finance group for the past four years. Prior to their time at Stifel, Lieber and Brass also spent time at Jefferies and Burford Capital, demonstrating an impressive history of senior leadership positions within the litigation finance industry. The announcement highlights the experience that Lieber and Brass are bringing to their new venture, stating that “over the last half decade, our team has originated and syndicated billions in large, structured, non-recourse loans to the top law firms in the U.S.” The post also notes the founders’ expertise in more complex legal finance transactions, pointing out that they “are the only team on Wall Street that regularly facilitates secondary market trading of other financiers’ and plaintiffs’ litigation risk.” Launching a new provider of legal finance in a busy and competitive funding market, Lieber and Brass emphasized that “what sets us apart from our competitors is the scale and flexibility of our capital.” They revealed that JBSL’s motto would be, “the institutionalization of this asset class”, and that their aim was to make legal finance “accessible to every type of investor and capital provider.” Those interested in working with JBSL are encouraged to contact the company at: JBSLinfo@jbsllitfin.com 
Commercial Special Features

Member Spotlight: Lee Vandevort

29 years ago, Lee Vandevort helped pioneer what is now the field of litigation finance, focusing on the funding of mediation and litigation in the large public works space. Lee is presently reviewing 2300 matters for possible funding, and he been involved in one of the first portfolio funds and secondary finances.
Company Name and Description: Construction Claims International, LLC, conducts dispute financing and claims analysis in the construction space. LinkedIn Profile: https://www.linkedin.com/in/leevandevort/ Year Founded: 1993 Headquarters: Los Angeles Area of Focus: Presently reviewing 2300 potential litigation funding matters  Quote from Lee: "Litigation finance is moving into the next phase. There will be a focus on niche areas for funding, such as public works projects."
Announcements Case Developments Commercial

Mishcon de Reya Announces Opt-In Claim Against OneCoin Cryptocurrency Scheme

At the European Litigation Funding Conference in March of this year, it was notable that one of the first panels of the event focused on the potential growth of litigation targeting cryptocurrency companies that have allegedly defrauded customers. Whilst it is still uncertain how viable these claims can be, given the difficulties around the valuation of the underlying assets, the announcement of a new claim being brought in the UK suggests that the appetite for these lawsuits is still present. In a press release, Mishcon de Reya LLP have announced that it will be bringing a claim in the High Court in London against those behind the OneCoin cryptocurrency scheme, which allegedly defrauded investors from around the globe. The opt-in claim will allege that OneCoin was not a legitimate cryptocurrency offering but instead “operated as a Ponzi scheme”, taking in over £4 billion in investment and resulting in the founder and their associates “pocketing vast sums of misappropriated investor funds.” Rhymal Persad, partner at Mishcon de Reya, stated: “The fraudulent OneCoin scheme concocted by Ruja Ignatova and others greatly impacted the lives of its victims who ranged from sophisticated to lay investors. The forthcoming claim in the High Court in London aims to achieve at least partial redress for those investors who were taken in by the deception and who suffered losses as a result". In the announcement, the law firm revealed that it had already secured financing from an unnamed third-party litigation funder. OneCoin investors who feels they are victims of the OneCoin scheme are encouraged to join the claim at: https://www.onecoinvictims.com/  
Commercial Deals

CMS’ European Class Actions Report Shows Continued Market Growth

Despite litigation funders facing an array of challenges in Europe, from the UK Supreme Court’s recent PACCAR decision to the European Parliament’s Voss Report, many are still keen to pursue the funding of class action claims within Europe. A new piece of research on class actions in Europe suggests that the market is still healthy and growing, with plenty of opportunities in a variety of jurisdictions and sectors. A partner article in Emerging Europe highlights the findings from CMS’ 2023 European Class Actions Report, which takes a sweeping view of class actions on the continent including current trends, individual country spotlights, and future risks. The top-line data from the report demonstrates how the class action market in Europe has remained strong, with 121 claims filed in 2022, demonstrating a slight increase from 120 claims in 2021, and 119 claims in 2020. As we approach the final quarter of 2023, CMS’ report puts a particular focus on member states’ implementation of the EU’s Representative Actions Directive (RAD). Kenny Henderson, partner at CMS, highlighted that although not every member has completed implementation yet, “the overarching message remains unambiguous: no sector remains unaffected to the far-reaching impact of mass litigation.” He also noted that whilst it is no longer part of the EU, the UK is still “the highest risk jurisdiction in Europe for class actions.” Whilst the report does not offer specific data on litigation funder involvement in these claims, as most funder participation remains anonymous and unreported, CMS’ report notes that “as EU MSs transpose the RAD into domestic legislation, we are likely to see litigation funding expand across Europe.” However, the report notes that the role of third-party funding in each jurisdiction will likely depend on the specific limits that are set out in the individual implementation bills for member states.  Looking at the distribution of these class action claims, CMS’ research found that over the past five years, 48% of claims in Europe have been filed in the UK, with the next highest being 12% in the Netherlands and 7% in Portugal. The class actions in 2022 were also widely distributed across different sectors with ‘financial products / shareholder / securities’ claims making up 31% of the total, competition claims comprising another 26%, and ‘product liability / consumer law / personal injury’ claims accounting for 24%.
Commercial People Moves

LCM Announces Appointment of Adam Erusalimsky to London Office

In a post on LinkedIn, Litigation Capital Management (LCM) announced that Adam Erusalimsky had joined the company as an Investment Manager in LCM's London office. Erusalimsky joins LCM from Woodsford, where he spent four years as a senior investment officer, having previously spent over nine years at Stewarts.  Erusalimsky has deep experience in complex commercial litigation, with specialist knowledge of securities litigation and class actions in both England and Australia. LCM's announcement highlighted that Erusalimsky's "deep understanding of the field and his track record of success will be invaluable to LCM and our funded parties,and his expertise in handling complex cases across different jurisdictions will greatly enhance LCM's offering."
Case Developments Commercial

