The beginning of the new year appears to have continued where 2022 left off, as third-party funding disclosure in patent lawsuits remains a contentious issue in a number of cases. Just as LFJ has reported in the Nimitz lawsuit, the U.S. federal courts are willing to allow a judge’s probing of litigation funding arrangements in another two patent lawsuits.Reported by Bloomberg, a panel of three judges from the U.S. Court of Appeals for the Federal Circuit denied two separate patent owners’ requests to stop Judge Colm F. Connolly’s ongoing efforts to mandate further disclosure of their litigation funding sources. Creekview IP LLC and Waverly Licensing LLC had requested to have their cases dismissed, with the agreement of the defendants in each suit, but the panel ruled that Judge Connolly should be allowed to continue his probe.The Federal Circuit maintained that the Delaware judge was not acting outside the bounds of the court’s authority, and that dismissal of a case does not prohibit the court from “addressing collateral issues.” The panel’s order resembles a ruling in the Nimitz patent dispute, in which the court’s authority to request further disclosure of funding arrangements was similarly upheld.
Litigation funding of class actions remains a powerful tool for holding large corporates to account, especially within industries such as Healthcare and Insurance, which can see customers outmatched by the financial and legal power of the companies involved. A new proposed class action in Australia looks to bring justice to customers of a major private health insurance provider.Omni Bridgeway recently announced that it is funding a class action against Medibank Private Limited, on behalf of customers affected by the company’s data breach around 12 October 2022. Medibank, which provides insurance policies under the ‘ahm’ brand, suffered the data breach in October of last year, and reportedly compromised millions of customers’ personal data including ‘passport numbers and health claim data’.Omni Bridgeway is inviting both current and former customers to register their interest in the class action, which will be led by the law firm Baker McKenzie.
The ongoing rise and potential continued growth in class actions in Europe was a common topic of discussion in 2022, and it appears that this year will continue that trend, as a prominent European funder is backing a significant action against some of Europe’s largest automobile manufacturers.LitFin, a European funding firm based in the Czech Republic, is funding a class action claim in Germany against manufacturers of heavy and medium-duty trucks, who were fined by the European Commission for breaching antitrust laws. LitFin is bringing this claim on behalf of companies who bought or leased this category of vehicles from Daimler, MAN, Volvo/Renault, DAF, Iveco and Scania; all of whom admitted their antitrust violations, with the exception of Scania.These manufacturers were all fined by the Commission for acting as a ‘cartel’, violating antitrust regulations by agreeing to prices on trucks sold in the European Economic Area (EEA) between 1997 and 2011. LitFin had already brought a claim against the cartel in the Netherlands, but due to the statute of limitations rendering these claims ‘time-barred’, the funder is also leading a claim in Germany to offer the manufacturers’’ clients another avenue for seeking compensation.The class action in Germany will be led by the Munich-based law firm, MMG Rechtsanwaltsegesellschaft.
The use of third-party funding in international arbitration is on the rise, and as its use grows more commonplace, parties are increasingly keen to understand the nuances of accessing funding in jurisdictions that do not have the same established practices as countries like Australia, the UK or US. In a new article for the China Business Law Journal, Yang Xueyu and Mariana Zhong, partners at Hui Zhong Law Firm, examine the different third-party funding practices and relevant legislative frameworks across Asia. Singapore has one of the most-established legal structures for legal funding, having permitted the use of third-party funding in international arbitration since 2017, and then widened this permission structure to include domestic arbitration matters in the Singapore International Commercial Court. However, the authors highlight that third-party funding is only permissible where the funder meets the required criteria of having at least 5 million SGD in paid-up share capital or managed assets.Whilst Hong Kong does not allow the broader use of litigation funding, it does permit the use of third-party funding in both domestic and international arbitration proceedings, and in 2022, legalised “outcome-related fee structures” in order to offer parties a wider array of permissible fee arrangements. Importantly, Hong Kong has well-defined disclosure regulations, which require the existence of funding agreements to be disclosed, including the identity of the funder.Finally, while mainland China does not have established legislation around third-party funding, there have been no indications that it is prohibited, and contingency fee agreements are also recognised as valid. Xueyu and Zhong do highlight that some of China’s arbitration bodies, such as CIETAC and BAC, have set out guidelines for third-party funding regarding investment arbitration that more closely align with international standards.
Patent dispute cases have dominated industry news in recent months, both due to them being among the most active areas for litigation finance involvement, and also due to the number of high-profile cases that have put the spotlight on funding disclosure. One of these cases appears to have found a resolution just before the end of the year, as VLSI and Intel have both agreed to drop their respective claims and counter-claims in the microchip patent dispute.Bloomberg Law covers this latest update which has been ongoing since June 2018, with a joint filing revealing that both parties are seeking dismissal and moving to drop their claims, with neither side receiving any financial payout. According to the article, the resolution contains no remuneration for either party, and also affirms that VLSI will agree to not take any further legal action regarding these microchip patents.The case had attracted attention as VLSI was caught in the crosshairs of Judge Colm Connolly’s April standing order, which mandated additional disclosure around the plaintiff’s litigation funding arrangements. Whilst VLSI had provided further disclosures, Judge Connolly and Intel both argued they were still failing to comply, and then in October, Connoly requested briefs from all parties as to whether the suit should be dismissed for VLSI’s failure to meet the court’s disclosure requirements.Whilst additional briefs were expected in January, these are unlikely to go ahead, after both Intel and VLSI have requested the case be dismissed. However, observers will now likely be closely watching the Nimitz patent case, which has faced increasing scrutiny from Judge Connolly regarding disclosure of its litigation funding arrangements.
