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Commercial Fundraising

TowerBrook Capital Cuts Investment with Validity; Funder to Lay Off Over Half its Staff

Private equity firm TowerBrook Capital was Validity Finance's primary investor in the firm's 2018 launch. However, TowerBrook has announced that it will cease to continue funding Validity due to a perceived lack of enterprise value, this despite Validity's high internal rate of return (34%). Bloomberg reports that New York-based Validity plans to slash staff from 20 down to 7-10. The funder has already let six employees go, with more layoffs to come. Validity CEO Ralph Sutton says the funder will focus on IP claims going forward, as those have been the most profitable, with the funder having “won” all of its eight completed patent investments.

Sutton claims he has received $50MM of capital commitments out of a total $100MM fundraise he is seeking to finance future IP litigation. For its part, TowerBrook will remain a minority investor in Validity, and maintain its commitment to the cases it has already funded.

According to Sutton, TowerBrook does not want to sell its stake in Validity's cases, viewing Validity's IRR as strong overall. The investor is simply concerned about a potential exit from the funder over the coming years, given the lack of enterprise value over anything beyond the portfolio of cases Validity manages.

Currently, Validity has invested more than $400MM in nearly 75 cases, with the portfolio having fully resolved 13 of those, and returned more than the principal investment in 12 of those 13.

Announcements Case Developments Commercial

RORO CAR SHIPPERS FAIL IN THEIR ATTEMPT TO LAUNCH UK SUPREME COURT APPEAL OF CARTEL CLASS ACTION CERTIFICATION

In a huge boost to the hopes of millions of UK consumers who stand to gain from a Woodsford-funded collective action against five large shipping companies who engaged in an anticompetitive cartel, the UK Supreme Court announced yesterday that it had refused to allow a further appeal against certification of the collective action to proceed.

In 2018, the European Commission (EC) fined the international shipping companies a total of EUR 395 million for their participation in a cartel between 18 October 2006 and 6 September 2012.

The EC found that the companies fixed prices, rigged bids and allocated the market for roll-on, roll-off (“RoRo”) transport of vehicles into Europe. According to the EC, the companies had agreed to maintain the status quo in the market and to respect each other’s ongoing business on certain routes, or with certain customers, by quoting artificially high prices or not quoting at all in tenders for vehicle manufacturers.

The claim, which seeks compensation significantly in excess of £100 million, is one of the first to be heard in the UK’s Competition Appeal Tribunal (CAT), which ruled earlier in 2022 that a collective proceedings order (CPO) could be launched on behalf of U.K. consumers and businesses that allegedly paid inflated prices due to the actions of the cartel.

Affected cars include passenger cars and light commercial vehicles such as vans, which represent over 80% of all new car and van purchases in the UK. Examples of affected cars include Ford, Vauxhall, Volkswagen, Peugeot, BMW, Mercedes, Nissan, Toyota, Citroën and Renault.

The CAT action was filed on behalf of the class by consumer rights champion, Mark McLaren. Financed by Woodsford, McLaren is represented by Sarah Ford KC, Emma Mockford and Sarah O'Keeffe of Brick Court Chambers, instructed by Scott + Scott UK.

Woodsford’s Chief Executive Officer, Steven Friel commented: "This is an important milestone for this case specifically, and also for promotion of collective redress in the UK more generally. Woodsford is dedicated to holding corporate wrongdoers to account and helping deliver access to justice. We are proud to support Mr. McLaren, who is now much closer to obtaining compensation for the millions of affected car purchasers.”

Hugh Tait, the Senior Investment Officer leading the case for Woodsford, commented: “This is a great success for consumer redress in the UK, and I am proud of Woodsford’s significant part in it. Woodsford is now clearly established as the most successful ESG and litigation finance business in this area of UK collective redress. My only regret is that big corporate defendants continue to use their significant legal and financial resource to fight technical arguments, with the goal of delaying compensation payments to consumers. “

Impacted customers can find further information about the case at https://www.cardeliverycharges.com/

A detailed case study can be found here.

About Woodsford

Since 2010 Woodsford has been helping to hold corporates to account for their egregious behaviour. Whether it is helping consumers achieve collective redress, ensuring that inventors and universities are properly compensated when Big Tech infringes intellectual property rights, or helping shareholders in collaborative, escalated engagement up to and including litigation with listed companies, Woodsford is committed to ESG and access to justice. Working with most of the world’s leading law firms, our strength lies in the combination of our legal experience, investment, business and technical expertise, together with significant financial resources.

Interviews, photos and biographies available on request.

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Announcements Commercial Deals

Omni Bridgeway Announces Completion of Fund 1 Secondary Market Transaction

Omni Bridgeway Limited (Omni Bridgeway, Company, OBL) (ASX: OBL) announces that the sale of a participation in Fund 1 to Gerchen Capital Partners (GCP) has completed and the Initial Payment of US$38.0 million has been received and distributed as set out in our announcement dated 11 May 2023.  Further, the residual interest in Fund 1, previously owned by the original investor, has been purchased by Fund 4, such that the original investor no longer retains any interest in Fund 1.  The continuing investors in Fund 1 will be GCP and OBL.
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Case Developments Commercial

Panthera Resources Agrees to Due-Diligence Deadline Extension with LCM Funding SG

As LFJ reported in February of this year, the gold exploration and development company, Panthera Resources, entered into an arbitration funding agreement (AFA) with Litigation Capital Management’s subsidiary, LCM Funding SG Pty Ltd. The agreement, which is set to provide Panthera with $10.5 million for a claim against the Indian government, is still being finalized pending further due diligence by LCM. Reporting by Sharecast provides an update on the AFA as Panthera Resources announced that it had agreed to an additional one-month deadline extension for LCM to fully complete its detailed due-diligence. Panthera stated that it did not expect further deadline extensions, and that once this due-diligence process was complete, Panthera and LCM would be able to finalize a funding confirmation notice. The claim in question focuses on allegations that the Indian government had breached the Australia-India Bilateral Investment Treaty. Commenting on the deadline extension, Panthera’s board stated: “In addition to pursuing a potential claim against the Republic of India for breaches of its obligations under the Australia-India Bilateral Investment Treaty, the company continues to pursue an amicable resolution of the dispute, and the grant of the Bhukia Prospecting License. In this regard, the company remains in advanced discussions with a potential joint venture partner pending the resolution of the LFA.”
Case Developments Commercial

