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Case Developments Commercial

Review of Quinn Emanuel’s Fee in Obamacare Class Action Raises Questions for Litigation Insurance

Alongside the growth of the litigation funding market is the equally important role that litigation insurance plays in the industry, allowing all litigation participants to reduce their risk profile whilst still pursuing meritorious cases. However, an ongoing review of a law firm’s awarded fee could highlight the risk taken on by litigation insurers, specifically those providing judgement preservation insurance policies. An article by Bloomberg Law provides an overview of the issue which arose following a class action brought by Quinn Emanuel Urquhart & Sullivan, which in 2020, successfully secured $3.7 billion for health insurers who had not been paid by Congress for providing higher risk policies under Obamacare. However, whilst Quinn Emanuel received a $185 million fee for its work in 2021, this fee was endangered in January of this year when the Federal Circuit ‘ordered a district court judge to recalculate the award’. The role of litigation insurance enters the picture because Quinn Emanuel had taken out a judgement insurance policy that is designed to secure a portion of the award if it is appealed or overturned, which happened in the Obamacare class action after the health insurers objected to the size of the award. Charles Agee, CEO of Westfleet Advisors, suggests that if the litigation insurer incurs a significant loss in this case ‘it could really have a broader chilling effect’ on the practice. Whilst there is the question of whether insurers are ready to pay out such claims, Tom Baker, professor at the University of Pennsylvania Carey Law School, argues that insurers ‘are definitely going to pay in the beginning because otherwise the market will go away’.
Commercial

How Portfolio Financing Can Support Law Firm Growth Strategies

Whilst single case financing from third parties represents a useful tool for law firms, one funder argues that these businesses should also explore portfolio financing as part of a strategy to maintain growth in the face of market instability. In an article published in Lexology, Amy T. Geise and Sarah Jacobson, investment managers and legal counsel for Omni Bridgeway, argue that there are multiple uses for portfolio financing that law firms should look to take advantage of to fuel growth. Firstly, Geise and Jacobson suggest that utilising portfolio financing will allow these firms to remove the uncertainty of litigation costs from their balance sheets, which in turn will allow them to increase their market share. Portfolio funding provides law firms with the opportunity to offer increased fee flexibility to clients, thereby attracting clients who might otherwise have avoided pursuing litigation due to their own cost pressures. Secondly, the authors argue that this kind of financing can be used to invest in the law firm’s own growth plan by avoiding otherwise necessary austerity cuts, and instead cover expenses or investing in internal improvements for the firm. This could mean using funds to expand a firm’s footprint, attract new employees and possibly most importantly, retain existing talent. Finally, Geise and Jacobson point to the value of portfolio financing as a risk management tool, allowing law firms to mitigate the more substantial risk of pursuing a single large contingent fee case. Furthermore, this influx of capital counters the potential of waiting years to realize the financial return of unresolved litigation.
Commercial Regulatory Issues

ILFA Director Says GAO Report Recognized the Value of Litigation Funding

The Government Accountability Office’s (GAO) recent report into the litigation finance industry was viewed by some as a promising start to wider acknowledgement and acceptance of the practice, whilst others criticized it for a lack of tangible policy recommendations. However, the leader of one of the industry’s most prominent associations has stated that the GAO’s report in fact recognized the ‘value of commercial legal finance’ to improving access to justice. Writing in RealClearPolicy, the executive director of the International Legal Finance Association (ILFA), Gary Barnett, argues that the report demonstrated the viability and positive impact of the litigation funding industry. Barnett points out that the report highlighted third-party funding’s ability to widen access to legal redress, whilst also noting that the significant due diligence that funders conduct on prospective cases ensures a high quality of cases being brought before the courts. Barnett contrasts the GAO’s findings with the oft-repeated criticisms leveled by the U.S. Chamber of Commerce and other parties, who claim funders represent a threat to U.S. security and are allowed to control litigation with no regulation or oversight. Barnett highlights that it was in fact notable that the GAO did not recommend additional regulatory measures, nor did it seem to support critics’ calls for increased disclosure around funding.
Commercial Deals

RPX Report Finds 36% Slowdown in Q1 NPE Litigation

One of the biggest topics in the world of patent litigation is the role of Non-Practicing Entities (NPEs) in driving a wave of patent infringement cases, often backed by funders eyeing lucrative investment opportunities. Whilst the role of NPEs in patent litigation is a divisive topic, with critics blaming NPEs for acting as ‘patent trolls’ and pursuing supposedly frivolous litigation, new research indicates that NPE litigation saw a downturn in the beginning of 2023. Research produced by RPX Patent Market Intelligence found that there was a 36% decrease in the volume of NPE litigation in the first quarter of 2023, which RPX attributes to two main reasons.  The first cause of this slowdown was the much-discussed conflict around funding disclosure in Delaware, that led IP Edge LLC, a leading NPE firm, to add zero new defendants to litigation in Q1 2023 (compared to 147 new defendants added in the first quarter of 2022). Secondly, RPX highlighted a 55% reduction in the number of defendants in the Waco Division of the Western District of Texas, which was caused by a standing order that no longer allowed plaintiffs to file in their preferred division. RPX’s full report includes insights into: changes to the Patent Trial and Appeal Board (PTAB), developments within the UK and Europe around SEP and FRAND litigation, and additional highlights from the litigation funding market. The full report can be found here. **Note: a previous version of this story stated that IP Edge filed zero new cases in Q1 2023. For accuracy's sake, we adjusted the statistic to read that IP Edge added zero new defendants.  We regret the error. 
Announcements Commercial Regulatory Issues

Validity Finance is First Commercial Litigation Funder to Achieve B Corp™ Certification

Validity Finance, one of the largest private commercial litigation funders in the United States, today announced that it has been awarded Certified B Corporation™ (B Corp) status. This recognition acknowledges Validity’s accountability to its stakeholders, including employees, investors, clients, and the communities in which it operates. Since its founding, Validity has been a purpose-driven organization focused on funding meritorious litigation as a corrective measure for an unbalanced legal system, and its new B Corp status reflects this commitment.

Validity’s B Corp certification, bestowed by the nonprofit B Lab, is an acknowledgement that the company is meeting high standards of verified performance, accountability, and transparency on factors ranging from environmental sustainability to employee benefits and corporate governance. Validity is the first U.S. commercial litigation funder to achieve B Corp status, a significant milestone in the maturation of the litigation finance sector, joining such prominent companies as Patagonia, Bomba, and Warby Parker.

“The B Corp evaluation process offered an excellent framework for Validity to review and improve our policies and practices, and to affirm our commitment to making a meaningful impact for our clients and the legal community,” said Ralph Sutton, Validity’s Founder & CEO. “Since our founding five years ago, we have been guided by a promise to not only help promote fairness in the legal system, but also to adhere to the strictest ethical standards in our business operations.”