Litigation finance represents a potent solution to the access-to-justice issues facing America’s legal system. However, third-party funding still faces barriers to entry, both in terms of a lack of general awareness of its availability, and how it can be best accessed and utilized.Writing in Law.com, Ron Lasorsa, managing general partner at Victory Litigation Fund, argues that digital transformation, and in particular, tokenization, is the key to unlocking access to litigation funding by opening pathways for more capital and further democratizing the judicial system. Lasorsa points out that it has been three years since the first lawsuit was tokenized, and has since become a more commonplace practice by funders.By embracing tokenization and thereby allowing for the effective crowdfunding of lawsuits, the litigation funding market can expand beyond the borders of the small group of established litigation funders. By widening the number of sources of capital, the individual risk can be reduced, and in the process, increase the liquidity of the market.Furthermore, Lasorsa highlights that ‘smart contracts’ on the blockchain would avoid the difficulties of ensuring payouts from funded wins are delivered on-time and without difficulty. Finally, he argues that tokenization would increase opportunities for activist investors, rather than commercial funders to finance litigation, especially within the ESG arena.
Litigation Finance Journal recently reported on a group of 14 state attorneys general that have called for action from the Department of Justice to review potential threats to U.S. national security from foreign adversaries' engagement of litigation investment. Litigation funders and industry advocates have new ammo in response to the AGs’ claims, given recent news of the RNC funding former President Donald Trump’s various legal entanglements. According to ABC News, RNC leaders earmarked $1.6M in legal funding to support President Donald Trump's defense over lawsuits brought by New York Attorney General Letitia James. Meanwhile, the United States Chamber of Commerce Institute for Legal Reform's research has prompted 14 state attorneys general to ask for the Justice Department to assess national security risks of adversaries 'undermining' the United States by engaging litigation funding and third party investment vehicles. The group of 14 state attorneys general are concerned about foreign adversaries 'weaponizing' United States legal frameworks via litigation investment, to attack critical national industry and infrastructure, such as energy sectors. The group of 14 seeks the Department of Justice to detail how a network of federal agencies could engage a blueprint for defending United States independence from international litigation investors, hostile groups, agencies or governments such as Russia and China.This latest attack on the industry, prompted by the U.S. Chamber of Commerce, is simply another attempt to undermine the nascent and growing litigation funding sector. It is ironic, given that in the case of Consumer Legal Funding–which the Chamber specifically targets–the funding in question does not go to support legal fees, but rather to finance claimants’ livelihoods while they remain injured and unable to work. While the RNC’s funding of Trump’s legal battles does not constitute foreign investment, it illustrates the acceptance of third party legal funding across political lines, and should be noted by industry advocates looking to respond to the negative publicity put forth by the U.S. Chamber.
The United States Chamber of Commerce Institute for Legal Reform recently warned that litigation finance is a potential risk to national security. Bloomberg Law has published a rebuttal to such claims, hailing Consumer Legal Funding as a cornerstone of many United States households seeking much needed cash flow during the litigation process. Bloomberg Law claims that Consumer Legal Funding poses no risk to United States national security. Bloomberg Law's opinion piece does draw a distinction between consumer and commercial litigation investment. With a focus on consumer funding, Bloomberg Law concludes that many Americans can only pursue justice through the facilitation of litigation investment as a cash flow facility. With the average Consumer Legal Funding contact around $2,000-$3,000, Bloomberg Law concludes that national security is certainly not at stake. Bloomberg goes so far as to call the Chamber of Commerce's position on consumer litigation investment a 'fallacy' of composition logic.
As we head into 2023, another new funder has entered the growing litigation funding market.Revealed in a LinkedIn post, Matthew Denney announced the launch of Versaras, a new legal finance and consultancy firm which is seeking to provide “outsourced dispute finance and funding solutions, and non-recourse investments in Real Estate.” Prior to founding Versaras, Denney has accumulated a wealth of experience across the legal and finance sectors, having most recently served as an investment manager and head of origination in EMEA for Litigation Capital Management.
As the litigation finance industry continues to grow in both established and nascent jurisdictions around the globe, new funders are launching investment firms dedicating a significant portion of their capital to this industry. As we close out the year, this trend does not appear to be slowing, with the launch of a new boutique investment firm: Inweasta.Interviewed by EU Reporter, Inweasta’s Hong Kong CEO, Annie Chan Wai Kwan, discussed the new company’s focus on special situation investing, with an eye towards international disputes resolution and litigation funding. The company is looking to bridge the gap between East and West, bringing expertise to complex cross-border disputes and litigation finance cases that require tailored solutions.Inweasta was founded and is owned by Andrei Elinson, who brings 20 years of experience in commercial disputes, distress assets management and private equity M&A.