Delaware District Court Rules in Favor of Compelling Plaintiff to Disclose Details of Financial Interests

Whilst state legislatures across the US continue to debate and advance legislation to mandate the disclosure of litigation funding in civil cases, in most jurisdictions the power to order disclosure still sits with individual courts and judges. This has been most frequently demonstrated in the area of patent litigation, and we now have yet another example from the Delaware District Court, where the court ruled in favour of compelling disclosure of financial interests. In a blog post on Lexology, Stanley M. Gibson, partner at Jeffer Mangels Butler & Mitchell, provides analysis on the district court’s ruling in Speyside Medical, LLC v. Medtronic CoreValve LLC et al, which granted the defendant’s motion to compel the plaintiff to provide information on its members and litigation funder. Medtronic had argued that the disclosure of this information was pertinent to the case, as it would bring to light any issues or biases caused by parties having a financial interest in the litigation’s outcome. The district court agreed with the defendant’s argument, and stated that the details of who has a financial stake in the case were “relevant to bias for purposes of future cross-examination” of the plaintiff’s members. Furthermore, the court ruled that the exact level of financial stake was relevant to this issue, explaining that a “1% stake will have a different impact on a witness than a 98% stake”.  Gibson notes that this information is most useful in providing context for the court in terms of what ‘winning’ the case would mean for each party, and as to the level of financial reward they could seek from recovery if successful.
Consumer

Louisiana Senator Makes Case for Litigation Funding Disclosure Bill

As LFJ reported last week, Louisiana has become the latest state in the US to advance new legislation that more closely regulates third-party litigation financing and increases disclosure requirements for funders operating in the state. With the bill making its way through the Louisiana legislature, the bill’s sponsor has spoken out in support of the proposed law and offered an argument for its necessity. In an op-ed published in the Shreveport Times, State Senator Barrow Peacock puts forward his argument that litigation funders are currently ‘using the civil justice system as an investment tool’, without any requirement that they disclose their involvement in cases. Sen. Peacock also suggests that the involvement of funders creates conflicts of interest between the claimant and their legal counsel, as he claims that the attorney’s salaries ‘are coming from the pockets of third-party financiers’, which supposedly allows a funder to exert control over the litigation. Sen. Peacock also includes the now common refrain from critics of the litigation finance industry, that third-party funding is a vehicle for foreign interests to undermine US national security. The op-ed concludes by not only asking readers to contact their state representatives to support Senate Bill 196, but also implores them to contact their representatives at the federal level to push for Congress to enact similar legislation that would mandate litigation funding disclosure nationwide.
Case Developments Commercial

LLS-Funded Class Action Enlists Hayne Royal Commission Barrister

For litigation funders, it is imperative that any legal action they choose to finance not only has a strong theory of the case to win, but also is paired with the best legal representation possible. This is especially true in high value class actions that may proceed to trial, such as the ongoing shareholder class action in Australia being brought against a prominent wealth management company over alleged failures to disclose misconduct. Reporting by the Australian Financial Review reveals that the class action being brought against Insignia Financial has enlisted the services of barrister Michael Hodge KC, who comes highly regarded having assisted the Hayne Royal Commission in 2018 as counsel. The investor class action, which is being led by Shine Lawyers and financed by Litigation Lending (LLS), is set to proceed to trial in Federal Court from June 5, with an expected duration of around five weeks. The class action representing shareholders who bought Insignia shares between March 1, 2014 and July 7, 2015, is centered on allegations that Insignia failed to disclose misconduct. This included conflicts of interest and insider trading, which led in turn to shareholders suffering financial losses.  Craig Allsop, joint head of class actions at Shine Lawyers, claimed that “the company breached its continuous disclosure obligations and misled its shareholders.” Insignia’s own spokesperson provided a statement saying that “Insignia Financial will vigorously defend the claim and is looking forward to having the matter heard and determined.”
Commercial Regulatory Issues

Legalization of Litigation Funding in Ireland Remains on the Distant Horizon

Whilst it is routinely stated that litigation funding is on the rise both in adoption and volume of activity around the world, there are still numerous jurisdictions where it has struggled to take hold, and others where it is actively prohibited under the law. One such country that is viewed as lagging other jurisdictions in terms of legalization and adoption is Ireland, where future law reforms do not appear to be arriving any time soon. An insights article by Dentons provides an overview of the current state of legislative reform regarding litigation funding in Ireland, highlighting that any potential changes to the law will not occur before the Law Reform Commission Review of third-party funding is produced in 2024.  The authors note that although some observers expected the new EU Directive on Representative Actions would catalyze more immediate reform in Ireland, recent statements by government ministers suggest that this is not the case. Whilst the Irish government will have to implement the directive’s broad requirements into Irish law, the Department of Justice has made it clear that litigation funding for these actions will not be permitted until separate legislation allows the use of third-party funding for litigation. The article does highlight that there are small areas of progress being made with the Courts and Civil Law Bill 2022 currently making its way through the legislature, which would permit the use of third-party funding in arbitration matters located in Ireland. The authors also point out that supporters for legal reform have a strong argument that it is necessary to modernize the Irish legal system, and would further allow Ireland to take advantage of its position as the only English-speaking common law jurisdiction within the EU.
Commercial Deals