There are currently only 6,000 Certified B Corporations across more than 80 countries and 150 industries. To become a Certified B Corporation, companies must undergo a comprehensive, multi-year assessment of the impact of their operations and business models on their workers, customers, communities, and environment, and must receive a minimum verified score on the B Impact Assessment. Certified B Corps are legally required to consider the impact of their decisions on all stakeholders.

“At a time when the U.S. Chamber of Commerce is attempting to leverage misinformation to unfairly stigmatize the litigation funding sector and to preserve the unfair advantage traditionally afforded deep-pocketed defendants in commercial litigation, we are proud to spotlight our corporate purpose,” said Julia Gewolb, Validity’s Chief Risk Officer.

Validity approaches every funding opportunity with a focus on trust, fairness, and transparency, enabling the company to build and sustain long-term client relationships by empowering clients with the resources they need to pursue and resolve meritorious litigation fairly and equitably. With decades of combined experience in funding, the Validity team of trial-tested attorneys has invested more than $400 million since 2018 across more than 70 matters.

“As commercial litigation funding expands in the U.S., it’s important to engage and educate people about the industry’s dedication to a more equitable legal system,” said Roman M. Silberfeld, National Trial Chair at Robins Kaplan. “I commend Ralph and Validity for being so forward-thinking and taking this significant step to solidify their commitment to responsible business practices.”

About Validity Finance

Validity is a leading commercial litigation finance company dedicated to fair and transparent funding practices that build trust. The first funder to become a certified B Corp, Validity’s mission is to make a meaningful difference in the legal system by helping clients bring good cases to trial with top counsel, while managing legal spend and risk. We believe every client has the right to a fair deal, clear term sheets, access to strategic advice, and timely responses. We invest in commercial, patent, bankruptcy, and breach of contract litigation, as well as international arbitration. Clients and law firms count on Validity for reliable capital, strategic resources, and risk mitigation that supports their litigation goals.

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Commercial Regulatory Issues

Settlement CFOs in Australian Federal Court

The viability of third-party litigation funding relies on the ability of funders to ensure that if their funded case reaches a successful conclusion, they will be able to secure an adequate financial return to make their investment worthwhile. However, recent developments in the Australian courts have demonstrated the difficulties of this process as it relates to the practice of courts making common fund orders (CFOs). A recent piece of analysis by Herbert Smith Freehills examines the potential consequences of a ruling by Justice O’Callaghan in the Federal Court of Australia, in the case of Davaria Pty Ltd v 7-Eleven Stores Pty Ltd, which denied the litigation funder’s application for a settlement CFO. The analysis illustrates that this ruling built upon the High Court’s 2019 decision in BMW Australia Ltd v Brewster, which found that s 33V of the Federal Court Act 1976 does not allow the court to order a pre-settlement CFO. Justice O’Callaghan’s ruling went further, by stating that the Brewster ruling made it ‘clear enough’ that s 33ZF equally does not grant the court the power ‘s 33V of the Federal Court Act 1976’. This issue has since been referred to the Full Court of Australia, which is in the process of receiving submissions from Attorneys-General in Australia, and will likely then offer clarification as to the court’s power around making CFOs at later stages of litigation. Herbert Smith Freehills’ article offers additional analysis of the situation, suggesting that ‘this will not be the end of the debate regarding funding models and their permissibility’ and that ‘there will likely be continued innovation in funding markets’. Among other observations, the analysis also reinforces the fact that these developments do not affect the situation in the New South Wales Supreme Court, which ruled in 2022 that courts do have the power to make settlement CFOs.  
Case Developments Commercial

Details of Funding Behind J&J Talc Lawsuits Revealed

Whilst the topic of disclosure in litigation funding has primarily been dominated by discussions around the financing of patent infringement lawsuits, the issue remains a key one across the whole spectrum of third-party litigation funding. Large class action claims against major corporations have been prime opportunities for funders looking to gain lucrative rewards, and new reporting by Bloomberg Law has shed light on one of the highest profile examples. An article by Bloomberg Law reveals the details of third-party funding in the ongoing lawsuits brought by consumers against Johnson & Johnson over the alleged cancerous effects of its talc-based baby powder products. The reporting reveals that it is Virage Capital Management and TRGP Capital who have been working with law firms representing plaintiffs in these cases, having funded over 500 of the 60,000 claims brought against J&J. Bloomberg Law’s Emily Siegel highlights that the reason this information is available to the public is because a 2021 rule enacted in New Jersey ‘requires parties using outside funding to disclose certain information about their backers.’ Of particular interest is the fact that since the rule came into force nearly two years ago, there have only been nine examples of disclosed funding out of over 800 filings examined during that period. Burford Capital’s Andrew Cohen stated that he hasn’t seen a significant impact since the rule was introduced, with very few discovery requests following these rare disclosures, and that the main effect has been to burden litigants with the cost of these additional filings. Of the nine lawsuits that had disclosed third-party funding, familiar names from the industry included Legalist, Longford Capital and Omni Bridgeway.
Announcements Commercial People Moves

Signature Litigation announces appointment of partner Jérémie Fierville to strengthen its corporate and financial dispute resolution expertise in Paris

Specialist disputes law firm Signature Litigation today announces the appointment of dispute resolution specialist Jérémie Fierville as Partner in their Paris office. Jérémie joins Signature Litigation from the French dispute resolution boutique law firm he founded eight years ago, after having spent nine years at a major international law firm. With experience in both Paris and London, Jérémie has developed a strong expertise in corporate, shareholder and financial disputes. He acts for a broad range of French and international companies and financial institutions, which he represents in strategic pre-litigation and litigation matters, as well as mediation proceedings. Jérémie also gives dispute resolution law and business law lectures to postgraduate students at University Paris Panthéon-Assas. Jérémie joins Signature Litigation alongside Senior Associate Luca Bódi and Associate Arthur Lamandé from Fierville Avocats, strengthening the Firm’s dispute resolution practice. Commenting on the appointments, Founding Partner of Signature Litigation’s Paris office Thomas Rouhette stated: “We are delighted to welcome Jérémie and his team and to add his extensive experience to our dispute resolution offering as part of our commitment to grow our Paris partnership.”  Kevin Munslow, CEO of Signature Litigation added: “Jérémie’s appointment represents our commitment to sustained growth across all of our offices, as well as strengthening our multi-jurisdictional client offering. Jérémie already has a recognised presence in the Paris and London markets for his corporate, shareholder and financial dispute expertise, and our conflict-free platform will allow him to further extend his reach and practice.”  Jérémie Fierville, newly appointed Partner at Signature Litigation further commented: “I am particularly enthusiastic about the prospect of joining Signature Litigation, an international law firm entirely dedicated to dispute resolution, which develops for its clients a unique offer on the market combining legal excellence, operational efficiency, and the strength of more than 70 talented solicitors and avocats", he explains. “With my team, I am pleased to be able to bring my expertise in corporate and financial disputes to the Paris office.” Now in its eleventh year, Signature Litigation comprises 20 partners and over 100 members across its offices in London, Paris and Gibraltar. Jérémie’s appointment follows the recent appointment of international arbitration and dispute resolution specialist Tsegaye Laurendeau as partner in September, and the promotion of leading international arbitration lawyer Neil Newing to the Firm’s partnership in October. Jérémie Fierville is Signature Litigation’s newly appointed corporate litigation partner, with over 15 years’ experience acting in highly complex, international commercial and corporate litigation, with a particular emphasis on shareholder disputes. Thomas Rouhette is a founding partner of the Paris office of Signature Litigation and a leading commercial and international litigator. Previously a partner in a major international law firm, Thomas has almost 30 years’ experience in litigation. Kevin Munslow is CEO of Signature Litigation. Signature Litigation is a law firm specialising in commercial litigation, international arbitration and regulatory investigations. Founded in 2012 in London, Signature Litigation also has offices in Paris and Gibraltar.
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Commercial Regulatory Issues