Recent discussion around the risks of litigation funding have highlighted the potential threat of foreign actors using third-party funding of lawsuits to harm U.S. national security. This claim, which was put forward in a report by the U.S. Chamber of Commerce’s Institute for Legal Reform, a prominent industry antagonist, has now found support among state officials, as a group of 14 state attorneys general have called for action from the federal government to review this alleged threat.Outlined in an article by Reuters, the letter sent to U.S. Attorney General Merrick Garland was signed by these Republican state AGs led by Georgia’s Chris Carr and Virginia’s Jason Miyares. The letter requested that the Justice Department outline what measures it has taken to address the use of third-party funding by foreign entities, stating that the potential of adversarial nations using the process to undermine American economic or security interests was a serious threat.Whilst the Justice Department did not provide Reuters with a comment in response to the letter, the International Legal Finance Association (ILFA) released a statement arguing that the letter was merely a repetition of the Chamber’s claims and was not supported on any factual basis.Eric Schuller, President of the Alliance for Responsible Consumer Legal Funding (ARC), stated the following: “The funds that ARC companies provide consumers are not used to pay for the cost of litigation and bringing cases forward. The funds are used to cover household needs, such as keeping a roof over consumers’ heads.” Schuller went on to note that “If there is a concern as to who is funding the lawsuit itself, then any proposed regulation or legislation needs to concentrate on that aspect, and not on consumers who need funds to make ends meet while their cases make their way through the legal system.”
A previous article covering mining company GreenX's claim against the Polish government, funded by LCM, suggested that LCM and GreenX are to be awarded over €700MM from the Polish government. In fact, a hearing has concluded, and the arbitral tribunal has reserved its award. We regret the error.
A significant class action lawsuit against Visa and Mastercard has progressed at the UK’s specialist competition tribunal. The Competition Appeal Tribunal (CAT) has set a date in April 2023 for a Collective Proceedings Order hearing, which will determine whether the claim – on behalf of a large number of businesses seeking damages for allegedly unlawful charges – can proceed to a full trial. Harcus Parker, a UK-based commercial litigation law firm specialising in group litigation, competition litigation and class action lawsuits, has brought the corporate card claim at the CAT, the UK’s specialist judicial body for hearing competition cases. The class action seeks compensation for UK businesses, which were charged Multilateral Interchange Fees (MIFs) for accepting payments using corporate* credit cards, as well as for both credit and debit cards used by overseas visitors. The CAT has published the claim on its website and has now agreed to hear the application for a Collective Proceedings Order. Harcus Parker claims that Visa and Mastercard have forced banks to agree to a level of MIFs set by the two giants, which are “anti-competitive and unlawful”. “We want to ensure businesses across the UK economy are properly compensated. We are making a stand against unlawful interchange fees, which should be abolished. Both the UK Supreme Court and the Court of Justice of the EU have condemned this practice for consumer credit and debit cards. The UK courts should now clamp down on commercial card fees and consumer card inter-regional fees,” said Jeremy Robinson, competition litigation partner at Harcus Parker. Mr Robinson added: “UK businesses in the travel, hospitality, retail and luxury sectors are particularly hurt by Mastercard and Visa’s multilateral interchange fees and we are pleased that this important claim has been endorsed by a number of leading trade bodies including UKHospitality and ABTA.” Multilateral Interchange Fees make up the greater part of the service charges levied by banks on businesses when customers pay by card. Typically, for every £100 spent, up to £1.80 is charged on payments made by corporate cards, or cards used by overseas visitors – costs which are borne by companies throughout the UK. Since 2015, EU law capped Multilateral Interchange Fees at 0.3 percent on consumer credit card transactions, and 0.2 percent for consumer debit cards. However, this cap did not apply to corporate cards or for consumer card inter-regional transactions. These sales have continued to attract fees of up to 1.8 percent per transaction. Harcus Parker accuses Mastercard and Visa of requiring banks to charge anti-competitive MIFs on businesses. These MIFs for corporate and inter-regional payments should be zero per cent, say Harcus Parker. The class action is open to all businesses, including large international companies and local businesses, as well as some non-UK companies. Many of these businesses, particularly in the travel and hospitality sectors but also the luxury sector too, have been particularly hard hit by Brexit, Covid-19 and the current economic climate. UK businesses are invited at this stage to register their interest online at www.commercialcardclaim.co.uk. Those businesses with an annual pre-Covid turnover of £100 million or more will be invited to opt-in to the claim. Businesses with a turnover under this threshold who have registered online will be automatically included unless they choose to opt out. A number of trade bodies have endorsed the claim, including:
ABTA, which represents over 3,900 leading UK travel brands;
UK Hospitality, which represents 740 members representing many businesses across the UK;
UKinbound, which represents 330 businesses;
Tourism Alliance, which represents 65 associations and organisations, which in turn comprise thousands of potential claimants;
Advantage Travel Partnership, which represents 350 businesses with over £4.5billion annual turnover and which officially endorsed the case at its 2022 annual overseas conference.
The CAT will hold a ‘certification hearing’ between 3-5 April 2023, when it will decide whether the case can go forward to trial, which is likely to take place in stages in 2024 and 2025. The case is financed by a third party litigation funder, Bench Walk Advisers, and is fully insured. *Corporate cards are a type of commercial card, sometimes known as a company or business card. The served claims can be found on the Competition Appeal Tribunal website: Harcus Parker is a commercial litigation firm. It specialises in bringing and defending complex claims, often involving large groups of claimants. Founded by Damon Parker in 2019, the firm is a recognised market leader in group litigation, case management and litigation funding.