Advice for Patent Owners Considering Third-Party Funding

Patent infringement lawsuits have become some of the most sought-after targets for litigation funders, despite the increasing pressure from courts in the US to increase disclosure around the involvement of third-party funding. In this contentious environment, it is important for litigants and patent holders seeking third-party funding to keep several factors in mind. An insights article by Lauren Sabol and Lawrence Hoff of Fox Rothschild, provides an overview of key considerations for patent owners when pursuing litigation funding for their infringement cases.  Sabol and Hoff emphasize that in order to begin the process, patent owners should enlist the services of experienced patent and litigation funding counsel before approaching funders with their case. They suggest that this kind of specialist counsel makes it more likely that patent owners will obtain a funding agreement with favourable terms, and enter into an agreement with full knowledge of the potential issues that can arise during litigation. Sabol and Hoff also highlight the ongoing issues around disclosure that have been brought to the forefront by Judge Connolly in Delaware, and note that whilst disclosure requirements vary from state to state, patent owners should always be prepared to, at the very least, disclose the existence of third-party funding. In addition, they note that proper care must be taken to ensure that privileged or confidential information cannot be exposed, primarily by using NDAs that counsel can assist patent owners with.
Commercial Regulatory Issues

Delhi High Court Provides Favorable Ruling to Funder in Costs Liability Appeal

As litigation funding continues to expand into newer markets, a key issue that funders will be keeping an eye on is the creation of precedents from court judgements and rulings that relate to the use of third-party funding, as well as any norms that are established in these cases. In a market that has enormous potential for growth, as India does, funders who are considering entering the market will be pleased by a recent ruling which suggests a limited scope for funder liability in unsuccessful claims. An article by Bar and Bench provides an overview of a recent judgement from arbitration proceedings in the Delhi High Court, which found Tomorrow Sales Agency (TSA), a litigation funder, is shielded from liability in the case, “which they have neither undertaken nor are aware of.” This ruling related to the case of Tomorrow Sales Agency Private Limited v. SBS Holding, Inc and Ors, in which SBS Holding had asked the court to order TSA to pay its legal costs, after TSA’s client had failed in its claims against SBS Holding. SBS Transpole, the claimant which TSA had funded, was unsuccessful in its arbitration against SBS Holding. However, SBS Transpole did not have the capital or assets to pay the tribunal’s award against it. SBS Holding’s request to force TSA to cover this award was appealed and finally rejected by the Delhi High Court, which found that “there are no rules applicable to proceedings in this court for awarding costs against third parties.” The High Court’s ruling will be of further interest to funders, as it emphasized the importance of third-party funding to the judicial system and stated “A person without the necessary means would have no recourse, in the absence of third-party funders. Third party funders play a vital role in ensuring access to justice.”
Commercial Deals

Legal Experts Share Guide to Choosing the Right Litigation Funder

The expansion of litigation funding around the globe and the concurrent increase in the number of funders has meant that there are now more options than ever for litigants or law firms seeking third-party funding. However, that increased choice also means that it will become harder for first-time users of litigation funding to know which funder would be the best partner for them. An article for the Concurrences journal by Marc Barennes of Bureau Brandeis and Miguel Sousa Ferro of Milberg Sousa Ferro, provides a guide to those seeking litigation funding on what factors they should consider when evaluating different funders. The article offers prospective users of third-party funding the necessary framework for choosing the right funder, outlining some of the key questions to ask during the process, and what considerations to keep in mind before making a final decision. The detailed and comprehensive article includes useful information on the following topics:
  • Approaching the right number of funders
  • Understanding who the funder is
  • Asking about the investment decision-making process
  • Agreeing on the timeline
  • Inquiring about the experience, expertise and appetite of the funder for a case
  • Understanding the financial criteria and expectations of the funder
  • Special considerations for the funding of class actions
Barennes and Sousa Ferro suggest that with the increasing maturation of the litigation funding market, the increased competition between funders will allow prospective clients to take a more comparative approach to find the best option for their case. Above all the factors to consider, the authors encourage potential users of litigation funding to be proactive in asking questions and gathering information before making a final decision. The full journal article can be found here.
Commercial

An Overview of Third-Party Funding in Mainland China

The global growth of litigation funding has funders, law firms and other interested parties all looking to see where the next major market could be for the widespread adoption of third-party funding. Whilst individual jurisdictions such as India or broader regional markets like Latin America are often discussed, one market that remains enticing, yet illusive, is mainland China. A new article for Global Arbitration Review by Heng Wang, partner at Global Law Office, provides a detailed overview of the current state of third-party funding (TPF) in mainland China and offers key takeaways for those interested in exploring this market. Wang’s analysis suggests that ‘Chinese courts take a similar approach to TPF for arbitration as international practice’, with it being permitted but with an expectation that parties involved in such arbitration will disclose TPF arrangements to avoid conflicts of interest. However, Wang emphasizes that whilst the permissibility of TPF in arbitration has repeatedly been confirmed in courts, there is less certainty over the legality of litigation funding.  Highlighting a case in Shanghai in 2017, Wang notes that whilst the courts confirmed there was no prohibition against litigation funding in Chinese law, the funding agreement itself was ruled to be ‘contrary to public policy and good morals, and invalid’. Yet in other cases the courts have come to contradictory conclusions, having ruled in favor of allowing third-party funding agreements and even sided with funders in disputes over unpaid returns. Wang concludes that there are clearly contradictory and divergent outcomes for the third-party funding of litigation specifically, with little sign of a consistent policy from the courts towards the practice. Importantly, Wang emphasizes that no cases involving the legality of TPF have come before the Supreme People’s Court, which does leave the door open to its use being more widely affirmed or prohibited in the future.
Commercial Deals