Former House Committee Chair Argues Third-Party Funding Threatens U.S. Industry and Security

As we saw earlier this week, efforts by individual U.S. courts and judges to mandate increased disclosure requirements for third-party litigation funding continues to generate fierce debate. Echoing prior critiques made by the Chamber of Commerce and current lawmakers, a former congressional leader has added his voice to the discussion and argued that foreign litigation funders pose a threat to both U.S. industry and national security. In an op-ed for Bloomberg Law, former U.S. representative, Buck McKeon, who served as the Chair of the House Armed Services Committee from 2011 to 2015, argues that new regulations are required to ‘prevent litigation funders from manipulating US innovators and our IP system.’ In the opinion piece, McKeon equates foreign funding of IP and patent litigation to efforts by foreign parties, with the intention to steal intellectual property through espionage, claiming that funders ‘leverage US courts and patents without oversight or transparency.’ McKeon’s central thesis is that the lack of transparency around the involvement of third-party funders could allow malicious actors to damage U.S. businesses through costly litigation, whilst also gaining ‘access to sensitive information during legal proceedings.’ McKeon also suggests that these funders ‘are able to direct lawsuits from behind the curtain’, although it should be noted that funders regularly assert that their funding agreements prohibit any control over the litigation process. McKeon concludes by suggesting that in order to combat the influence of foreign investment in U.S. litigation and the lack of transparency around these activities, action must be taken through federal legislation or through amendments to the Federal Rules of Civil Procedure.
Commercial Regulatory Issues

New European Directives Will Fuel Class Action Growth

At a recent litigation funding conference, much time was devoted to the potential implications of the EU’s Representative Actions Directive (RAD) being implemented by member states later this year. One London law firm argues that it is not just the RAD, but also the EU’s Product Liability Directive (PLD) that will ‘supercharge’ the already bustling levels of class action activity across Europe. In an article originally published on Law360, Edward Turtle and Harriet Jones, associates at Cooley, predict that the combination of these two directives represents ‘a fundamental shift in the European risk landscape’ and will catalyse a major increase in product liability class actions within the EU. Although the PLD is not expected to come into force this year, with implementation unlikely to occur before 2024 or even 2025, changes to the EU’s liability regime will make it easier for consumers to prove their claims, whilst broadening both the scope of potential claims and the range of damages awarded. Among the various changes to the liability regime included in the directive, Turtle and Jones point to the inclusion of digital products and services, as well as adding liability for online marketplace operators. The PLD also provides new disclosure requirements for defendants to provide technical information, widens recoverable damages to include psychological harm, and redistributes the burden of proof by ‘creating new presumptions of defect’. Turtle and Jones argue that while the combination of these new directives does not directly mirror the U.S. model, the EU system still shares similarities as the RAD includes the allowance for third-party funding of class actions and the lowering of the ‘threshold to initiate proceedings’. The new regime also is set up to increase the likelihood of settlements, and at the same time, rebalance the financial incentives by ‘claimants will have the upper hand when it comes to costs.’
Case Developments Commercial

LCM Announces 261% Return on Investment for Comet Insolvency Litigation

Funding of insolvency-related litigation continues to demonstrate its potential, as just this week Litigation Capital Management (LCM) revealed that it achieved an impressive return on investment in its funding of a case brought by Comet's liquidator. This follows the High Court’s ruling in favor of Comet’s liquidator in December 2022, which ordered the retailer’s former parent company, Darty, to pay £110 million into the Court. Covered by Legal Futures, the announcement by LCM revealed the realization and cash receipt of its investment in the liquidator’s case, which yielded a 261% return on invested capital. LCM stated that whilst Darty is still appealing the Court’s judgement, the liquidator had secured a judgement protection insurance policy and ‘an application was made to the Court for payment out of court of sufficient monies to pay LCM’s entitlements pursuant to the Litigation Funding Agreement as well as the cost of defending the appeal.’ From LCM’s original investment of £4.5 million, the funder achieved a £12 million profit. LCM’s CEO, Patrick Moloney, stated ‘This is the second substantive Resolution of a Fund I investment. The Resolution provides a further example of how the use of managed third party investment funds leverages the return to LCM’s balance sheet and its equity investors.’ The previous resolution of a Fund I investment came in February as a result of the settlement of a funded case brought against KPMG, over failures to properly audit Carillion’s accounts.
Commercial Regulatory Issues