Woodsford Awarded $1.8MM in Hosie Rice Claim

In most cases, the relationship between law firms and litigation funders is mutually beneficial, as they work together to help clients reach a successful conclusion to their lawsuit. However, the resolution of a long-running dispute between Woodsford and Hosie Rice over unpaid fees acts as a reminder that a breakdown in this relationship can lead to fresh litigation between previously allied entities. An article in Bloomberg Law provides an overview of the decision from Judge Colm Connolly in Delaware, who ruled that Hosie Rice ‘failed to establish a basis for vacating the $1.8 million award’ to Woodsford, thereby concurring with the previous ruling by a magistrate judge. Steven Friel, CEO of Woodsford, expressed that the company was “pleased but not in the least surprised” by Judge Connolly’s decision, and stated that Woodsford would “continue with enforcement efforts until we have recovered the full amount of the debt owed to us.” The origins of this dispute date back to Woodsford providing around $800,000 in funding for Space Data’s case against Google, with Space Data refusing to pay Hosie Rice after it reached a settlement with Google in 2020. After an arbitrator ruled that Space Data owed the law firm up to $4 million in costs but no contingency fee, Hosie argued that it was not required to award Woodsford any additional fee beyond the original loan repayments.  This $1.8 million award is the result of Woodsford’s subsequent lawsuit against Hosie Rice, in which the funder argued that it was owed additional remuneration as the $4 million client payment constituted a ‘revenue event’ for the law firm. The $1.8 million award was given by an arbitration panel, which Hosie Rice unsuccessfully appealed before US Magistrate Judge Sherry Fallon, before finally bringing their latest appeal to the District Court of Delaware.
Announcements Commercial Deals

Equine Capital Solutions LLC Selects DealBridge.Ai’s DRM Solution to Revolutionize Litigation Finance

DealBridge.ai, the first Deal Relationship Management (DRM) platform, is proud to announce its strategic partnership with Equine Capital Solutions LLC (ECS) to transform the complexities of Litigation Finance. ECS, a prominent provider of specialty finance solutions, has chosen DealBridge.ai's DRM solution as the central technology to modernize its business, incorporating the platform into every aspect of their client, deal, and operational needs. Litigation Finance poses unique challenges that require sophisticated technology solutions to effectively navigate. With the integration of DealBridge.ai's DRM solution, ECS aims to revolutionize the Litigation Finance landscape by streamlining and automating critical processes, thereby enhancing efficiency and improving outcomes for their clients. DealBridge.ai's cutting-edge DRM platform provides a user-friendly interface that seamlessly handles origination, due diligence, and distribution of private assets. By automating tedious tasks, DealBridge.ai empowers users to focus on building valuable relationships and maximizing revenue potential. The collaboration with ECS marks a significant milestone in the private markets industry, demonstrating how DealBridge.ai's advanced technology can be tailored to address the specific needs of Litigation Finance. Pat Shannon, Managing Partner of Equine Capital Solutions LLC, highlighted the importance of this partnership, stating, "After an extensive evaluation process, we have chosen DealBridge.ai's DRM solution as the central piece of technology to modernize our Litigation Finance business. By incorporating DealBridge.ai into our workflow, we are confident that we can streamline our processes, enhance our deal management capabilities, and deliver superior services to our clients." Joshua Masia, Co-founder and CEO of DealBridge.ai, expressed enthusiasm about the collaboration, saying, "We are thrilled to partner with Equine Capital Solutions LLC in their mission to transform Litigation Finance. DealBridge.ai's DRM solution is specifically designed to optimize deal management processes, and we are excited to see how ECS will leverage our platform to enhance their operational efficiency and drive growth in the industry." Jon Burlinson, Co-founder and CEO of DealBridge.ai, further emphasized the significance of the partnership, stating, "By choosing DealBridge.ai's DRM solution, Equine Capital Solutions LLC is embracing the power of automation and innovation in Litigation Finance. Our technology will provide ECS with the tools and capabilities necessary to overcome the complexities of the industry, enabling them to provide superior financial solutions to their clients and stay at the forefront of the market." With the integration of DealBridge.ai's DRM solution, Equine Capital Solutions LLC is taking a bold step towards modernizing their business operations in the Litigation Finance sector. By leveraging the power of automation, ECS aims to enhance deal management processes, improve client experiences, and achieve greater success in the market. To learn more about DealBridge.ai and Equine Capital Solutions LLC, please visit their respective websites: DealBridge.ai : https://www.dealbridge.ai   Equine Capital Solutions LLC: https://www.equinecapital.solutions
Case Developments Commercial

Delta-Funded Arbitration Against Tanzania Reaches Conditional Settlement Agreement