Omni Bridgeway’s Giacomo Serra Zanetti Discusses Italian Expansion

Despite the looming spectre of potential regulation affecting the litigation funding industry in Europe, it seems that third-party funding is continuing to grow in activity across a wide variety of European jurisdictions. One country that has experienced a surge in new activity is Italy, with domestic startup funders emerging to take advantage of local opportunities, and international established firms, such as Omni Bridgeway, looking to expand their operations into the country. An article by Legalcommunity.it explores the entry of Omni Bridgeway to the Italian market, providing insight into the company’s strategy through an interview with Giacomo Serra Zanetti, who will be leading the funder’s operations in Italy. Serra Zanetti shared that he will be responsible for sourcing investment opportunities in Italy, with Omni Bridgeway looking to explore both domestic disputes and international arbitration cases involving Italian parties or recoveries within the country. Discussing Omni Bridgeway’s targets for clients, Serra Zanetti explained that the funder will primarily focus on establishing relationships with law firms in Italy, but will also look at direct engagements with companies involved in litigation, especially in the bankruptcy and insolvency arena. Emphasising the nuances of the Italian market, Serra Zanetti points out that Italian law firms often have to take a creative approach to align with the financial interests or constraints of their clients. This creates opportunities for a funder like Omni Bridgeway to take that burden off of the law firm and allow it to focus on the litigation itself.
Commercial Deals

Deminor and Grimaldi Alliance Discuss New Partnership

The relationships between law firms and funders are key to the success of the litigation finance industry, whether around the funding of individual cases or wider-ranging partnerships. Last month saw the announcement of a new approach to this relationship, as litigation funder Deminor and Italian law firm Grimaldi Alliance entered into a global partnership. An article in Legalcommunity.it provides more detail on the partnership between the two companies, featuring comments from Giulia Lovaste, counsel at Grimaldi Alliance, and Giacomo Lorenzo, senior legal counsel at Deminor. Clarifying the exact nature of the partnership, Lorenzo stated that whilst this would not be an exclusive relationship between Deminor and Grimaldi, it is the only partnership of its kind that Deminor has entered into so far.  Lovaste and Lorenzo confirmed that the partnership will allow Grimaldi to present its clients with a range of financing options for their cases, whether that be single case funding or the opportunity for Deminor to purchase the claim outright and thereby allow the client to monetize that claim. Lovaste emphasized that the main advantage of this partnership will be to support its customers in managing the costs of litigation, allowing the client and law firm to focus on managing cases. With the potential for new regulation looming over the industry in Europe, both Lorenzo and Lovaste agreed that whilst regulation could be beneficial by adding credibility and legitimacy to the industry, it will need to be approached in the right way and in collaboration with the existing funding industry.
Commercial Regulatory Issues

Louisiana Advances Legislation to Regulate Litigation Funding

The push for increased regulation of litigation financing across several US states has been gaining momentum this year, with new bills announced, and in some states like Montana, those bills being signed into law. This campaign does not appear to be losing steam, as the Louisiana legislature has advanced its own regulatory bill.  An article in Bloomberg Law details the advancement of a bill in the Louisiana legislature that seeks to increase the level of regulation over litigation funding in the state. Compared to similar bills announced or passed in other states, the Louisiana bill goes further in requiring the production and disclosure of litigation finance agreements to the courts within 60 days of being signed. If plaintiffs and their funders do not provide the agreement within the timeframe, the contractual agreement will be deemed unenforceable.  The bill’s sponsor, State Senator Barrow Peacock, has argued that litigation funding has “flourished in the shadows with very minimal oversight”, and repeated the common refrain from the US Chamber of Commerce that litigation funding represents a threat to national security. The Chamber’s senior vice president of legal advocacy argued that the bill does protect the plaintiff and funder’s sensitive information, as the bill gives the court the power to modify any disclosure of the funding agreement to redact proprietary information. Dai Wai Chin Feman, director of commercial litigation strategies at Parabellum Capital, had testified in opposition to the bill during its passage, stating that the concern around national security was “entirely speculative” and described these claims as “careless and baseless accusations without any evidence or facts”. The bill will go to the House as early as next week for further amendments, before being sent back to the Senate, with the bill’s supporters hoping that a mutually agreed draft can be sent on to the governor to be signed into law.
Announcements Commercial Deals