Looks Dubious – The Third Ground to Restrain a Lawyer from Acting

The following piece was contributed by Valerie Blacker, commercial litigator focusing on funded litigation, and Amelia Atkinson, litigation and dispute resolution lawyer at Piper Alderman. Strata Voting Pty Ltd (In Liq) v Axios IT Pty Ltd and Anor[1] is a funded single plaintiff action. It involved a recent examination of the Court’s power to prevent a lawyer from acting in proceedings for a conflict of interest. The authors represented Strata Voting in its successful defense of the restraint application. The Third Ground Less frequently invoked than the first and second grounds (misuse of confidential information and breach of fiduciary duty), the third category upon which to restrain a lawyer in a position of conflict from acting in a matter is known as the “inherent jurisdiction” ground. The Court can restrain lawyers from acting in a particular case as an incident of its inherent jurisdiction over its officers and control of its processes.[2] The jurisdiction is enlivened where there is an objective perception that a lawyer lacks independence such that the Court is compelled to interfere and remove the lawyer from acting in the matter. In other words, the position of the lawyer makes the Court uneasy. The test for intervention is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice, including the appearance of justice, requires that a legal practitioner should be prevented from acting.[3] Axios’ failed application The jurisdiction to enjoin a solicitor from acting is to be regarded as exceptional, and to be exercised by the court with caution. That was the basis on which his Honour Judge Dart of the South Australian Supreme Court dismissed the application brought to restrain Piper Alderman from acting for the liquidators. Here, Piper Alderman is acting for the company in relation to a dispute which was in existence before the winding up commenced.  The liquidator retained Piper Alderman to continue acting for the company for the purpose of the litigation, the subject of the existing dispute. The supposed conflict was said to have arisen from a proof of debt which Piper Alderman lodged for about $47,000 in fees incurred prior to the administration. The argument was that Piper Alderman’s impartiality was impaired by the fact that unless the litigation is successful, Piper Alderman will not be paid its outstanding fees because there will be no funds in the winding up to do so. Axios contended that “the conduct of the solicitor was so offensive to common notions of fairness and justice that they should, as officers of the Court, be restrained from acting”. However, his Honour considered the firm’s status as creditor to be unremarkable. Even in a case where a substantial sum (over $830,000) was owed to lawyers by their insolvent client,[4] there was no risk to the proper administration of justice. As everyone knows, solicitors routinely act in matters where they are owed money including conditional costs agreements, risk share arrangements, contingency fee arrangements and agreements that include uplift fees, to name a few. The restraint application in Strata Voting was unsurprisingly and swiftly[5] dismissed with costs. Conclusion If an opposing party asserts that a lawyer should be restrained from acting for the opponent, it is necessary for a clear case to be made that the lawyer is in a position where he is fixed with an interest of such a nature that he may fail in his overriding duty to the court. It requires proof of facts, and not mere speculation as to motive. The risk to the due administration of justice has to be a real one. Otherwise, a litigant ought not to be deprived of the lawyer of his choice. -- About the Authors: Valerie Blacker is a commercial litigator focusing on funded litigation. Valerie has been with Piper Alderman for over 12 years. With a background in class actions, Valerie also prosecutes funded commercial litigation claims. Amelia Atkinson is a litigation and dispute resolution lawyer at Piper Alderman with a primary focus on corporate and commercial disputes. Amelia is involved in a number of large, complex matters in jurisdictions across Australia. For queries or comments in relation to this article please contact Amelia Atkinson | T: +61 7 3220 7767 | E:  aatkinson@piperalderman.com.au [1] Unreported, Supreme Court of South Australia, Dart J, 23 January 2023 (Strata Voting). [2] Kallinicos & Anor v Hunt [2005] NSWSC 118 at [76] (Kallinicos). [3] Ibid. [4] Naczek & Dowler [2011] FamCAFC 179, [84]. [5] In a 5-page judgment.
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Commercial Deals

Forecasting UK Litigation Trends for 2023

It is impossible to separate the future direction and trends of litigation funding from the broader movement of the litigation sector itself, as investors are naturally drawn towards those areas that are increasing in both activity and financial value. A new blog post from one of the industry’s leading insurers offers predictions for the litigation trends in the UK we should expect to see for the rest of 2023. The blog post released by Harbour Underwriting examines the current state of UK litigation and suggests what areas funders may be pursuing most actively. Unsurprisingly, competition claims are highlighted, citing the 10 Collective Proceedings Orders (CPOs) that have been already approved by the Competition Appeal Tribunal (CAT), along with the 24 opt-out CPO applications which began in 2022. A spectre remains over UK competition claims, with the upcoming Supreme Court decision likely impacting how these claims can be funded by third parties. The article goes on to spotlight securities class actions as another major area of focus, with high profile cases likely setting the stage for even more activity if they reach successful outcomes. Similarly, fraud-based litigation is seen as a potential growth area, fueled by the aftermath of the pandemic, and which has already seen claims being brought against companies who allegedly misused government loans. As has been discussed by other industry commentators, insolvency litigation is also expected to be a significant trend in 2023, given the current economic instability that has put additional pressure on companies already struggling to recover from the effects of Covid-19. Whilst ESG litigation is always of interest to funders, Harbour Underwriting highlights the variety of cases that exist under this broad umbrella, and suggests the sector will remain a prominent target market for litigation funding. Finally, mergers and acquisition litigation is offered as another trend, with the author speculating that a rise in the number of deals, as well as the speed of those transactions, could pave the way for litigation focusing on ‘valuation and warranty disputes and claims for misrepresentation.’
Commercial Legal Innovation

Above the Law and Lake Whillans Launch Litigation Finance Survey

In the GAO report on the litigation funding industry published last December, one of the key takeaways from its research was the lack of publicly available data around the market and its participants. However, some industry firms and publications are leading the way on gathering such data, as Above the Law and Lake Whillans are partnering once again on their annual litigation finance survey. Announced in an article by Above the Law, the latest addition of the publication’s annual survey of attorneys and in-house counsel is being launched in partnership with funder Lake Whillans. The research aims to study these individuals’ perspective on litigation funding, with the overarching theme of ‘Is Litigation Finance An Effective Option In A Down Economy?’ The survey includes questions such as ‘What are the most important considerations in choosing a litigation financier?’ and ‘Has litigation finance become more relevant to your practice in the last year?’. The survey is brief and all responses are anonymous, with participants given the chance to win a $250 gift card. Law firm attorneys and in-house counsel are invited to complete the survey here.
Commercial Regulatory Issues

Former U.S. Circuit Judge Argues Disclosure Orders in Patent Infringement Cases Only Benefit Big Tech

The end of 2022 saw many industry headlines dominated by the ongoing stories of fights in patent infringement lawsuits between plaintiffs and a District Court judge in Delaware, primarily focused on orders requiring increased disclosure of third-party litigation funding. However, a new opinion piece by a former federal court judge argues that this campaign to increase funding disclosure in patent disputes is part of a wider effort to tip the scales in Big Tech defendants’ favor, and to disadvantage tech startups. Writing for RealClear Policy, Paul Michel, the former Chief Judge for the United States Court of Appeals for the Federal Circuit, argues that if Judge Connolly’s disclosure requirements are upheld, then large technology corporations will gain ‘a huge tactical advantage’ in these cases. Michel points out that these orders seem to have gone in the opposite direction to the conventional position that ‘the funders of a lawsuit are irrelevant to the merits of the lawsuit itself’. Responding to critics of third-party funding who say the practice encourages frivolous lawsuits, Michel states that this is ‘absurd’ and that it is in these funders’ interests not to back cases that will fail and therefore deny any return on investment. He closes by suggesting that if these requirements become the standard for patent infringement cases, then defendants will be able to ‘tie up small patent holders in expensive legal knots over issues irrelevant to the merits and only rarely relevant to case management.’
Commercial People Moves

Lex Ferenda Litigation Funding Expands to Denver; Announces Addition of Prominent Litigator and In-House Attorney Andrew Kelley