Contingency Capital, a global asset management business focused on credit-oriented legal assets, has successfully completed the capital raise for its first commingled fund, with over $490 million in new discretionary capital across the fund and related managed accounts. The firm launched in November 2020 and has raised and deployed in excess of $700 million across a series of strategies and transactions. Its investor base includes university endowments, pension funds, family offices and consultants.
Brandon Baer, Founder and Chief Investment Officer of Contingency Capital, stated: “We are very grateful for the support our business has received from institutional investors in the United States and Europe. Since launch, we have continued to see strong interest from investors seeking diversifying strategies that are generally uncorrelated to the broader equity and fixed income markets. The asset class has evolved considerably in recent years, and our capital raise reflects a growing appetite for legal asset-related investments as well as the increasing institutionalization of the asset class more generally.”
Contingency has a multi-strategy approach, focusing on a broad spectrum of legal assets, including loans to law firms, portfolio financing and distressed and special situations investments where the primary driver is related to a legal, tax or regulatory process. The firm combines litigation expertise with a fundamental credit approach, building structured, diversified pools of legal assets to create sustainable, credit-like returns.
About Contingency Capital
Contingency Capital is a global asset management business focused on credit-oriented legal assets. For further information on Contingency Capital please see www.contingencycapital.com.
Regulation will be a key industry focus in 2023, with the stage having been set by the Voss Report passed by the European Parliament in September. However, the report’s proposals have received significant criticism, and one law firm has offered careful analysis of issues posed by five of the Voss Report’s central recommendations.In an article for ThoughtLeaders4 Disputes, partners at law firm Schulte Roth & Zabel, Polly O’Brien and Boris Ziser, have examined the following recommendations from the report: capital adequacy, adverse costs, fiduciary duty, a cap on fees, and disclosure of funding arrangements.O’Brien and Ziser note that it already benefits funders to ensure they have sufficient capital to finance activities, and question how a universal standard could be applied, whilst also questioning whether industries outside of litigation finance are held to such standards. Regarding the proposal to make funders liable for adverse costs, the authors highlight that this seems to sit at odds with the report’s stated aim to lower the costs of litigation and widen access to justice, as enforcing such a measure would increase the risk for funders and thereby necessitate higher fees.On the suggestion that funders should maintain a fiduciary duty to the claimant, O’Brien and Ziser observe that while such a duty appropriately exists for a funder to its investors, there seems to be no reason for this to exist for clients who have no need for financial recourse where a claim is unsuccessful. The recommendation for a cap on fees is highlighted as an idea that seems misguided in trying to use a one-size-fits-all approach to all cases, regardless of individual differences in risk and capital required, and would also lead to funders being hesitant to finance cases in the EU.Finally, the authors criticize the similarly blanket approach to disclosure by highlighting that the details of a funding arrangement should have no relevance to a claim’s merits, and that enforcing such detailed disclosure will only encourage defendants to prolong cases where they can see the financial burden will drain a claimant’s funding resources.
\Despite the mutually beneficial partnership between litigation finance companies and lawyers, one ongoing dispute in U.S. federal court had placed a spotlight on a strained relationship between a funder and law firm. However, the dispute between Woodsford and Hosie Rice, which LFJ originally reported on in September, looks closer than ever to being resolved.A recent article by Bloomberg Law details the latest development in the case, after a recommendation was issued by US Magistrate Judge Sherry Fallon, saying that the federal district court in Delaware should confirm a $1.8 million award to Woodsford. The judge found that Hosie Rice had not provided sufficient legal reasoning to overturn the award set by a panel of three arbitrators. This arbitration found that Woodsford was entitled to collect fees from Hosie’s case against Google, where the funder had provided $800,000 in funding.Woodsford’s chief executive officer, Steven Friel, reiterated the company’s position that the basis of the dispute was a “straightforward debt collection matter”, whilst the law firm said that it would continue to fight the award despite Judge Fallon’s recommendation. Both parties will now await the Delaware federal judge’s decision as to whether it will grant the award to Woodsford.
Shareholder-led class actions are on the rise, with investors seeking to hold corporations to account where they engage in misleading or deceptive statements, and litigation funders are increasingly eager to fund these actions.One of the latest examples was reported by the Australian Financial Review, covering a shareholder class action being brought against AVS Minerals, an exploration company based in Australia. Omni Bridgeway is funding the action which alleges that AVZ misled its investors over its ownership rights to a hard rock lithium deposit in the Democratic Republic of Congo, called the Manono Project.The claim alleges that AVZ failed to disclose relevant information related to its ownership of the project, which led to an increased valuation of AVZ’s shares on the stock market. Law firm Johnson Winter Slattery will be running the claim, and will represent investors who purchased shares during an almost year-long period between May 17 2021 and May 6 2022.