The funding of international arbitration brought by corporations against governments is not without its challenges, as funders must endure lengthy proceedings whilst taking on sovereign states who often attempt to frame these disputes as examples of corporate greed. However, where funders are able to find examples of meritorious disputes in which companies have fallen victim to state wrongdoing, significant returns on investment can be achieved. A press release by Winshear Gold Corp. reveals that the company has suspended arbitration proceedings against the Republic of Tanzania, as both parties have found terms for a conditional settlement agreement. Winshear emphasized that “there is no guarantee that the conditional settlement agreement will be concluded,” and that they will provide updates as further developments in the settlement process are reached. In December 2020, Winshear announced it had secured up to $3.3 million in litigation financing from Delta Capital Partners Management LLC (Delta) to support the legal proceedings against the Tanzanian government. The dispute began with Winshear seeking compensation for Tanzania’s “illegal expropriation of the SMP Gold Project and loss of the asset”, with the most recent arbitration hearing held in February of this year. Winshear clarified that “any settlement or judgement paid to Winshear from the Tanzanian government is subject to a formula whereby a portion of any proceeds are paid to Winshear's funders and legal counsel.” The announcement of this conditional settlement agreement with Tanzania is noteworthy, as in July of this year LFJ reported on a ruling by an ICSID ad hoc arbitral panel, which ordered Tanzania to pay over $109 million to Indiana Resources. That arbitration also received third-party funding in the form of $4.65 million from Litigation Capital Management.
Case Developments Commercial

Hearings in Gutmann v Apple Suggest Potential Impact of PACCAR Decision

Ever since the Supreme Court handed down its judgement in the PACCAR case, which saw the court rule that litigation funding agreements (LFAs) should be classified as damages based agreements (DBAs), we have been waiting to see what the impact on funded collective proceedings will be. New analysis suggests that recent submissions heard by the Competition Appeal Tribunal (CAT), in Mr Justin Gutmann v Apple Inc., Apple Distribution International Limited, and Apple Retail UK Limited, may give us an idea of the short-term impact of the Supreme Court’s decision. A market insight article by Clyde & Co’s partner & chair of the global arbitration group, Ben Knowles, looks at the implications of the application for certification of opt-out collective proceedings in the Gutmann v Apple case. Knowles explains that the first day of the hearing revealed that, in light of the PACCAR ruling, the class representative had not yet reached a finalized LFA with Balance Legal Capital. Mr Gutman’s lawyers explained that discussions over this matter are still ongoing between their client and the funders, but asked the CAT to still hear the remaining points relevant to certification. Knowles highlights that this is most likely emblematic of the issue facing litigants, counsel, and funders, as they all are faced with the difficulty of how to adequately amend their LFAs to comply with DBA regulations. Knowles goes on to explain that it is possible to conclude that “there isn't a lawful way to fund opt-out claims in the CAT post PACCAR, or to put it another way, there is no proven way to fund opt-out claims in the CAT post PACCAR.” He suggests that this will not be the last example of class representatives asking for more time to finalize their LFAs. As other industry leaders have argued, Knowles argues that the only tangible solution for this issue is “primary legislation that effectively reverses PACCAR or at least excludes its application to certain sorts of cases, such as opt-out collective proceedings in the CAT.”
Commercial Legal Innovation

Darrow Raises $35M for AI Platform that Identifies Potential Class Action Lawsuits

As LFJ reported last week, the worldwide momentum behind class actions continues to gain steam, as countries like New Zealand look to implement formal class action regimes. With no signs of slowing down, legal technology companies are looking to provide tools to support law firms and funders, as they search for those cases with the highest valuations and probabilities of success. Reporting from TechCrunch covers the news that Darrow, a startup which uses AI research to find and select opportunities for class action lawsuits, has raised $35 million in funding to continue its growth and expand its services. The Series B funding round takes Darrow’s total funding raised to nearly $60 million, with the company claiming that its data insights have led to around $10 billion in claims that are being actively pursued. Darrow boasts a client base of around 50 law firms at present, with the CEO, Evyatar Ben Artzi, stating that the goal for the startup is “to be the place where they can find cases that will be impactful.”  Speaking from the investor’s perspective, Margo Wu, lead investor at Georgian, highlighted that “Darrow’s founders recognized a gap in the $63 billion class and mass action market and developed an innovative language model to transform the scale and impact of litigation teams.” Whilst Darrow’s primary client base is still lawyers, as they are one of the parties most interested in finding new viable cases, the company’s leaders clarified that they hope to expand to serve individuals who may have interests in a potential case. The company’s CTO, Gila Hayat, explained that consumers “are part of the long-term vision” and that “they are the reason we started this.”
Commercial Special Features

Member Spotlight: Jonathan Stroud 

Jonathan Stroud is General Counsel at Unified Patents, LLC, where he manages a growing team of talented, diverse attorneys and oversees a docket of administrative challenges, appeals, licensing, pooling, and district court work in addition to trademark, copyright, administrative, amicus, policy, marketing, and corporate matters. Prior to Unified, Jonathan was a litigator with Finnegan, Henderson, Farabow, Garrett & Dunner LLP, and prior to that, he was a patent examiner at the USPTO. He earned his J.D. with honors from the American University Washington College of Law; his B.S. in Biomedical Engineering from Tulane University; and his M.A. in Print Journalism from the University of Southern California. He enjoys teaching, writing, and speaking on Federal Courts, administrative law, competition, and IP policy. Company Name and Description: Unified Patents, LLC is a 350+ international membership organization and trade group that seeks to improve IP protection and patent quality and deter unsubstantiated or invalid assertions in defined technology sectors through its activities. Its actions include analytics, prior art, invalidity contests, patentability analysis, administrative patent review (PTAB), amicus briefs, economic surveys, and essentiality studies. Unified works independently of its members to achieve its deterrence goals.
Company Website: www.unifiedpatents.com Year Founded: 2012 Headquarters: 4445 Willard Ave., Suite 600, Chevy Chase, MD Areas of Focus: Competition and IP Policy, NPEs, Patent and Trademark Law, Economics, Commentary, Quote on Litigation Funding:
 
From Jonathan Stroud: “Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser---in fees, expenses, and waste of time. As a peacemaker, the lawyer has a superior opportunity of being a good man. There will still be business enough."
Commercial Regulatory Issues

Will The UK Supreme Court Decision In PACCAR Affect Hong Kong Litigation Funding?