Lex Ferenda Litigation Funding LLC "LF2" is pleased to announce its expansion to Denver, Colorado, with the addition of prominent in-house attorney and litigator, Andrew Kelley, who joins as Managing Director, Underwriting and Risk. He was previously Associate General Counsel and head of commercial litigation at Fortune 500 company, DaVita Inc. (NYSE: DVA). "Andrew is an incredibly talented, business-oriented leader and lawyer with a long track record of successfully representing clients both as outside counsel and as in-house client representative," said Michael German, Chief Investment Officer at LF2. "LF2's clients will benefit from Andrew's deep understanding of the dispute resolution process, which led Andrew to successfully recover hundreds of millions of dollars on behalf of his clients during the course of his career," said German. LF2's expansion to Denver with Mr. Kelley marks an inflection point at the firm: "Our new outpost in the Rockies gives us key access to important US markets for dispute resolution," said Chief Operating Officer Chris Baildon. "With the addition of Andrew substantially focused on underwriting and risk management, clients can expect faster decisions, stronger engagement, and a supportive investment management team that is able to add value exponentially," said Baildon. Before DaVita, Andrew was General Counsel to a private equity firm headquartered in Colorado. Before that he was outside counsel at two different international law firms in Colorado. Andrew received his J.D. from Harvard Law School and his Bachelor of Arts from University of Colorado, Boulder. He is actively licensed to practice law in Colorado. "I am excited to be joining the team at LF2 and look forward to applying my experience and training in this new and exciting space," said Kelley. "As a senior advisor to large companies, our advice and analysis is often a combination of sound legal advice and good business acumen, and I look forward to helping our clients and their counsel successfully navigate the dispute resolution process without having to worry about how to pay for their representation," said Kelley. ABOUT LEX FERENDA LITIGATION FUNDING LF2 is a commercial litigation finance company anchored by institutional capital. LF2 is structured with the objective of meeting the highest standards in investment process management, quality control, risk management, and compliance. For further information about LF2, please visit: www.lf-2.com. For Investor Relations or other questions, please contact: Chris Baildon.
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Commercial Legal Innovation

Lawdragon Releases 100 Global Leaders in Litigation Finance Guide

It would be impossible to recognize every single participant who is providing important contributions to the litigation finance sector, however, Lawdragon has honored many of the industry’s key individuals in its 100 Global Leaders in Litigation Finance for 2023. The latest edition of Lawdragon’s annual listing recognizes funders from across the world, with individuals on this year’s list hailing from countries including Australia, Germany, Singapore, the United Kingdom and United States. Lawdragon stated in its announcement that as an ‘advocate of inclusion in the legal profession’, the 2023 guide is 32% female, and 17% inclusive.  Whilst there are many familiar funder names from the 2022 list, there are plenty of new entrants this year including: Rob Ryan, CEO of Aristata; Ian Garrard, Managing Director at Innsworth Advisors; and Brandon Baer, Founding Partner of Contingency Capital. Three members of the 2023 list are also featured in Lawdragon’s Hall of Fame: Louis Young, Co-Founder of Augusta; Stuart Grant, Managing Director at Bench Walk Advisors; and Andy Lundberg, Managing Director at Burford Capital
Commercial

Cartiga Earns Top Legal Funding Provider Honors, Reinforces Commitment to Law Firms and Clients

Cartiga has recently been rated the #1 legal funding provider in both the consumer litigation funding and law firm funding categories by the New York Law Journal and the National Law Journal. It was also voted best litigation funding provider by the Daily Business Review. Cartiga's Chief Executive Officer Charlie Platt said, "These rankings are well-deserved. We have over 20 years of experience and are well-positioned to serve our customers' funding needs with competitive pricing, fast funding, and reliable service. Our goal is to be a strategic partner with law firms and help them manage the costs of funding so that law firms and their clients maximize case recoveries." Mr. Platt added, "In a time of economic uncertainty, Cartiga's financial strength and stability, together with innovative tools to manage litigation costs and improve outcomes, provide a unique platform to serve our customers. We look forward to serving law firms and their clients who want the winning edge." Business Update Cartiga recently completed its second-rated 144A ABS offering of consumer pre-settlement advances for approximately $112 million. In addition to this successful financing transaction, Cartiga has also added new partners in its $200 million warehouse facility of committed, multi-year bank lines of credit to support its consumer and commercial funding franchises.  About Cartiga  Cartiga is a leading provider of legal pre-settlement funding to consumers and working capital funding to law firms. It combines the former LawCash, Ardec, and Momentum funding businesses with 20+ years of experience and data analytics tools so that consumers who use funding are delighted and maximize their case recoveries.
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Case Developments Commercial

Burford-Funded Lawsuit Against Argentina Secures Summary Judgement

The prolonged timescale of litigation is regularly cited as a barrier to entry for some investors, with the uncertain duration of any case making it difficult to predict when those returns will be realized. However, as a recent decision demonstrates, there will always be opportunities available for funders and investors willing to take a pragmatic approach. An article by Bloomberg Law provides an update on Burford Capital’s financing of a long-running lawsuit brought by shareholders of YPF SA, a re-nationalized oil company, against Argentina. The case of Petersen Energia Inversora, S.A.U. v. Argentine Republic dates back to 2015 and has stretched on for long enough that Burford ‘began posting financial results and projections that excluded any returns’ from the case. However, the U.S. District Court for the Southern District of New York (SDNY) released an important ruling last Friday, with District Judge Loretta A. Preska finding that the Argentine Republic is liable for the YPF shareholders’ losses following the company’s re-nationalization in 2012. The ruling from SDNY granted summary judgement to the investors without specifying damages, as Judge Preska stated that further details on the exact ‘timing of the nationalization’ needed to be clarified before damages could be calculated.  According to Bloomberg’s reporting, Burford ‘has already made more than three times its initial investment in the case, after previously selling claims worth more than $230 million.’ Burford had suggested that the shareholders’ claims could be worth more than $7.5 billion.
Case Developments Commercial

Omni Bridgeway Funding Shareholder Class Action Against Downer EDI

Class actions continue to be a top choice for funders looking to pursue meritorious claims with the potential for strong financial returns, buoyed by favourable regulatory regimes in many jurisdictions. In another example of this trend, Omni Bridgeway announced that it is funding a class action against Downer EDI, an integrated services provider operating in Australia and New Zealand.  Omni Bridgeway’s shareholder class action alleges that Downer EDI failed to disclose accounting irregularities to the market, misrepresented the truth about its financial position, and that its shares were trading at an artificially inflated price until December 8th, 2022. Omni Bridgeway has stated that the class action will be run by Piper Alderman. The claim has its origins in two events: a December 8th announcement by Downer EDI that disclosed these ‘accounting irregularities’, and the publishing of restated half-year accounts and the provision of updated FY23 guidance on February 27th, 2023. Downer EDI’s share price fell by 20% following the December announcement and then fell by 24% following the February release. Omni Bridgeway is encouraging any shareholders who acquired Downer EDI shares or an interest in Downer EDI shares between April 1st, 2020 and February 27th, 2023, to register their interest.
Case Developments Commercial

Burford Co-Founders Pen Open Letter to Wall Street Journal

The ongoing dispute between Burford Capital and Sysco Corporation continues to develop, with lawsuits on each side accusing the other party of wrongdoing. Last week saw Burford’s leadership make an emphatic defense of its position and track record in a letter to the Wall Street Journal, in which it categorically stated that ‘the facts of this litigation are on Burford’s side’. The letter from Burford’s CEO and CIO, which was originally published in the WSJ last Thursday, saw Christopher Bogart and Jonathan Molot make the case that this dispute was not ‘exemplary of litigation finance […] but rather of an admitted breach of contract.’ In this letter, Bogart and Molot re-emphasise that the origin of this dispute came from Sysco breaching the original terms of its contract with Burford, which resulted in a negotiated settlement that included a ‘limited consent right’ for Burford. Burford’s letter also reframes Sysco as the party which has ‘already lost twice’ in court, with Burford having been granted both ‘a temporary restraining order and preliminary injunction’. The letter ends by reinforcing Burford’s principle that their ‘standard contract makes client control of their litigation clear’, and that this would have also been the case with Sysco had the client not breached the original terms of the contract.
Case Developments Commercial