Fortress Management and Mubadala to Acquire Fortress Investment Group

Fortress Investment Group (“Fortress”) and Mubadala Investment Company, through its wholly owned asset management subsidiary Mubadala Capital (“Mubadala Capital”), today announced that they have entered into definitive agreements to acquire 90.01% of the equity of Fortress that is currently held by SoftBank Group Corp. (“SoftBank”), who have been the owners of Fortress since 2017. Terms of the deal were not disclosed, and the deal is subject to customary closing conditions and regulatory approvals. After transaction close, Fortress management is expected to own a 30% equity interest in the company and will hold a class of equity entitling Fortress management to appoint a majority of seats on the board. Mubadala Capital (which currently holds a 9.99% stake in Fortress through its Private Equity Funds II and III), will own 70% of Fortress equity. After the closing, Fortress will continue to operate as an independent investment manager under the Fortress brand, with full autonomy over investment processes and decision making, personnel and operations. Drew McKnight and Joshua Pack will be appointed co-CEOs of Fortress and Pete Briger will be appointed Chairman. Mubadala Capital’s CEO and Managing Director, Hani Barhoush, who has served on Fortress’ board since 2019, will continue to serve on the board. Dean Dakolias will continue in his role as Managing Partner and Tom Pulley will continue in his role as the CEO of the global Fortress Real Estate business. Jack Neumark has been appointed a Managing Partner and will continue to lead the Legal Assets business and co-head the Specialty Finance business, and Marc Furstein will continue in his role as President. Fortress co-Founders Wes Edens and Randy Nardone will continue to oversee the PCV business and remaining PE investments, including Brightline. Under the new joint ownership, Fortress is expected to generate significant value for its stakeholders by further establishing itself in the alternative investment space, particularly in credit and real estate across public and private markets, where it currently manages $46 billion of assets on behalf of more than 1,900 institutional investors and private clients. Fortress is expected to benefit from Mubadala Capital’s global network and extensive portfolio of diversified assets, as well as its access to proprietary investment opportunities to support its growth and expansion. Fortress’ Pete Briger, Drew McKnight and Joshua Pack said in a joint statement: “We are extremely pleased to deepen our relationship with Mubadala, partnering with one of the world’s most sophisticated investors in a transaction that will provide significant long-term benefits to our company, our employees and the clients we serve. We have worked closely with Mubadala for years and have enormous respect for their investment acumen and discipline. We view Mubadala’s further investment as an affirmation of the business model and investment approach we have embraced for more than 20 years, and—at a time when market dynamics are better aligned than ever before with our experience and expertise— we could not be more excited about the future of Fortress.” Hani Barhoush, CEO and Managing Director of Mubadala Capital, said: “Fortress is a world-leading investment manager with a proven track record of delivering superior risk-adjusted returns to its investors throughout business cycles. Over the last 20 years, they have built an incredible franchise and established themselves as a premier credit and asset investor while simultaneously growing investment strategies across a wide range of asset classes. We have a strong existing relationship with Fortress’ exceptional management team, and are excited to deepen the relationship further in the years ahead based on a strong alignment of vision, while delivering even greater value to our investors.” The transaction is expected to close in the first quarter of 2024, subject to regulatory approvals. Ardea Partners served as financial advisors and Shearman & Sterling served as legal counsel to Mubadala. Goldman, Sachs & Co. LLC served as financial advisor and Kirkland & Ellis served as legal counsel to Fortress senior management in the transaction. Skadden, Arps, Slate, Meagher & Flom LLP represented Fortress in the transaction. The Raine Group served as exclusive financial advisor and Morrison Foerster served as legal counsel to SoftBank. About Fortress Investment Group Fortress Investment Group LLC is a leading, highly diversified global investment manager. Founded in 1998, Fortress manages $45.8 billion of assets under management as of December 31, 2022, on behalf of over 1,900 institutional clients and private investors worldwide across a range of credit and real estate, private equity and permanent capital investment strategies. About Mubadala Capital Mubadala Capital is the asset management subsidiary of Mubadala Investment Company, a leading global sovereign investor headquartered in Abu Dhabi. In addition to managing its own balance sheet investments, Mubadala Capital manages c. $20 billion in aggregate across its own balance sheet investments and in third-party capital vehicles on behalf of institutional investors, including four private equity funds, three early-stage venture funds and two funds in Brazil focused on special situations.
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Commercial Deals

Catalonian Fintech Targets Litigation Funding Opportunities in the UK

As litigation funding is predicted to continue its impressive growth, it is perhaps no surprise that beyond the traditional cohort of funders, small fintech companies are starting to look to the sector as a lucrative investment opportunity. Another example has reinforced this trend, as a Spanish fintech is entering the world of litigation funding with a focus on disputes targeting UK banks. Reporting by Fintech Finance News highlights the entry of 11Onze, a community fintech based out of Catalonia, into the world of litigation funding with two tranches of €100,000 investments already raised. Due to the current economic instability that is impacting traditional investments, 11Onze has turned to litigation finance as an avenue to generate financial gains for its community of investors. James Sène, chairman of 11Onze, explained that the fintech’s litigation funds will primarily target litigation around Personal Protection Insurance (PPI) that was wrongly sold to customers by UK banks. Outlining the broader aims of 11Onze’s litigation funds, Sène said that “this not only helps fight for justice; it also offers great returns on your savings above inflation.” Hoping to reassure the 11Onze community around the risks involved with investing in litigation finance, Sène stated that all of the capital involved is being covered by insurance from AM Best.
Announcements Consumer

Legal-Bay Pre-Settlement Funding Announces California’s Possible $3 Billion Payout for Sexual Abuse Victims

Legal-Bay, The Pre Settlement Funding Company, announced today that Los Angeles County is preparing to spend a sizable chunk of their proposed annual budget to resolve the thousands of sexual abuse claims that plaintiffs say they suffered within the walls of state-run institutions. The county's juvenile halls have been the focus for many of the allegations, where a multitude of plaintiffs claim they were verbally, physically, and sexually abused while living within the facilities as minors. The bulk of the cases are due to a recently-enacted state law that extended the statute of limitations for victims of childhood sexual assault to file claims against their abusers. It resulted in a slew of new lawsuits, many from abuses incurred at the MacLaren Children's Center, which Legal-Bay has written about extensively in the past. Los Angeles County has one of the largest budgets in the country, but with upwards of 3000 claims, the state may be looking at anywhere from $1.5 Billion to $3 Billion in order to cover the estimated settlement payouts. The financial repercussions from past crises arrive as the county faces a new wave of problems in its juvenile halls. Conditions in the juvenile halls have become so deplorable that state regulators are considering shutting them down. Chris Janish, CEO of Legal-Bay, said, " If you require an immediate cash advance from your anticipated sexual abuse lawsuit settlement, please visit the company's website HERE or call 877.571.0405. Legal-Bay is an advocate for sexual abuse survivors. They also assist plaintiffs in other types of lawsuits including personal injury, medical malpractice, dog bites, police brutality, commercial litigation, motor vehicle accidents, and more. Their lawsuit funding programs are designed to provide immediate cash in advance of a plaintiff's anticipated monetary award. The non-recourse lawsuit loans—sometimes referred to as loans for lawsuit or loans on settlement—are risk-free, as the money doesn't need to be repaid should the recipient lose their case. Therefore, the lawsuit loan isn't really a loan, but rather a cash advance.
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Commercial Regulatory Issues

Former MEP Argues Malaysia Dispute Reinforces Need for Litigation Funding Regulation