The Hong Kong Department of Justice's approach to litigation finance and third party funding is coming into greater focus following the UK Supreme Court’s July 26, 2023 ruling on R. (on the Application of PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28. Mondaq reports that PACCAR has defined "damaged-base agreements" or "DBAs" in the United Kingdom. DBAs are strictly regulated in the UK, now including litigation funding agreement contract law. Many UK courts have operated under the assumption that funding of litigation agreements does not fall under the purview of DBAs. PACCAR's Supreme Court decision has sparked a fervent debate around this topic.  Mondaq says that Hong Kong DBA relevancy differs from the UKs DBA approach. Specifically, in Hong Kong, champerty and maintenance are illegal factors that can lead to a fine and prison sentence.  It’s important to note that Hong Kong does allow waivers to the general prohibition of litigation investment if: 
  1. Third parties share a common interest in funding the outcome of a case.
  2. Accessible justice is a prime consideration.
  3. Insolvency proceedings are necessary.
Commercial People Moves

Aon Joins The European Litigation Funding Association (ELFA)

The European Litigation Funding Association (ELFA) is pleased to announce Aon’s Litigation Risk Group, the litigation risk solutions arm of Aon’s M&A and Transaction Solutions, has joined ELFA as an associate member.  “ELFA founding members are on the forefront of litigation finance in Europe”, said Paul Jeroen van de Grampel, Managing Director and Global Co-Head of Aon’s Litigation Risk Group. ”As a pioneer of litigation risk and insurance capital solutions, it is important for Aon to offer its leadership as part of ELFA and continue to shape this industry. ”  Van de Grampel added, “We are delighted to join ELFA and look forward to collaborating with like-minded professionals and industry leaders to build a deeper understanding of litigation funding within the industry. Aon is well positioned to contribute valuable insight on how litigation funding can be leveraged as a valuable tool for access to justice and, where possible, seek combinations with insurance solutions, to better support the growth of fair and effective dispute resolution mechanisms and shape better decisions.”  Omni Bridgeway Managing Director and ELFA Chairman, Wieger Wielinga commented: “ELFA was established to serve as the European voice of the commercial litigation funding industry, and we are immensely proud to welcome reputable and knowledgeable professional services firms such as Aon. The members of ELFA look forward to collaborating with Paul Jeroen and the entire Aon Litigation Risk Group who have decades of experience with the practice of litigation funding globally and particularly in the context of European civil law. Their expertise with litigation risk transfer through insurance will create deeper understanding in the market and help clients leverage bespoke insurance solutions.”
Commercial

LCM Announces Record Financial Results

A year of strong financial returns for litigation funders continues as Litigation Capital Management (LCM) released its full year audited results for the year ending 30 June 2023. The Sydney-based funder announced that it had achieved ‘record results’ with a realised income of A$181 million, with A$84 million of that income directly attributable to LCM. LCM also reported A$0.66 billion in total funds under management and its portfolio of investments are now valued at A$428 million. Praising the hard work of the LCM team, Jonathan Moulds, non-executive chairman, described the year as “LCM's most successful 12 months since inception” and provides the company “a platform from which to continue to expand our asset management business and develop scale.” With such a strong showing in the last year, Moulds highlighted that LCM had declared a final dividend of 2.25p per share, to be paid to shareholders on 27 October.  The funder also finished this period with A$104.5 million of gross cash, of which A$83 million was attributable to LCM. This marked a significant increase from its FY22 figures of A$50 million of gross cash, of which A$29m was attributable to LCM. Patrick Moloney, CEO of LCM, provided the following comment on the results: "Our fund management strategy is delivering third party capital for investment. Our referral network in Europe and APAC is delivering the high-quality investment opportunities that will underpin our generation of value and cash to Fund investors and LCM shareholders. As we continue to grow, increased activity levels will not need to be matched with proportionate increases in overall costs and this in turn means greater profitability and cash generation. This is a critical differentiator for LCM."
Commercial Regulatory Issues

Opportunities for Intra-EU Treaty Award Enforcement in the UK

Whilst it does not receive as much coverage as patent litigation or class action funding, the opportunities for litigation funders around investment treaty disputes are becoming increasingly tangible. As we have seen in the last year, whether it is disputes around bilateral investment treaties or the Energy Charter Treaty, one of the most important considerations for claimants is the selection of jurisdiction for enforcement. In a recent insights piece, Timothy Mayer, senior investment manager at LCM, provides an analysis of the recent developments around international treaty awards and how the UK’s departure from the European Union may make it a more appealing venue for enforcing arbitral awards in this area. Mayer looks at some of the significant judgements over the past five years, which illustrate how the EU has steadily become a less hospitable environment for those companies looking to enforce investment treaty awards. He highlights the path from decisions by the Court of Justice of the European Union (CJEU), such as Achmea vs Slovakia and Republic of Moldova vs Komstroy LLC, which both appeared to reinforce the idea that the court’s view was that ‘ECT based intra-EU arbitrations were contrary to EU law.’ However, Mayer also notes that since these decisions, all but one arbitral tribunal have still found that they have jurisdiction to hear these investment treaty disputes, despite the CJEU’s ‘Intra-EU Objection’. Furthermore, this year’s ruling by the English and Welsh High Court in Infrastructure Services vs Spain provided further reasons for optimism, as the court ruled that there were no reasons to set aside the award and ‘that EU law did not override the UK’s pre-accession treaty obligations to implement the ICSID Convention’. As a result of this pattern of decisions, Mayer suggests that claimants may increasingly look to enforce their investment treaty awards in non-EU jurisdictions, with the US and Australia being examples of creditors looking outside Europe for enforcement. Therefore, Mayer concludes, it is possible that the UK will see a ‘small Brexit-inspired benefit’ when it comes to dispute stakeholders looking to maximize their recovery in intra-EU disputes.
Commercial