LitigationCapital Management Limited (AIM:LIT),an alternative asset manager specializing in dispute financing solutions internationally, is pleased to announce positive progress on two investments within its portfolio. SuccessfulJudgmentininvestmentinEnglishcourtlitigation As announced on 23 June 2021, LCM entered into an agreement to provide a finance facility to Geoffrey Carton-Kelly, a partner of FRP Advisory ("FRP"), additional liquidator of CGL Realisations Ltd (In Liquidation), formerly known as Comet Group Ltd ("Comet"). This investment forms part of LCM’s Fund I portfolio of investments. In November 2022, judgment in the High Court was awarded in favour of Mr Carton- Kelly (the funded party) for approximately £110m. This judgment is understood to represent the largest ever (by value) preference claim successfully brought under the UK’s 1986InsolvencyAct. The Defendant to the proceeding has obtained permission to appeal the judgment, which will delay the maturity of the investment, but will be paying the judgment amount into court. This investment has been significantly de-risked from both a merits and recovery risk perspective. The financial performance of this investment is protected against the passage of time by way of an increasing multiple of invested capital. The size of the investment made by LCM is within the median range for an investment within Fund I. ClarificationofpressreportonanLCMinvestment Following recent press speculation, the Company is providing an update on a further Fund I investment involving claims against Poland under both the Energy Charter Treaty (ECT) and the Australia-Poland Bilateral Investment Treaty (BIT), which has now been heard by an Arbitral Tribunal. Following completion of the hearing, the Arbitral Tribunal will render an Award in due course. There is no specified date for an Award to be rendered and there is no certainty as to what the outcome of that Award will be. Revenuerecognition In line with LCM’s revenue recognition, the Company will only recognise revenue associated with these matters at the point in time it has more certainty on the final outcome, including following any appeal where relevant, or when there is more clarity around the recovery of funds. We remain confident that with respect to the awards set out above these will generate returns in line with management expectations, notwithstanding that, the timing within which each award will be realised remains uncertain. The Company generally expects the duration of investments to increase to between 36 - 42 months. PatrickMoloney,CEOofLCM,commented:“Wearepleasedwiththesignificantprogressonthesekeyinvestments.ThesuccessfuljudgmentintheHighCourtofEnglanddemonstratesLCM’sstrengthinprojectselectionandwelookforwardtoreportingfurtheronceeachoftheseinvestmentshasreachedaconclusion.”About LCM Litigation Capital Management (LCM) is an alternative asset manager specialising in disputes financing solutions internationally, whichoperatestwobusiness models. The first isdirectinvestments madefromLCM's permanent balance sheet capital and the second is third party fund management. Under those two business models, LCM currently pursues three investment strategies: Single-case funding, Portfolio funding and Acquisitions of claims. LCM generates its revenue from both its direct investments and also performance fees through asset management. LCM has an unparalleled track record driven by disciplined project selection and robust risk management. Currently headquartered inSydney, with offices in London, Singapore, Brisbane and Melbourne, LCM listed on AIM in December 2018, trading under the ticker LIT.
Disclosure of litigation funding remains one of the most discussed industry topics as we head into the end of the year, with disclosure requirements and disputes occurring in jurisdictions around the world. In the realm of international arbitration, one funder argues that disclosure should not be viewed as a negative, but as a useful tool for strengthening the client’s claim.Outlined in a new piece of analysis by William Panlilio, an investment manager at Litigation Capital Management (LCM), the issue of disclosure in international arbitration is reframed to focus on its benefits for funders. Mr Panlilio points out that while there are no formal rules around disclosure in this area, it is generally accepted that both the presence as well as the identity of litigation funders in international arbitration should be discoverable.Panlilio argues that this should not be seen as undesirable, as the existence of a funding arrangement can act as a strong signal to all parties concerned that the claim is supported by a third-party who has assessed it as being substantial and likely to succeed. Additionally, it can dissuade the opposite party from engaging in stalling tactics in the hope of draining a claimant’s financial resources.Panlilio does specify that discoverability should not be exhaustive, as the details and exact nature of a funding arrangement should not play any role in a tribunal’s decision-making, nor is it relevant to the merits of a claim.
Litigation funding is perhaps at its most impactful when it can be used by individuals or groups of citizens to hold their government to account. A new class action in Australia is once again demonstrating this impact, as a leading funder is supporting a new action by Aboriginal communities against the regional authorities.Detailed in an article by National Indigenous Times, the Northern Territory’s public housing body is facing a class action suit brought by Aboriginal remote community residents who allege that the regional government has failed to ensure that local housing meets safety standards. The class action brought by residents of Gunbalanya is being funded by CASL, and takes aim at both the Territory and Commonwealth governments for failing to resolve tenant complaints about the quality of housing.Madeline White, a senior associate at law firm Phi Finney McDonald, which is leading the case, argued that this class action is not only about securing compensation for those residents involved in this lawsuit, but also for the wide array of remote Aboriginal communities throughout Australia. This is also not the first case of its kind, with similar lawsuits being brought in 2016 and 2019 by communities in Santa Teresa and Laramba.
Regulatory developments are at the front of mind for funders around the world, with significant proposals being discussed to place restrictions on third-party funding in the European Union, whilst other jurisdictions look to open their legal systems to increased involvement from funders. In a welcome development for funders in Australia, the government has made good on its commitment to reverse litigation funding restrictions put in place by the prior administration.In an announcement by the Department of the Treasury, the Australian government announced that its plans to exempt funders from investment regulations have now come into force. This reversal of the previous government’s position, which LFJ reported on in September, means that funders will once again be exempt from regulations including the managed investment scheme and Australian financial services licensing, according to a release by the Australian Securities & Investment Commission.Stephen Jones, the Assistant Treasurer and Minister for Financial Services, said in the statement that litigation funders play a crucial role in the government’s broader aim to widen access to justice. He also stated that the Treasury would continue to evaluate the Australian Law Reform Commission’s wider recommendations, to ensure that the country’s class action regime would produce ‘fair and reasonable outcomes’.