Ever since the publication of the Voss Report and its recommendations for increased regulation of litigation funding in the EU, there has been much debate about what the future of regulatory oversight should look like for this growing industry. In the absence of any updates on the advancement of the Voss Report’s proposal, critics of third-party funding are reigniting their calls for the EU to act and impose stricter regulations on funders operating in Europe. Writing in an op-ed for Funds Europe, former British MEP Mary Honeyball highlights the recent example of Therium’s funding of the case against the Government of Malaysia by the descendants of the Sultan of Sulu. Honeyball suggests that this case, and its $15 billion arbitral award, underscores the lack of transparency around litigation funding and goes so far as to suggest that “this case harnesses colonial divides for financial gain.” Honeyball goes on to argue that this case, along with other similar activities by litigation funders, are examples of why the EU must move to strictly regulate litigation financing, suggesting that without such regulation, “this risks millions of European consumers becoming pawns in profit-seeking.” Honeyball rejects the idea that self-regulation is sufficient to act as guardrails to the litigation funding industry, and that the EU must not only enact transparency requirements, but use its legislative authority to set appropriate standards for the industry.
Case Developments Commercial

LCM-Funded Claim Against DeepMind is Thrown Out by High Court

Representative actions in the UK have often been viewed as strong vehicles for litigation funders to pursue their dual objectives of widening access to justice and delivering significant financial returns on their investments. However, a new ruling from the High Court has demonstrated the risk-on nature of the asset class, as a class action against a Google subsidiary has been thrown out for failing to meet the ‘same interest’ requirement. Reporting by The Law Society Gazette outlines the judgement from Mrs Justice Heather Williams DBE, which denied the request to proceed with a claim against DeepMind over allegations that the company misused the private information of 1.6 million individuals. The action focused on the alleged use of individuals’ medical records which were transferred to DeepMind in 2015, in order to develop a diagnostic and medical records app called Streams. The action, funded by LCM Funding UK Limited, failed to meet the court’s base requirements for a claim to proceed. In her ruling, Williams stated that “This is not a situation in which every member of the Claimant Class, or indeed any given member of the class, has a realistic prospect of establishing a reasonable expectation of privacy in respect of their relevant medical records or of crossing the de minimis threshold in relation to such an expectation.” Furthermore, the judgement went on to emphasize that “it cannot be said of any member of the Claimant Class that they have a viable claim for more than trivial damages for loss of control of their information.”
Case Developments Commercial

Patent Lawsuit Funding Back in the Spotlight in Delaware

There may be no area of litigation funding that has attracted more headlines and controversy than the area of intellectual property and patent litigation, particularly in regard to court orders requiring the disclosure of third-party funding and patent ownership. This has been most aptly demonstrated in Delaware, as U.S. Chief District Judge Colm Connolly has pursued a campaign determined to shed more and more light on the involvement of third-party funding in patent lawsuits. Reporting by The Wall Street Journal offers a detailed and comprehensive summary of Judge Connolly’s actions dating back to April 2022, when he first issued a standing order mandating the disclosure of third-party funding arrangements in the lawsuits brought before his court. This has led to numerous back-and-forth disputes with plaintiffs and their attorneys, with the most high profile disputes still ongoing between the court and plaintiffs that are potentially linked to the non-practicing entity, IP Edge.  This saga is expected to evolve further in the coming months, as Judge Connolly has called for a hearing next month in one of these lawsuits, and ordered the disclosure of any records connecting the plaintiff and their attorneys to IP Edge and Maxevar, a patent consulting firm whose principals are also the founders of IP Edge. In an opinion published earlier this month, Judge Connolly provided a severe warning that he has seen evidence “to suggest that Mavexar and its principals may have used Backertop and Ms. LaPray, along with other LLC plaintiffs and their nominal owners, to perpetrate a fraud on this Court.” Maya Steinitz, a law professor at the University of Iowa, told WSJ that the last 12 months of Connolly’s campaign have demonstrated “that there could be situations where there are undisclosed parties who should be considered the real party in interest.”
Announcements Commercial Fundraising

LEGALPAY LAUNCHES USD 3 MILLION FUND TO FACILITATE SPORTS DISPUTE RESOLUTION INDIA

LegalPay, India’s first and largest litigation financier, is breaking into the world of sports law disputes. In a first, the company has announced the launch of a $3 million fund for sports disputes with a focus on supporting the rights of athletes in India while also addressing disputes pertaining to broadcasting rights, endorsement & advertising aiming to boost the sports industry. With a tenure of four years, the sports focused fund has no limit on the ticket size. Over the past decade the sports industry in India has evolved with the advent of major sporting leagues like IPL, ISL, Pro Kabaddi and IHL. This development has been accompanied by rising number of disputes pertaining to contracts between sports players and other parties, doping policies, harassment in sports, liability with regard to sports injuries, broadcasting rights and conflict of interest regarding the endorsement by players. The fund will be utilized to manage these disputes in the Indian legal sector The company has created a robust and fast process mechanism to run the fund in a fair and swift manner. The company has drafted strict rules and regulations which will govern its use. Talking about this, LegalPay CEO Kundan Shahi states “As the country is evolving towards sports, it is our mission and duty to safeguard the interests of our aspiring athletes. Therefore, LegalPay has launched this fund to provide athlete representation, and legal advice as well as help them with dispute resolution which has to encourage more students to take up sports as a career.” While the spirit of this initiative is effectively encapsulated by Shahi, he goes on to add that this fund will be used in an all-encompassing manner to cover all kinds of disputes in this sector. LegalPay is a Fintech startup that focuses on litigation funding and helps people at large to get access to justice through litigation and arbitration. LegalPay has funded over 2500 litigations and arbitrations across the globe in different jurisdictions. It has a network of 2000+ lawyers who work on different assignments as per their expertise. Shahi stated that through litigation funding, LegalPay will help the athletes by funding their commercial litigations and arbitrations as well as provide them embedded finance for their representation and general legal advice. This fund will ensure that every prospective athlete will have the right to dream big and choose sports as a career in India. About LegalPay LegalPay is India’s 1st Fintech startup that specializes in Legal and debt financing. LegalPay through it’s Litigation Financing and embedded lending product has played a pivotal role in the legal market as it helps businesses and individuals at large to get access to justice. LegalPay has funded over 2500 litigations and arbitrations across the globe in different jurisdictions. It has a network of 2000+ lawyers who work on different assignments as per their expertise. LegalPay has played a monumental role over the last 3 years in the revival of various companies which were undergoing CIRP under IBC, 2016. LegalPay through its own NBFC provides funds to corporate debtors that ranges from Rs. 30 Lakhs to 50 Crores.Currently LegalPay has disbursed more than 100 crores as Interim Finance to 17 different businesses. LegalPay is backed by a strong team which comprises of CAs, Lawyers (Alumni of India’s top-ranking college), MBA ands Economists.
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Consumer