The Flaws of Using Plaintiff Bias to Justify Litigation Funding Disclosure

The issue of transparency and disclosure in litigation funding, especially within patent infringement lawsuits, appears to be here to stay, as the last year has displayed increasing efforts from defendants and certain judges to enforce stricter requirements for funding disclosure. Whilst one of the most asserted arguments is that increased disclosure is necessary to uncover a plaintiff’s bias, it is worth considering whether this is a logical reason or even an effective method to uncover plaintiff bias. In an opinion piece for Bloomberg Law, Casey Grabenstein and Andrew Schwerin of Saul Ewing, analyze this very question and suggest that the burden of proof for launching such discovery attempts should rest with the defendant rather than the plaintiff. Grabenstein and Schwerin first compare two cases which involved defendants’ requests for further disclosure of details around the plaintiffs’ litigation funding arrangements, with two very different outcomes.  In the case of Speyside Medical, LLC v. Medtronic Corevalve, LLC, Judge Christoper Burke granted the motion to compel the plaintiffs to testify over their financial stakes in the lawsuit, stating that the size of their stake “is surely instructive as to the heft of any charge that their testimony may be biased by their ability to profit from the case result.” In GoTV Streaming, LLC v. Netflix, Inc., Magistrate Judge Shashi Kewalramani denied Netflix’s request for the disclosure of litigation funding documents, reasoning that the defendant’s argument was “too speculative to warrant the production of litigation funding related documents.” Grabenstein and Schwerin suggest that in the case of Judge Burke, the argument over bias would be far more relevant in the case of third-party witnesses, whereas “it should come as no surprise that plaintiffs and owners of plaintiff companies have a financial interest in the outcome of litigation and want to win the case.” They argue that the plaintiff’s financial stake is not relevant to the material facts of the case and, more importantly, that these kinds of orders “could prejudice plaintiffs who cannot afford to litigate the case on their own and have given up a portion of their recovery in order to secure representation.”
Announcements Commercial Deals

New research shows GCs seek greater value from legal claims and judgments

Burford Capital, the leading global finance and asset management firm focused on law, today releases new independent research that reveals how businesses are finding solutions to extract greater value from legal claims and judgments, based on a survey of 350 GCs, heads of litigation and senior in-house lawyers in the US, Europe, Asia, Australia and the Middle East.

The economic climate has amplified longstanding pressures on businesses, including legal departments. With research released earlier this year by Burford showing that GCs expect commercial disputes to increase in the next two years, how companies pay for and extract value from their meritorious claims is more important than ever. Burford’s new report on the economics of commercial disputes and enforcement demonstrates a desire by senior in-house lawyers to maximize the value of claims, judgments and unenforced awards, without adding to costs. Notably, 61% of those surveyed say that uncertain or challenging conditions would impact their likeliness to consider legal finance solutions.

Christopher Bogart, CEO of Burford Capital, said: “Companies account for well over fifty percent of Burford’s business today, including very large Fortune 500 global companies. As the former GC of such a company, I am awake to the financial pressures legal departments face, especially in uncertain economic times. The new research confirms GCs’ desire to achieve optimal financial outcomes with their claims, judgments and awards. At Burford, we are strategic partners for businesses seeking to reduce risk and maximize value both through our legal finance offerings and our enforcement and recovery services. More in-house counsel are realizing the innovative ways we can help them avoid leaving money on the table, and the research affirms that.”

Consistent with the growth of its business with leading companies, Burford on a group-wide basis recently entered into a $325 million transaction with a Fortune 500 company to finance a portfolio of matters in its affirmative recovery program, allowing the company to recognize immediate value from those claims.

Key findings from the research include:

Economic pressures impact how clients manage their costs and partners, with the majority of those surveyed likely to seek cost-sharing solutions.

  • Over half (52%) say they are likely to seek cost-sharing solutions with counsel or legal finance providers to mitigate the impact of the current economic climate.
  • Although many say they are likely to implement cost-saving measures to mitigate these impacts (44%), in-house lawyers seem to favor cost-shifting over cost-cutting.
  • Aside from relevant legal expertise, the top attributes in-house lawyers seek in outside counsel are efficiency and speed (89%), the ability to provide accurate budgets (87%) and familiarity with legal finance (69%).

Unenforced awards remain a problem for businesses, and even more so in the current climate.

  • Vanishingly few (2%) say they recovered 100% of the value of their judgments and awards over the last five years and a clear majority (61%) state that their opponents voluntarily pay their outstanding judgments and awards less than 50% of the time.
  • The consequence of slow-to-pay or fail-to-pay judgment debtors is many millions of dollars in lost value to businesses at a time when legal teams wish to minimize costs and maximize recoveries.

Enforceability is a key consideration for litigation and arbitration strategy.

  • Top perceived barriers to enforcement are jurisdiction and cost.
  • More than three quarters (77%) view ease and likelihood of recoverability as important factors in whether to pursue claims.
  • Immediate liquidity is a key benefit for funded enforcement and recovery.
  • More than half (57%) say they are likely to use financed enforcement and recovery services for a pending judgment or award.

The 2023 Commercial Dispute & Enforcement Economics Survey can be downloaded on Burford’s website. The independent research was conducted by GLG in June 2023.

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.

This announcement does not constitute an offer to sell or the solicitation of an offer to buy any ordinary shares or other securities of Burford.