This Sunday’s “60 Minutes” featured a segment on the growth of litigation funding. Host Leslie Stahl highlighted the industry’s important role within the Legal Services sector, but also pointed out the lack of regulatory oversight which can lead to ethical concerns. “Litigation funding can help in cases where otherwise the little guy who’s suing would just get crushed or lowballed by defendants with deep pockets,” Stahl explained as part of her opener on the necessity of the funding industry. “The problem is, this market is exploding, with almost no rules or oversight.” Stahl profiled a litigation funding claimant: Craig Underwood’s family farm. Underwood had one customer—a hot sauce maker. When that customer pulled out of a contractual obligation, Underwood faced financial ruin. He sued his former client and won a breach of contract claim. But the hot sauce maker appealed, and Underwood couldn’t afford to keep fighting. That’s when he heard of litigation funding, and found Burford Capital. Underwood took $4MM from Burford to continue fighting, and won the appeal and the $23MM. When it was all said and done, Underwood still had to pay his attorneys, and then compensate Burford to the tune of $8MM. Asked whether he thought that payment amount was predatory, Underwood emphatically said no, given that Burford stepped in and funded his case when no one else would. “They basically rescued us.” Christopher Bogart, co-founder and CEO of Burford, noted that on average, the funder will double its money on a successful outcome, explaining that funders take enormous risk, given the non-recourse nature of their investments. He emphasized that Burford has a roughly 90% success rate. Stahl then interviewed Maya Steinitz, law professor at University of Iowa, who pointed out the ethical considerations at play here. Steinitz explains that although funders like Burford claim not to interfere in how a case is managed, there is nothing legally stopping a funder from compelling a client to settle. Consumer Legal Funding was also featured prominently in the program, where Stahl explained that the funding helps poor people pursue their legal claims. Yet she also pointed out how claimants are routinely charged very high interest rates by funders, highlighting RD Legal Funding’s alleged ‘predatory behavior’ in the 9/11 victims’ compensation fund case. The program concluded by pointing out how essential litigation funding is to American society. “Accessing the courts in a civil process is a luxury good in America” explained Maya Steinitz. “It’s simply too expensive to bring your case in a court.” That said, Steinitz is calling for more oversight of this largely unregulated industry.
Burford Capital will be featured on CBS’ 60 Minutes this Sunday, December 18 at 7:30 PM ET/7:00 PM PT [after to Sunday Night Football (please check local listings)].
Schedule for the show is as follows:
CONVOY OF LIFE – Scott Pelley reports from Ukraine, where more than 1,000 children are fighting cancer amid Russian attacks on hospitals and the power grid, putting their lives in immediate danger. A renowned American hospital and 21 countries have stepped in to help. Kristin Steve and Nicole Young are the producers.
LITIGATION FUNDING – Lesley Stahl reports on litigation funding, a relatively new multi-billion-dollar industry where investors fund lawsuits in exchange for a slice of the award. It can be lucrative and help level the playing field against big corporations with deep pockets, but it’s growing rapidly with little rules or oversight. Shachar Bar-On and Jinsol Jung are the producers.
LOURDES – Bill Whitaker reports from the Sanctuary of Our Lady of Lourdes, a Marian shrine in southern France and the site of 70 medical miracles recognized by the Catholic Church. 60 MINUTES goes inside the Lourdes Office of Medical Observations where world-renowned doctors and researchers conduct decade-long investigations into the dozens of claims of miraculous cures made every year. They determine which cases can be medically explained and which cannot. Nichole Marks is the producer.
ESG financier and litigation investor Woodsford is proud to announce a new class of team members joining the firm's global enterprise. Amar Singh Mann, David Haighan and Jordan Howells will join Woodsford's London, United Kingdom office. Cody Nguyen is slated to enter Woodsford's Brisbane, Australia office. Additionally, Woodsford announced that former Australian Federal Magistrate, the Honorable Neil McKerracher KC will join the firm's global investment advisory panel. Woodsford says that Australia continues to be an emerging market for litigation finance innovation.Woodsford's appointment of Howells as Senior Investment Manager is rooted in his wealth of experience, including 14 years of public and private organizational investigation, litigation and negotiation for ESG malfeasance. Woodsford plans to engage Howells' prosecutorial acumen that includes liaising with the United States Department of Justice, Securities and Exchange Commission and Serious Fraud Office.Steven Friel, Woodsford's Chief Executive Officer, says that the firm's new international appointments are indicative of cross border litigation investment innovation. Friel goes on to say that Woodsford's international footprint in ESG justice is expected to represent some of the highest standards in the world.