A Mutually Beneficial Approach to Litigation Funding

Discussions around the use of litigation funding often focus on the individual relationships between funders and law firms, or between funders and the claimant, and evaluate these dynamics in isolation. A new blog post takes a step back and looks at the harmonious and mutually beneficial relationship between all three of the core parties, in what it describes as ‘The Litigation Funding Triangle’. An article published on LinkedIn by Mustang Funding examines the funder’s approach to working with clients and law firms, explaining a holistic methodology that is founded on the idea that no funding deal should move forward without the certainty that is wanted by, and beneficial to, all parties.  Mustang begins by noting that one of the core issues that can arise with third-party funding is a situation where litigation is funded and reaches a successful conclusion, but it only amounts to a ‘pyrrhic victory’ where the plaintiff is left with little in terms of financial compensation. Mustang argues that this bare minimum approach to funding is ‘entirely unethical’ and that funders should equally weight both the probability of success and the probability of the claimant receiving tangible financial benefits. Alongside the value to the plaintiff, Mustang points out that the use of funding should also come as a benefit to the law firm involved, thereby allowing counsel to focus on securing the maximum award for their client without concerns about capital shortcomings increasing pressure to reach an early settlement. Mustang concludes by stating that not only must funding be mutually beneficial to all parties, but its use must also be wanted by all parties and not imposed by either the client or counsel without mutual agreement and approval.
Commercial Deals

Funders and Law Firms Report Increasing Demand for Third-Party Litigation Financing

Over the last year we have seen many predictions that the litigation finance industry will benefit from the current economic uncertainty around the world, with rising inflation and supply chain issues putting a strain on corporate budgets in every sector. A new article suggests that these forecasts were broadly correct, as many funders are reporting an increase in the number of requests for funding. Reporting by Bloomberg Law covers this positive trend for litigation funding, featuring insights from several funders who are finding that potential clients are keen to explore third-party funding to move forward with meritorious litigation. Validity Finance co-founder, David Kerstein, stated that the funder generated its highest volume of leads last quarter, as companies find that it is increasingly difficult to borrow the capital they need from traditional sources.  The article notes that this growing trend is reflected in the actual number of funders now active in the US market, with the International Legal Finance Association now counting over 40 funders offering their services. It is not just funders who are recognizing the receptive environment, with Bob Bodian managing partner at Mintz Levin, reporting that his firm frequently takes advantage of third-party funding for its intellectual property litigation. Burford Capital’s co-chief operating officer, David Pela, highlighted that Burford is also seeing growing interest from law firms that do not regularly use contingency fees, stating that “they very often don’t want to take on the full risk, and that is where litigation finance companies come in.” The demand is not just coming from law firms, but also directly from their clients as these companies are “trying to find other sources of revenue and cut back costs”, according to Rebecca Berrebi, a litigation finance broker and consultant.
Announcements Consumer

KBRA Assigns Preliminary Ratings to US Claims LFS Securitization 2023-A

KBRA assigns preliminary ratings to three classes of notes issued by US Claims LFS Securitization, Series 2023-A (LFS 2023A), a litigation finance ABS. LFS 2023A represents the ninth ABS collateralized by litigation finance receivables to be sponsored by US Claims Holdings, LLC (US Claims or the Company). US Claims, originally established in 1996 and acquired in 2014 by Blackstone Tactical Opportunities as a subsidiary of Majestic Financial Holdings, LLC, is a leading provider of non-recourse advances to plaintiffs and attorneys with pending legal settlements across a variety of case types. Through its strategy of keeping “Litigation Funding Simplified”, the Company has funded over $800 million of litigation finance since 2010. The Company has 100 full-time employees across its headquarters in Delray Beach, FL and support offices in Clearwater, FL and Moorestown, NJ. LFS 2023A will issue three classes of notes (Notes). The Notes benefit from credit enhancement in the form of overcollateralization and, for the Class A and B notes, a cash reserve account and subordination. The portfolio securing the Notes has a net advance amount of approximately $126.01 million and an aggregate discounted projected receivable balance (ADPB) of approximately $164.99 million, including assumed prefunding, as of April 26, 2023 (Cutoff Date) based on the illustrative discount rate of 7.96%. The ADPB is the aggregate discounted collections associated with USC LFS 2023-A’s litigation receivables. The discount rate used to calculate the ADPB is a percentage equal to the sum of the weighted average anticipated interest rate on the Notes, the servicing fee rate of 0.50%, and an additional 0.10%. As of the Cutoff Date, the total net advances are made up primarily of plaintiff advances (97.97%) and pre-settlement advances (98.12%). The average advance to expected case settlement value is 13.53%. The transaction also features a $22.8 million prefunding account that is funded through the note issuance and may be used to purchase additional eligible receivables during the month after closing. To access ratings and relevant documents, click here. Click here to view the report.
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Commercial Regulatory Issues