Commercial Legal Innovation

Embracing Sustainability in Litigation Finance

Gian Marco Solas, Ph.D.2, is a qualified lawyer and academic, and currently serves as the Lead Expert at the BRICS Competition Law and Policy Centre and in private practice, where he advises on the application of physics models in (antitrust) litigation and market & investment modeling worldwide. With over a decade’s experience working with law firms and litigation funders, where he has inter alia built and managed the (then) largest European collective redress initiative (the Italian truck cartel initiative), Dr. Solas has published a number of papers on litigation funding and is the author of Third Party Funding: Law, Economics and Policy (Cambridge University Press, 2019) and the forthcoming 'De Lege et Amore - Theory of Interrelation & Sustainability (Escargot, 2023) about the interrelation of the laws of physics and human laws in the economy. In his latest analysis about the litigation funding market, Dr. Solas looks at three previous historical litigation funding cycles that have similarly and quickly appeared and disappeared in specific spatio-temporal dimensions (Ancient Greece, Ancient Rome and Middle-Ages England), to then conclude - on the basis of recent and publicly available evidence - that the same 'destiny' appears to be repeating in the modern global cycle. This analysis on the one hand suggests to reject the non realistic view that litigation funding would be an uncorrelated asset class, which view ultimately is backfiring and making capital raises more difficult. While, on the other, to learn from its cyclicality and correlation to the economy to understand how and where to evolve. That is a fund individual choice that can be summed up, as matter of principle, to either transform into (or merge with) a proper asset manager (managing litigious and not litigious assets and / or classes thereof) or into a law firm (or special type thereof, with funds, technology, etc.) making profit both upfront and on a contingency / conditional or other basis. Such move would also potentially remove the need for discussions and implementation of sector-specific regulation of litigation funding while, from a more economic point of view, potentially allow to mitigate the risks physiologically linked to portfolios of unsecured debt in an economic downturn. In Dr. Solas’ view, it is therefore pivotal for the specialist litigation funding industry to embrace legal science and work on their “legal finance ‘beta’ strategy” to potentially move from the tail of the ending “debt cycle” to the head of the new “codified cycle”. This move should be designed to allow litigation funders to reach a realistic equilibrium between high-risk-high-reward investments with lower but steady and more secure income streams. Thus, freeing them from the evidently too tight and inefficient financial model that – together with regulatory pressure and other challenges – appear to be strangling the industry at this stage. In fact, many litigation funders are already part of larger and / or balanced conglomerates, while many others are not. All or most of them, however, seem to be still attached to the now surpassed view of a commoditized economy, that not only fails to capture the real value of legal claims, but also 'weighs' heavily on all asset managers in terms of compliance and legal costs. Most modern technology and legal science allows not just to analyze and factor the weight of the law in rational decision making, but also to enlarge the scope of viable legal claims and to codify any legal asset, therefore making them more economically valuable. Litigation funders’ higher familiarity and experience with the law compared to other asset managers could prove to be the distinguishing skill and make them not just sustainable - but also thrive - in the “new” codified economic reality. In addition to the books and articles mentioned above, further data for the above analysis can be found in the following forthcoming publications:
  • Physics as model for the law? Sustainability of the litigation finance business model (Journal of Law, Market and Innovation, 2024)
  • Third Party Funding in the EU. Regulatory challenges (Theoretical Inquiries on Law, co-ed. C. Poncibo’, 2024)
  • Third Party Funding in the EU (E. Elgar, co-ed. C. Poncibo’, E. D’Alessandro, 2024)
  • Third Party Funding and Sustainability considerations (E. Elgar, Research Handbook on Investment and Sustainable Development, 2024, co-ed Annie Lesperance and Dana McGrath)
Commercial Regulatory Issues

Kennedy, Manchin introduce bipartisan Protecting Our Courts from Foreign Manipulation Act to end overseas meddling in U.S. litigation

Sen. John Kennedy (R-La.), a member of the Senate Judiciary committee, and Sen. Joe Manchin (D-W.Va.) today introduced the Protecting Our Courts from Foreign Manipulation Act of 2023 to stop foreign entities and governments from funding litigation in America’s courts.  “Leaving our courts unprotected from foreign influence—such as from China—poses a major risk to U.S. national security. The Protecting Our Courts from Foreign Manipulation Act would put necessary safeguards in place to ensure that foreign nations, private equity funds and sovereign wealth funds linked to hostile governments are not tipping the scale in federal courtrooms,” said Kennedy. “Foreign actors such as China and Russia use third-party litigation funding to support targeted lawsuits in the United States, undermining our economic and national security. This legislation would provide a commonsense strategy to protect our legal system by requiring greater transparency and accountability from third-party groups and preventing third-party litigation funding from foreign states and sovereign wealth funds. I urge Senators on both sides of the aisle to support this bipartisan bill to ensure that our federal courts are protected from foreign influence,” said Manchin.  Rep. Mike Johnson (R-La.) introduced companion legislation in the House of Representatives. “Foreign states and sovereign wealth funds should not meddle in our justice system. This bill prevents foreign actors like China from financing malicious lawsuits, protects critical industries and prioritizes the interests of Americans in court,” said Johnson.  Currently, foreign entities flood courts with billions of dollars in litigation financing in order to achieve a particular outcome in a case. Hostile foreign governments or companies that are connected with those governments could fund lawsuits in federal courts in order to achieve their geopolitical objectives and undermine America’s national security, especially by targeting proprietary commercial and military technology and exploiting U.S. disclosure requirements. The Protecting Our Courts from Foreign Manipulation Act would:
  • Require disclosure from any foreign person or entity participating in civil litigation as a third-party litigation funder in U.S. federal courts.
  • Ban sovereign wealth funds and foreign governments from participating in litigation finance as a third-party litigation funder, either directly or indirectly. 
  • Require the Department of Justice’s National Security Division to submit a report on foreign third-party litigation funding throughout the federal judiciary.
In January, Kennedy urged U.S. Supreme Court Chief Justice John Roberts and U.S. Attorney General Merrick Garland to take action in order to mitigate the threat foreign actors like China pose by covertly funding litigation in U.S. courts. “The U.S. Chamber of Commerce applauds Sens. John Kennedy (R-LA) and Joe Manchin (D-WV), and Rep. Mike Johnson (R-LA) for introducing this landmark bill, and we urge Congress to quickly pass it to protect consumers, businesses, and U.S. national and economic security,” said Harold Kim, President of the U.S. Chamber of Commerce Institute for Legal Reform. “The R Street Institute is excited to support and endorse Senator Kennedy’s legislation that will shine a light on the shadowy funders of third-party litigation, and limit the ability of foreign governments to negatively impact various U.S. industries by tying them up in anonymous third-party litigation. The current third-party litigation funding laws lack much needed transparency, and they could open the door to foreign entities detrimentally impacting our national security. We applaud the Senator for his leadership on this issue, and we urge more lawmakers to join him in this effort,” said Anthony Lamorena, Senior Federal Affairs Manager at the R Street Institute. Full text of the legislation is available here.
Commercial Deals