Mill City Ventures III, Ltd. ("Mill City") (NASDAQ:MCVT), a specialty short-term finance and non-bank lender, announced today that, in accordance with its previously announced letter of intent regarding a proposed merger transaction with Mustang Funding, LLC dba Mustang Litigation Funding ("Mustang"), it has entered into a $5 million short-term financing arrangement with Mustang in furtherance of the proposed merger. The related short-term note is scheduled to mature on the ninth-month anniversary of the loan.Mill City Chief Executive Officer, Douglas M. Polinsky, said, "Our announcement on December 6, 2022, outlined a few conditions set forth in the letter of intent, one of which was the consummation of a short-term loan by Mill City to Mustang. This $5 million short-term loan that we closed not only provides Mustang with short-term liquidity, but also marks the first step in what we believe will be an eventual combination transaction between Mill City and Mustang as outlined in our letter of intent and related public announcement. This is an exciting time for Mill City, as we believe that the proposed transaction with Mustang will be transformational for our combined company."Mustang President, Jimmy Beltz, said, "We are excited about taking the next steps in our company's growth and development, and look forward to working towards our goals with Mill City's team."About Mill City Ventures III, Ltd.Founded in 2007, Mill City Ventures III, Ltd., is a specialty short-term finance company providing short-term non-bank lending primarily to small businesses, both private and public. Additional information can be found at www.sec.gov or www.millcityventures3.com.About Mustang Litigation FundingFounded in 2018, Mustang Funding, LLC dba Mustang Litigation Funding looks for best in class capital solutions for the legal industry through funding law firms, plaintiffs, vendors and other opportunistic legal assets. More information can be found at www.mustangfunding.com
The nature of litigation funding means that it is often most sought after and most valuable in situations where unforeseen events lead to dire consequences for a wide array of parties. As a new piece of analysis suggests, the interconnected nature of the global economy and financial markets means that such situations could increase in frequency and trigger a higher volume of lawsuits requiring funding.This analysis by Jason Levine, investment manager and legal counsel at Omni Bridgeway, uses the example of the latest scandal in the cryptocurrency world: the collapse of FTX, to illustrate the danger of these ‘black swan’ events. Levine points out the unanticipated and massive financial losses that occur in such events, acting as a catalyst for a strong litigious response which can be enabled and bolstered by the use of third-party funding.Levine highlights that in situations where corporate plaintiffs are damaged by these black swan events, they may lack the liquidity to pursue litigation due to the financial strain imposed by the event. He also points to the fact that during these challenging times, taking on the costs of litigation may result in a hit to company valuation, and so, the use of litigation finance to shift these costs off the balance book can become particularly important.Levine concludes that if we do see an increase in the number and scale of these black swan events, particularly in the currently unstable financial markets, litigation funding will be a vital tool for corporates to seek redress and compensation through the legal system.
Although the issue of disclosure has primarily been discussed in recent months with relation to US plaintiffs being required to disclose details of their funding arrangements to the courts, a ruling in another jurisdiction appears to signal a victory for clients looking to disclose confidential information to their funders. Detailed in a piece of analysis by Ogier, a law firm specializing in offshore matters, a new ruling by the Court of Appeal in the British Virgin Islands (BVI), affirmed the right of clients to disclose certain confidential case details to their funders where necessary. In the case of Fang Ankong v Green Elite Limited, the Court agreed with the precedent set by the English High Court, that the ability of funders to access such information does fall within the ‘purposes of proceedings.’Ogier’s analysis noted that this is an important victory for funders and their clients, as it ensures they will be able to share information that could be used to assess the viability of future funding, thereby creating a more transparent process and one in which funders are less likely to be blindsided by information relevant to evaluating funding decisions. However, the analysis did note that this ruling only applies to cases within the BVI, and where cases involve proceedings in other jurisdictions, this guarantee is not automatically assured.
The volume and scale of class actions is on the rise in jurisdictions around the world, mirroring the regularity and broad scope of proceedings that are more commonly experienced in the US. Many industry commentators see Europe as a market with huge potential, driven by the expansion of litigation funding on the continent, and the regulatory development that could act as a catalyst for growth.In an article in Strategic Risk, Henning Schaloske, partner at Clyde & Co, argues that the European Union’s ‘Directive on Representative Actions’ will set the stage for a significant rise in class action activity, as it will create a uniform structure that will enable collective actions to be taken across all member states. Schaloske argues that this directive will be the mechanism to open the door for increased class actions, but it will be litigation funders who will play a key role in realising this opportunity.Whilst Schaloske does not see the EU completely emulating the US model, he does see an opportunity for funders to drive further activity, especially in cases related to data privacy misconduct which are enabled through the EU’s General Data Protection Regulation (GDPR). He does note the counter-balancing factor of proposed regulations that would restrict third-party funding, but argues that the trend of high-profile and high-value cases would suggest that litigation funding will still play an important role.