An Alternative Perspective on the Dispute Between Burford and Sysco

The dispute between Burford Capital and Sysco Corporation has continued to dominate headlines over recent weeks, with commentators speculating on how this situation will resolve and the potential implications for the wider litigation funding industry. However, a new piece of analysis breaks down what lies at the core of this dispute, reframing the story as one about the breach of a litigation funding agreement and the ensuing consequences, rather than the supposed idea of a funder exerting undue control on settlements. Writing in an op-ed for Bloomberg Law, Dai Wai Chin Feman, director of commercial litigation strategies at Parabellum Capital, offers a comprehensive analysis of the root cause of the dispute: Sysco’s original breach of its agreement with Burford. Dai Wai traces this conflict back to Sysco’s breach of its $140 million funding agreement, by breaching the terms prohibiting ‘Sysco from divesting collateral without Burford’s consent’. Dai Wai explains that in order to maintain access to Burford’s capital, Sysco gave Burford an increased share of the claims’ proceeds and ‘agreed not to settle without Burford’s prior consent’. Having agreed to this consent right and identifying a ‘settlement floor’ for the future resolution of the claims, Sysco then sought to negotiate settlement terms below that floor and ignored Burford’s attempt to exercise ‘its consent right based on the commercial unreasonableness of the terms’. As laid out by Dai Wai, this led to Burford seeking the arbitration panel’s injunction, which was granted by the tribunal and led to Sysco’s lawsuit, along with what the author describes as ‘an aggressive public relations campaign’. Dai Wai concludes his analysis by suggesting that ‘Sysco essentially seeks to benefit from a nine-figure windfall borne out of its own breaches’ and ‘has conducted a master class on how to breach a litigation funding agreement.’
Commercial

Examining the ‘Uncorrelated’ Nature of Litigation Funding as an Asset Class

It is often said that one of the most attractive qualities of litigation funding is that it stands as an uncorrelated asset class, largely insulated from market forces and the macroeconomic situation. However, given the extremely turbulent global economic conditions, one industry leader has provided a blog post analysing whether this commonly accepted statement can be taken at face value. Writing in for Thomson Reuters’ Dispute Resolution Blog, Tets Ishikawa, managing director at Lionfish Litigation Finance, suggests that in the wake of SVB’s collapse ‘it would be a mistake to sit back and watch the mayhem with the comfort that litigation funding is uncorrelated.’  Looking at how the current market downturn could affect the litigation finance industry; Ishikawa highlights the inherent complexity of this sector that can dissuade outside investors who lack expertise in the area. This sits in contrast to some investors’ preference to return to safe and familiar investments in times of disruption. Ishikawa pairs this with the fact that in such an environment, there could be a naturally occurring ‘pinch on capital raising’ for litigation funders, which could even lead to ‘some industry consolidation’. Furthermore, Ishikawa points out the current economic environment can substantially raise the risk of litigation investments, especially where the defendants’ underlying assets could be devalued by outside pressure, and therefore impact the ability to make accurate predictions on the true return on investment. Building on his previous analysis of the ways defendants can ‘arbitrage the time value of litigation’, Ishikawa states that these same economic pressures could encourage defendants to drag out litigation rather than settle, in order to effectively manage their liquidity. However, Ishikawa suggests there are naturally positive correlations from the market downturn, such as the other commonly held belief that litigation activity increases during economic disruption. Moreover, he returns to the idea that much like how the litigation funding industry benefited from the 2008 financial crisis, there is equal potential that this period could lead to similar growth driven by corporates turning to third-party funding in order to continue to pursue meritorious litigation whilst managing their own cashflow pressures.
Announcements Case Developments

Legal-Bay Lawsuit Funding Reopens Underwriting Department for Victims of Sexual Abuse

Legal-Bay, The Pre Settlement Funding Company, announced today that they are reopening funding for victims of sexual abuse in light of recent settlements in the McLaren sports facility and multiple Los Angeles detention center lawsuits. The McLaren case centers on the alleged sexual abuse of hundreds of children by a former Olympic coach, Bahram Hojreh. Hojreh was accused of sexually abusing young female gymnasts who were under his care at the Los Angeles-based gym where he coached. The allegations of abuse first surfaced in 2017, and Hojreh was arrested in April 2018. In March 2020, the case was settled for a staggering $8.125 million, with each victim receiving $125,000 on average. According to reports, Hojreh pleaded no contest to charges of sexually abusing 13 female gymnasts, aged 7 to 14 years old, between 2014 and 2017. He was sentenced to 10 years in prison, but the sentence was later reduced to 6 years and 8 months, though he will have to register as a sex offender for life. Also in Los Angeles, probation and detention officers at various juvenile centers are being accused of sexually assaulting approximately 300 boys and girls during their incarceration. The lawsuit was filed this past December, and alleges that the minors suffered multiple incidents of sexual abuse at the hands of the very staff employed to watch over them. The abuse dates back as far as the 1970s right on up through 2018, and specifically names the following facilities: Camp Scott, Camp Kenyon Scudder, Los Padrinos, Barry J. Nidorf, and the Challenger Memorial Youth Centers. The lawsuit claims that there were times when employees were granted unsupervised access to the detainees, subjecting them to verbal as well as physical and sexual abuse. Lawyers for the plaintiffs argue that reasonable supervision should have been enacted to keep the incarcerated juveniles safe. In January 2020, a California state law opened a three-year window for victims to file suit, allowing any victim of sexual abuse to seek damages regardless of the amount of time that had passed since the assault took place. While that specific filing window has since closed, new cases have emerged similar to the ones outlined above that will need to be resolved. As it stands now, the law only allows victims to file suit prior to their 40th birthday or within five years of becoming aware of the childhood abuse if they are over 40. However, The Justice for Survivors Act is presently being debated in the state, and if passed, would end the statute of limitations to file claims of childhood sexual abuse. Legal-Bay reminds plaintiffs that the legal system is backlogged, creating an indefinite wait for sexual abuse survivors to see justice. Chris Janish, CEO of Legal-Bay, commented, "The issue of sexual abuse of minors has been an ongoing problem for years, and unfortunately, still continues today. The California sports facility and juvenile detention center cases are just two examples of the ongoing problem of sexual abuse within youth organizations. While it's encouraging to see settlements being reached, it's clear that much more needs to be done to prevent abuse from occurring in the first place. This includes greater advocacy for the children. Only by taking bold steps can we ensure that kids are kept safe and protected while in the care of youth-based institutions. In the meantime, Legal-Bay stands at the ready to assist survivors and their families with their lawsuit funding needs." If you've been a victim of any type of sexual assault and need an immediate cash advance against your impending lawsuit settlement, please visit Legal-Bay HERE or call toll-free at 877.571.0405.
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Case Developments Commercial