Woodsford Pursuing Sale of US Passive Investments Portfolio

A recurring theme at industry forums and conferences over the last year has been the need for a secondary market for litigation finance, providing investors with alternative exit routes and allowing funders to raise additional liquidity. Whilst most of these secondary transactions go under the radar, a new story reveals that one of the leading global litigation funders is pursuing a significant portfolio sale in the secondary market. In an exclusive story from Bloomberg Law, Emily R. Siegel reveals that Woodsford is moving forward with plans to sell its portfolio of passive investments in the US, allowing the funder to refocus its capital on litigation that targets corporate malpractice. Although the funder has not specified the number of passive investments, nor the total value of the portfolio up for sale, it is reportedly meeting with several unnamed buyers. Steven Friel, CEO at Woodsford, explained the reason for this move by stating that “one of the ways in which we can fuel our growth—get cash for our growth and also re-position ourselves—is by pursuing a secondary market transaction.” Friel went on to emphasize that the funder would be looking to prioritize litigation led by consumers or shareholders who are seeking to hold companies to account. This will include identifying securities litigation which may involve US-based claimants, but which are being tried in other jurisdictions due to the 2010 Supreme Court ruling on securities lawsuits with foreign elements. Commenting on the transaction, Ted Farrell, founder of Litigation Funding Advisers, highlighted that whilst they do not always take place in public view, “secondary transactions are definitely a part of the every day in litigation funding now.”
Commercial Regulatory Issues

Landmark New York Court’s Decision Strengthens the Future of Litigation Funding

The following piece was contributed by Guido Demarco, Director and Head of Legal Assets at Stonward. In a groundbreaking legal battle that pitted Petersen Energía SAU and Petersen Energía Inversora SAU[1] (the Petersen Companies) against the Republic of Argentina, the recent decision by the District Court of Southern District of New York has far-reaching implications for the litigation funding industry. This landmark ruling reaffirms the critical role litigation funders play in providing access to justice, particularly in complex cases involving powerful sovereign entities. The Petersen case was a high-stake dispute that arose when Argentina failed to fulfill its obligations under the bylaws of YPF S.A, the national oil company. When Argentina privatized the company during the 90s, the country promised under the bylaws a compensated exit to shareholders – a mandatory tender offer - if Argentina were to reacquire control of the company by any means. In 2012, Argentina expropriated Repsol's 51% stake in YPF but did not fulfill this promise, eventually plunging the Petersen Companies into insolvency and liquidation. To fight back against this injustice, the resourceful insolvency administrator of the companies, Armando Betancor, devised a liquidation plan in 2015 that included securing litigation funding. Given the immense risks involved, the Petersen Companies had to assign 70% of any recovery obtained in the claims to Burford Capital, the litigation funder. These risks included fighting a fierce sovereign in New York courts, which implied paying high attorney and experts' fees during a lengthy period, as well as enforcement risks. During the trial, Argentina attempted to diminish the awarded damages by arguing that the litigation funder was the primary beneficiary of the compensation, seeking to shift the focus away from the plaintiffs' rightful claims. This tactic sought to undermine the legitimacy of the litigation funding arrangement, implying that the claimants should receive reduced damages due to the involvement of a third-party funder. However, the court's decision firmly rejected this argument, emphasizing that the responsibility for compensation lay with Argentina, regardless of the funding arrangement, ensuring that the claimants were not deprived of the full measure of their entitled damages. In a single paragraph, the Judge unequivocally dismissed Argentina's attempts to derail the case by injecting the role of Burford Capital into the proceedings. The Judge emphasized that the essence of the case remained between the plaintiffs and the defendant who inequitably refused to comply with its promises: “The Court also rejects the Republic’s effort to inject Burford Capital into these proceedings. This remains a case brought by plaintiffs against a defendant for its wrongful conduct towards them, and the relevant question is what the Republic owes Plaintiffs to compensate them for the loss of the use of their money, not what Plaintiffs have done or will do with what they are owed. The Republic owes no more or less because of Burford Capital’s involvement. Furthermore, the Republic pulled the considerable levers available to it as a sovereign to attempt to take what it should have paid for and has since spared no expense in its defense. If Plaintiffs were required to trade a substantial part of their potential recovery to secure the financing necessary to bring their claims, in Petersen’s case because it was driven to bankruptcy, and litigate their claims to conclusion against a powerful sovereign defendant that has behaved in this manner, this is all the more reason to award Plaintiffs the full measure of their damages.” Ironically, the most powerful impact for the litigation funding industry comes not from a lengthy legal argument, but from a single paragraph tucked away in a footnote of the judgment. Within this inconspicuous footnote, the Judge's words resonate loudly, reaffirming the fundamental principles underpinning litigation funding. It reminds us that justice is blind to the funding mechanisms employed to level the playing field and that litigants should not be penalized for seeking financial support, particularly when facing formidable sovereign opponents and obstacles. No doubt, this will be a beacon in times in which the industry is under heavy scrutiny, especially in Europe under the so-called Voss Report. The ruling reaffirms the legitimacy and importance of litigation funders in enabling access to justice in complex cases where financial backing is essential to bring claims to fruition. The Court's decision in the Petersen case is a significant victory not only for the plaintiffs but also for the litigation funding industry. It sets a powerful precedent that reinforces the rights of litigants to secure funding for their cases without sacrificing the full measure of their damages, contributing to a more equitable and accessible legal system. This decision will inspire confidence among potential litigants, funders, and investors alike, encouraging continued growth in the litigation funding industry. We, at Stonward, are proud of having Armando Betancor, the insolvency administrator of the Petersen companies, in our Board of Investment. [1] Petersen Energía SAU and Petersen Energía Inversora SAU v. Republic of Argentina, District Court of Southern District of New York, 15 Civ. 2739 (LAP) - 16 Civ. 8569 (LAP)
Announcements Commercial