Lex Ferenda Litigation Funding LLC "LF2" is pleased to announce that it recently launched commercial funding operations after completing the first capital close for its Lex Ferenda Litigation Funding Master Fund. The Fund, which will focus its investments on US litigation and domestic commercial arbitration, welcomed several institutional investors whose commitments to LF2 exceeded initial expectations, and brought the Fund substantially closer to its USD $100 million+ target.LF2 is co-founded by Michael German, a veteran litigator and litigation funder with more than a decade of experience resolving high-value, complex commercial litigation, and Chris Baildon, a financial services expert with more than 30 years of industry experience."We are incredibly excited to officially announce our commercial launch and look forward to being disruptive to the litigation finance industry," said Michael German, LF2's Chief Investment Officer. "We have created an investment platform at LF2 that permits us to quickly assess and make informed, data-driven decisions about the potential litigation investments we consider. The resulting transparent, client-focused investment process, which is driven by true subject-matter experts, makes LF2 a trusted partner and advisor for our clients and the law firms that represent them," said German. "In addition, our industry access and deep bench of seasoned litigators and investors make LF2 a trusted investment manager for the Fund's investor-base as well," said Chris Baildon, LF2's Chief Operating Officer.LF2 Differentiates Through Niche Focus and Veteran Team of Industry ProfessionalsLF2 is a privately held investment management firm, with a focus on the litigation, legal, and litigation support and technology markets. As manager, LF2 is primarily focused on single-case investments in US commercial litigation and domestic commercial arbitration, with sizes ranging between USD $1 million and $10 million, although LF2 retains discretion to make all manner of investments on behalf of the Fund. LF2 brings to market one of the most flexible funding mechanisms currently available, with the ability to assess and invest in claims at any point along the dispute resolution life cycle and with flexible guidelines on law firm and client co-investment."We created the investment program at LF2 to specifically address the lack of focus on the customer across the industry," said German. "LF2 solves for this by creating a unique and individualized funding plan for each investment as assessed from the perspective of each of the investment's underlying stakeholders. Our experience shows us that this yields the greatest outcomes for our clients," said German.Executive TeamMichael German – Co-Founder and Chief Investment OfficerMichael is one of the co-founders of and the Chief Investment Officer at LF2. He is primarily responsible for the firm's strategic direction, investments, and fund risk management. Michael is an experienced litigator, trial lawyer, and litigation funder with more than a decade of experience litigating, resolving, and investing in complex commercial litigation and arbitration matters.Chris Baildon – Co-Founder and Chief Operating OfficerChris is one of the co-founders and the Chief Operating Officer at LF2. He is primarily responsible for the firm's operational and compliance efforts as well as its capital raising and investor relations efforts. Chris brings three decades of global investment banking and finance experience, with substantial experience in management, business development, and capital raising across investment verticals, including litigation finance.David Stickney – Managing Director, Underwriting and RiskDavid is LF2's Managing Director, Underwriting and Risk. He is responsible for the firm's case underwriting, investment monitoring, and risk management programs, and supports the firm's business development efforts. David is a renowned litigator and law firm leader who recovered billions of dollars for his clients through complex commercial litigation, earning him recognition as a "Titan of the Plaintiffs' Bar" and a "Litigation Groundbreaker."Advisory BoardHon. Vanessa Gilmore (ret.) – Member of the Advisory BoardJudge Gilmore is a member of the Advisory Board at LF2. She primarily advises the leadership team on new and existing investments, but is also an important strategic advisor to the firm on various legal and dispute resolution matters. Judge Gilmore recently retired from the bench after more than 25 years serving as an Article III judge in the Southern District of Texas.Scott Mozarsky – Member of the Advisory BoardScott is a member of the Advisory Board at LF2. He is an important strategic advisor to the business on legal, data and technology issues. Scott currently leads the M&A and Capital Markets Advisory Practice for a leading middle market investment bank and previously served as a corporate and legal leader to several large multinationals and publicly-traded entities.Institutionally Managed Capital Takes Long-Term View of LF2LF2's first close was led by a leading global financial investment manager with an alternatives portfolio AUM exceeding USD $22 billion. "We are thrilled to have an exceptionally strong investor, with substantial experience in the litigation finance asset class, show such confidence in LF2. With access to significant committed capital and the substantial reach of its industry-knowledgeable investors, LF2 is able to act quickly in meeting plaintiff funding needs, which is crucial to securing quality case investments," said Baildon.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 Lex Ferenda Litigation Funding, please visit: www.lf-2.com. For Investor Relations or other questions, please contact: Chris Baildon.
Patent dispute funding has been a prominent topic in recent headlines, largely due to ongoing cases where the area of third-party funding disclosure has become a divisive issue. However, according to new research, this is unlikely to have a dampening effect on this type of litigation finance activity, and in fact, indicators suggest that it will continue to be a dominant sector.An article by Bloomberg Law highlighting the results of its recent Litigation Finance survey suggests that patent litigation remains one of the most active areas of third-party funding, with 23% of lawyers surveyed indicating they had obtained funding specifically for patent cases in 2022. This activity is reflected by the response from funders, with 68% of these companies having committed capital to patent litigation.Of particular interest for those looking ahead to 2023 is the fact that interest in exploring funding for patent law cases has risen dramatically in recent years, with 30% of lawyers expressing interest in 2022, compared to only 11% when asked two years prior. Unless a major regulatory development appears to discourage the use of third-party funding in patent litigation, it seems likely based on this data that we will see continued growth next year.
Sign Up for LFJ’s Weekly Newsletter & Daily Alerts
Thank you for signing up for the LFJ Newsletter!
Stay informed on the latest news and events taking place in the global legal funding space.
You'll now receive the latest global legal funding news, insights, and analysis straight to your inbox.
Please check your email to confirm your subscription.
By completing this form, you agree to allow LFJ to communicate with you per the terms of our Privacy Policy. Your personal information will never be shared or sold to 3rd parties.
Access Premium Content
LFJ members, please log in below to access premium content.