Dispute Between Burford and Sysco Escalates, as U.S. Chamber Files Amicus Brief

Disputes between funders and their clients are uncommon occurrences, and those that spill over into public headlines are an even rarer sight. However, the ongoing dispute between Burford Capital and Sysco Corporation appears to be accelerating in magnitude, with third parties now weighing in and taking sides in this high-profile conflict. Reporting by Reuters provides the latest updates on the fight between funder and client. In a new filing to the U.S. District Court for the Northern District of Illinois, Burford accused Sysco of a ‘case of blatant forum shopping’ for attempting to ‘transfer oversight of the arbitral proceeding’ from New York to the Illinois court.  This was in response to Sysco’s attempts to have the New York arbitration tribunal’s temporary restraining order overturned, which had prohibited Sysco from settling the antitrust cases that Burford had funded. Burford is already engaged in a lawsuit in New York against Sysco, seeking to confirm the arbitration panel’s previous judgement. Meanwhile, the U.S. Chamber of Commerce has waded into the dispute by filing an amicus brief with Illinois District Court this Monday, which it also used as an opportunity to repeat its routine criticisms of third-party litigation funding. In the brief, which argued for the Court to grant Sysco’s petition, the Chamber of Commerce stated that the case demonstrated ‘how litigation funding creates conflicts of interests, interferes with attorney-client relationships, and allows opaque interests to control litigation.’
Commercial Deals

Regional UK Funder Looks to Fund Larger Claims

The UK funding market has seen continuous growth in both the demand and supply of funding, with newer market entrants seeking to serve markets outside of London. Thaxted Capital launched last July, aiming to serve the litigation funding needs across the North and Midlands, and has now expanded its services to offer financing for larger cases. An article in The Law Society Gazette details the announcement that Thaxted will be lifting its £1 million cap on funding cases, and will be looking to support commercial disputes requiring over £1 million of funding. Jack Bradley-Seddon, founder and partner at Thaxted, stated that the funder will ‘continue to serve the market for smaller claims’, but will now be able to support larger claims in these regional markets. In Bradley-Seddon’s announcement on LinkedIn, he explained that with the current economic conditions contributing to an increase in the volume of commercial disputes, it has left many businesses without the capital necessary to pursue claims. With the lifting of the £1m cap, Thaxted is looking to ‘offer businesses in this situation the funding to pursue litigation cases for these larger commercial disputes.’
Consumer

California State Senator Introduces Bill to Regulate Lawsuit Lending

2023 is shaping up to be a year in which legislation focusing on the regulation of litigation finance will become a regular feature, ranging from the potential implementation of the Voss Report’s recommendations in the EU, to state-level legislation in the United States. A new development in California has seen a State Senator introduce a bill to more closely regulate the consumer legal funding industry. Writing in Capital Weekly, California State Senator Anna M. Caballero and Linette Lomeli, executive director of Madera Coalition for Community Justice, put forward an argument in favour of a new bill that would increase consumer protections against predatory lawsuit lending practices. Senate Bill 581 (SB 581) was introduced by Senator Caballero on February 15 and aims to implement new rules around the funding of civil claims and class actions.  Among its provisions, the bill would require: litigation financiers to be registered with the Secretary of State, litigation financing agreements to be shared with ‘all parties to the litigation, without awaiting a discovery request’, and would prohibit the funder from ‘charging the consumer an annual fee of more than 36% of the original amount of money provided to the consumer for the litigation financing transaction’. In advocating for the bill, Caballero and Lomeli provide examples of predatory and malicious lawsuit lending practices, including the ongoing Girardi Keese lawsuit, and that the ‘absence of regulation enables bad actors to take advantage of borrowers’. The authors do not advocate for consumer lawsuit lending to be prohibited entirely, but instead argue for reforms which they argue ‘strike a balance between protecting vulnerable borrowers and ensuring the lawsuit lending industry can continue to serve an important role for those in financial need.’ With regards to the section of the bill requiring disclosure of litigation funding agreements to all parties in civil and class action cases, Caballero and Lomeli suggest that this will increase transparency whilst revealing any conflicts of interest between financiers and parties involved in the lawsuit.
Commercial Regulatory Issues

Augusta’s Head of Competition Discusses State of Play for Collective Actions

As we saw earlier this month at Brown Rudnick’s European Litigation Funding conference, competition litigation and collective actions are top of mind for funders in the UK and Europe. The Competition Appeal Tribunal (CAT) has become a prominent venue for claims in the UK, and with the upcoming implementation of the European Representative Actions Directive (RAD), the coming months and years are unlikely to see a slowdown in activity. In an interview with FinLegal, Augusta Ventures’ head of competition litigation funding, Simon Latham, spoke about his career in the industry and what opportunities or challenges funders will face in the near future. Speaking to the current state of third-party funding, Latham acknowledges that with so many funders competing for the best and most lucrative cases, some funders may have to implement a more agile strategy and consider claims with tighter margins or look at secondary investment opportunities. Discussing the future of class actions and group claims, Latham expects that in the next five years we will see some of the claims in the CAT reach a successful conclusion, but also that we should expect a small number not to succeed. Latham suggests that those cases which are unsuccessful will most likely come about in ‘claims with novel market definitions and/or theories of harm’, as these are ones that ‘are effectively in a 50/50 scenario at trial’, if no settlement can be reached. Speaking to the role and impact of technology on litigation funding, Latham states that data will continue to play a key role in class actions that include a large pool of potential claimants, as funders will ‘need to aggregate claims and quickly assess the quality of their evidence to reach a critical mass’. These types of claims on a ‘mass scale’ are only likely to increase in volume according to Latham, due to ongoing regulatory developments which will provide regimes for these kinds of actions.
Commercial Deals

Bespoke Capital Consulting Announces First Investment

Bespoke Capital Consulting has announced the deployment of its first investment. Bespoke provides equity investments to contingent fee law firms looking to grow their business, partnering investment funds with ongoing consultative guidance from its highly qualified and experienced management team. Bespoke’s mission, as explained by CEO Crystal Utley, “is to increase access to the justice system for underserved injured parties, and we are thrilled to invest in a law firm that embodies the spirit of Bespoke. To be able to provide capital and guidance as this firm continues its mission of representing the underrepresented is quite fulfilling.” Bespoke is the first of its kind to take a consultative approach to deploying capital in the legal field. With more than 60 years of collective industry knowledge, Bespoke’s management team leverages their expertise to provide a wide spectrum of consulting services including operational best practices, financial core competencies, and business development. Utley reports, “Contingent fee plaintiff law firms often lack access to strategic resources. As a result, these businesses face challenges, and present opportunities distinct from other industries and asset classes. Our goal is to apply quality competencies that not only drive value creation, but ultimately improve outcomes for those who are injured.” For more information about Bespoke’s services, visit www.bespokecapitalconsulting.com, or e-mail Bespoke’s team of experts at info@bespokecapitalconsulting.com Contact Information: info@bespokecapitalconsulting.com
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Commercial Special Features

Key Takeaways from LFJs Special Digital Event: Mass Torts and Litigation Funding 

On Thursday March 23rd, Litigation Finance Journal hosted a special digital event: Mass Torts and Litigation Funding. Panelists included Michael Rozen (MR), Founder and Managing Partner at TRGP Investment Partners, James Romeo (JR), Managing Partner at Greenpoint Capital, Brian Roth (BR), Chief Executive Officer and Chief Investment Officer of Rocade Capital, and Michael Guzman (MG), Partner at Kellogg, Hansen, Todd, Figel and Frederick. The discussion was moderated by Ed Truant (ET), Founder of Slingshot Capital.