Burford Capital Reports First Half and Second Quarter 2023 Financial Results; Strongest Set of Six-Month Financial Results in Burford’s History

Burford Capital Limited ("Burford"), the leading global finance and asset management firm focused on law, today announces its unaudited financial results at and for the three and six months ended June 30, 2023.1 Burford's report on Form 6-K at and for the three and six months ended June 30, 2023, including unaudited condensed consolidated financial statements (the "2Q23 Quarterly Report"), is available on the Burford Capital website at http://investors.burfordcapital.com. Christopher Bogart, Chief Executive Officer of Burford Capital, commented: "We have produced the strongest set of six-month financial results in Burford's history, with net income attributable to shareholders of nearly $240 million and tangible book value per share growth of 12% over the past six months. Our core portfolio generated a lot of cash with realized gains tripling on our core portfolio realizations, and new business was very strong. Our new valuation methodology is sensitive to interest rate changes and thus higher rates during the first six months of 2023 were a headwind for the fair value of our core portfolio, especially during the second quarter, but these valuation movements are non-cash and unrealized and are expected to continue to fluctuate over time. Operating expenses reflect strong portfolio performance and certain idiosyncratic events." Highlights Key activity
  • 2Q23 realized gains tripled to $59 million, up 254% from $17 million in 2Q22
    • 1H23 realized gains of $94 million, up 255% from $27 million in 1H22
  • 2Q23 realizations of $133 million, up 167% from $50 million in 2Q22
    • 1H23 realizations of $195 million, up 178% from $70 million in 1H22, reflecting increased portfolio velocity, as the case backlog in the courts continues to clear
  • 2Q23 cash receipts3 of $150 million, up 266% from $41 million in 2Q22
    • 1H23 cash receipts3 of $247 million, up 148% from $99 million in 1H22, primarily driven by realizations including three matters that generated aggregate proceeds of $147 million
  • 2Q23 deployments of $181 million, up 159% from $70 million in 2Q22
    • 1H23 deployments of $248 million, up 103% from $122 million in 1H22, reflecting in part the balance sheet's greater participation in new capital provision-direct assets
Commercial Regulatory Issues

House Committee Hearing Sees Representatives Spar Over Litigation Funding

As LFJ reported last week, litigation funding has once again found itself in the crosshairs of critics and lawmakers, with the House Committee on Oversight and Accountability holding a hearing on the industry to ‘examine how left-wing activists have hijacked America’s legal system’.  Articles in Bloomberg Law and Reuters provide a recap of yesterday’s hearings which saw members of congress exchange contrasting views on third-party funding, whilst industry professionals offered their perspectives on a variety of issues including mass torts, climate litigation and transparency in funding. Among the committee members there was unsurprisingly a larger partisan split, with each side trying to focus the four-hour session on their own agenda.  Republican representatives who had organized the hearing took a critical eye to litigation finance, with committee chairman Rep. James Comer saying that the hearing was “a first step to identifying how pervasive third party litigation funding is and how deep the abuses go.” Whilst Democrats accused their colleagues across the aisle of trying to shield corporations from litigation, and argued that the real issue was the funneling of ‘dark money’ to the Supreme Court, with Rep. Max Frost going as far as stating: “Shame on Republicans for holding this hearing.” Among the witnesses called, Aviva Wein, assistant general counsel for Johnson & Johnson, was one of the strongest critics of the industry and argued that “mass tort litigation has been transformed into a money play: driven, funded and distorted by legal financial entrepreneurs.” It is worth noting that Johnson & Johnson is also in the middle of attempting to settle a large number of claims brought against it over the alleged harm caused by its talcum powder product. Maya Steinitz, professor of law at Boston University, provided a more balanced perspective on third-party funding and emphasized that the most important consideration was how to regulate this “relatively new industry”. Rep. Jamie Raskin of Maryland provided one of the stauncher defenses of the actual benefits of litigation finance, arguing that “a lack of money should not prevent any individual American from seeking justice when they have been harmed.”