California Legislature’s Litigation Finance Bill On Hold Until 2024

As we have seen in recent weeks and months, there has been accelerated momentum behind state legislatures moving forward with legislation to govern and more heavily regulate the use of third-party litigation funding at the state level. However, in an unexpected turn of events, it appears that California’s proposed bill to impose stricter guidelines on litigation financing will not be moving forward this year. An article by The Recorder covers an announcement by California State Senator Anna Caballero that the advancement of SB 581, a bill which would have increased restrictions on the funding of consumer litigation, is now on hold until January 2024. According to the reporting, this decision was announced alongside numerous other bills as part of the Legislature’s ‘suspense file day’, when decisions are made as to the future progression of bills in the committee stage. Whilst Sen. Caballero’s announcement did not offer any explanation as to why the bill’s advancement had been stalled, it is notable that SB 581 had already seen its scope reduced from the initial draft text published in February. The revised bill announced in April had shed the mandatory disclosure requirements for third-party funding, and narrowed its scope to focus on lending to small-scale consumer litigation, rather than commercial litigation. With these changes made after significant criticism from the likes of ILFA and Consumer Attorneys of California, it is difficult to predict what the final version of SB 581 will look like, if it indeed moves forward in 2024. 
Commercial Regulatory Issues

Mastercard Class Action Representative Discusses State of Collective Redress 

The UK’s collective redress regime has received significant attention for its positive developments in recent years, and particularly for the involvement of litigation funders in supporting collective claims against large corporations. At a conference in London this week, the class representative for the high profile claim being brought against Mastercard spoke about the current state of class actions in the UK. Reporting by The Law Society Gazette highlights comments made by Walter Merricks, a former solicitor and financial ombudsman, at the London International Disputes Week event.  Speaking on a panel discussion about the future of collective redress in the UK, Merricks argued that defendants have an incentive to settle before trial under the current collective redress regime. He highlighted that in a settled claim, unclaimed damages may be returned to the defendant whilst unclaimed damages in a trial are distributed to charity, which he argues should incentivize defendants to look at settling ‘when the doors of the court loom.’  However, Merricks stated that those involved with collective claims are ‘all a little nervous’ at the moment, as they await the Supreme Court’s ruling on the DAF appeal, which could have a huge impact on the future of litigation funding in ongoing and future claims. Merricks also announced the formation of the Class Representatives Network, a new organization designed for class action representatives to come together and share their insights and experiences. 
Commercial Deals

An Analysis of Litigation Funding’s Potential Growth in Italy

As LFJ reported last week, we are seeing more and more evidence that litigation funding is becoming more widely adopted in Italy and is being put forward as a capital solution for a wide range of litigation across the public and private sector. A new article looks at the potential future for the litigation financing market in Italy, examining what sectors would benefit most from its adoption and how the market may be helped by legislative reforms. A blog post on HUB | Area Centro Meridionale’s LinkedIn, provides analysis on this topic by Daniela Saitta, president of LFAA (Litigation and Financing Arrangement Advisory) and Stefano Previti, managing partner of Studio Previti and founder of LFAA.  Saitta and Previti highlight bankruptcy proceedings as one of the biggest areas which could benefit from a growth in litigation funding in Italy, stating that there are around 100,000 ongoing insolvency proceedings in the country. They also point to litigation areas such as international arbitration, banking and finance disputes, and compensation claims as potential beneficiaries of third-party funding. Looking at the effect of legislative reforms that could pave the way for an increase in litigation finance usage, the authors highlight two decrees which reformed the civil process and worked to simplify judicial activity in order to increase efficiency and reduce case duration. Saitta and Previti point out that if these decrees are successful in reducing the duration of proceedings to match the standards in other European jurisdictions, cases in Italy may become more attractive to litigation funders.
Commercial Deals

Opportunities and Challenges for Litigation Funding in India

When discussing the future growth of litigation funding in new jurisdictions around the world, India is often highlighted as one of the most attractive opportunities, given the size of its economy and the associated scope of its litigation market. An article by Business Today provides an overview of the current state of litigation financing in India, with insights provided by industry leaders from different organizations involved in the sector. Ashish Chhawchharia, partner and head of restructuring services at Grant Thornton Bharat, points to the combination of rising legal costs and the huge volume of cases, as being a key driver for the industry’s growth in India.  To demonstrate the size of the potential market, the article includes data from the National Judicial Data Grid, which reveals that as of May 1, 2023, there are nearly 43.5 million pending cases throughout the Indian court system. With such a large volume of cases, new funders like FIGHTRIGHT Technologies are turning to analytics tools to help assess cases and perform the necessary due-diligence, with FIGHTRIGHT’s CEO Nitin Jain highlighting that by utilizing technology, they can make litigation funding ‘one of the least risky products’.  However, obstacles remain for litigation funding’s growth in India as Sumit Agrawal, founder of Regstreet Law Advisors, states that ‘the regulators are monitoring this trend closely to ensure that it is properly regulated and does not lead to any financial misconduct or illegal activities.’ Jain argues that increased regulation will be inevitable as the industry matures, and suggests that some degree of legislative standards will be beneficial, stating that ‘the more formal it becomes, the better it is for the industry.’
Case Developments Commercial

Woodsford-Funded Claimant Awarded £12.6 Million in Damages in Scottish Court

The harmonious relationship between a funder, a law firm and the claimant is at the center of the ongoing success of the litigation finance industry. However, as a recent judgement demonstrates, there are occasions where funders must support claimants who have been failed by their legal counsel, and as a result, lost out on a successful litigation outcome. In a post last week, Woodsford announced that a claimant it had funded, Centenary 6 Limited (C6), had been awarded £12.6 million in damages for the negligent behaviour of TLT Solicitors that led to C6 losing its prior case against Grant Thornton. Lord Ericht of the Scottish Outer House, Court of Session, ruled that TLT was at fault for its failure to provide C6 with adequate advice on ‘an order for caution for expenses’, which subsequently led to C6’s claim being dismissed. Commenting on the outcome of the case, Woodsford’s chief investment officer Charlie Morris stated: “This fantastic result has been a long time in the making. Woodsford started supporting C6 in this classic David v Goliath fight back in June 2017. On the one side, C6 with no meaningful assets, on the other a well-resourced law firm backed by deep-pocketed PI insurers. Despite having a meritorious claim (negligence was ultimately admitted), the defendant and its insurers dragged this out for far longer than they should have. They now have to pay the price for that. Woodsford is delighted to have been a part of this successful team.”