The panel discussion spanned a range of topics, including claims origination, financing/underwriting, plaintiff and defense-side strategies and tactics, the impact of ABS regulation and much more. 

Below are some key takeaways: 

ET: How does the industry originate claims and identify and validate claimants? And how has origination industry evolved over the years from the time of mass TV advertising to the current omni-channel world of advertising? 

MG: First, all of the old traditional methods still work.  Networking, late night TV, radio, advertising - all of that still works. But what I am seeing is a number of firms have either affiliated with or own social media marketers, who are using social media in targeted ways. It’s a lot cheaper depending on how you use it, and it can be a lot faster. So people are using the old techniques, plus a number of new ones.  I’ve had some really good success with that, because you’re not just blanketing the airwaves, the people that you get back are much more focused and more interested in what it is you’re trying to recruit them for. 

JR: I think it’s helpful to go back and think about the history of legal advertising, which started in the late 70’s when two lawyers started advertising, it led to some fighting in the state bar, but ultimately it was decided that legal ads are a form of free speech and that they provide consumers valuable information. 

We’ve now seen this huge evolution around what’s possible. There is very targeted social media and paid search advertising that is driven by analytics. At Triton we’re doing a lot of this, we’ve developed our own in-house marketing team, and we’re using things like intake forms and chatbots to help pre-screen potential claimants. We’re using different identify verification tools and we’re experimenting with different medical retrieval tools to help with the intake of potential claimants. 

ET: Describe the ‘fall-out rate’ of claimants and what are typical fall-out rates evidenced in the market and reasons therefor? Has there been an improvement in fall-out rates as a result of enhanced data analytics and technological sophistication?

MR: Access to justice is always a goal for those who think that corporate America has long gotten away with unequal justice because they have a lot of money and the individual claimants don’t. So having better ways of reaching people who may have been impacted by a drug that’s been pulled from the market or a product that didn’t work as advertised is obviously a good thing. The flip side is, in tougher economic times, you see higher claim rates from people who may not be good claimants, because there is an expectation there may be some quick money to be obtained. 

So I think the fall-out rate is really a function of whether or not you’re in the right economic time with the right kind of claim. Camp Lejeune is an example of that. 3M earplugs is an example of that. We’re talking about hundreds of thousands of claimants, whereas in an ordinary mass tort you may have tens of thousands of claimants. And this is something defendants don’t like, and they push back on litigation finance in particular, and argue that somehow specious claims are being promoted. What is really at the base of that is a desire to create an unequal footing between the haves and the have nots. If you are on the have side, it is obviously to your benefit to have either lower claim rates, fewer number of plaintiffs, and/or a higher fallout rate where you can allege later on that these were not valid claimants, that they were somehow propped by third party financing. 

Nobody who has or will speak on this panel will tell you that investing in non-meritorious claims is a good thing. Yet what the other side of this argument will claim is that somehow the fall-out rate as an individual metric is indicative of whether or not there are valid claims in a particular litigation. I would say you to it is irrelevant—the more claims you have in a litigation, the higher the fall our rate is going to be. 

ET: Given the high fall-out rates and the potential for false claimants, is this sector ripe for the application of blockchain to minimize duplication of claimants and decrease fall-out rates as well as tracking the transactions and pay-outs? 

 BR: Fall out impacts the litigation strategy and settlement strategy. When a litigation starts, nobody really knows what will be a settle-able case, so there’s always going to be some level of origination that’s not going to result in a paid claim at the end of the day. I do think the technology will help with some areas like de-duplication and dual representation, whether it’s blockchain or other smart contracts. We’re seeing billions of dollars transact in the space and there’s very little transparency across the different players in the space. I see that changing over time, and that will impact the fall out rates as well. 

ET: What is the nature of the prototypical plaintiff litigation firm? Why do so called “White Shoe” law firms not get involved in mass tort plaintiff litigation work? 

MG: When I started my career, there was this perception that there were defense-side firms and plaintiff-side firms. Lines were pretty well drawn, people crossed over from time to time. But for the most part, if you did plaintiff’s work you did plaintiff’s work, and you didn’t go back and forth. My firm and lots of others defy that model, and at this point, I’m not sure there is a prototypical plaintiff’s firm. My firm is a litigation boutique, and very early on we realized some of our clients wanted us to be plaintiffs for them, and it was enormously challenging and lucrative to play that role for them.

I think why so many of the so-called ‘white shoe’ law firms have found it difficult to be a plaintiff-side firm is because they have corporate departments or longstanding institutional clients, and some of those clients just don’t like the idea that one of those partner is representing them, but at the same time someone else is off pursuing a mass action or class action, so it gets to be an institutional conflict—it’s hard to manage from a client standpoint, and we’ve dealt with that over the years. 

ET: How has the US mass tort industry evolved in terms of the size of the industry, the quantum of cases and the number of claimants over the years? 

JR: If you look at the federal docket, it took something like 59 years to reach the first 250,000 cases in MDLs, and over the subsequent seven years, from 2007-2014, we hit a total of half a million cases, and then by 2021, we topped 1 million cases. So that’s an additional 500,000 case jump from 2014 to 2021. And there’s currently something like 360,000 cases that are still pending in the federal docket. So there’s definitely been an acceleration of cases, and that’s continued. And I don’t see that sopping any time soon. 

ET: Can you describe the various ways in which finance intersects with the mass tort industry?

BR: Financing is an ever changing landscape, but at the front end, you’re seeing it for case origination, a lot of times it’s done on a non-recourse basis. We see a lot of law firm loans, where you’re financing the whole process from origination to settlement. We’re also seeing capital enter for service providers in the space - lead origination or working up cases, ordering records on a contingent basis. We’re also starting to see some post-settlement finance develop, where firms are basically able to factor their claims. 

As we think about the space, we expect this to continue to evolve and develop, and this matures as an asset class, and we develop more data and track records, you’ll see more segmentation I think. But that should translate into more flexible options for the firm. The space currently is shaped by the rules around fee sharing and the ethical rules for law firms which prevent non-lawyers from having ownership in the firm. Obviously, Arizona and other jurisdictions are changing that, so the landscape of how finance intersects with firms is changing as well. 

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