In 1977, the United States Supreme Court ruled that legal advertisements are protected by the first amendment. The court highlighted that restrictions on legal marketing hampered access to justice “particularly for the not-quite-poor and the unknowledgeable.” The 1980s spawned a renaissance in attorney advertising, and today, the market for legal advertising tops well over $1.2B a year in the United States.CNN Business reports that many personal injury firms are seeking to advertise to the public, in a bid to attract attention with clever TV commercials and newspaper promotions. Direct response methods are even engaged to target potential clients who are currently in the hospital recovering from injury. Hedge funds and savvy litigation investment networks invest vast sums of capital to attract business in the personal injury market, according to CNN. The U.S. Chamber’s Institute for Legal Reform (a longstanding opponent of the litigation funding industry) claims that aggressive attorney advertising is problematic and can increase the number of frivolous lawsuits. In contrast, CNN reports that the overall amount of claims filed in the United States is declining, partly due to stricter state laws to curb social inflation, and also due to the increasing cost of bringing cases to court. That latter point is exactly why consumer legal funding exists in the first place.
Litigation funding continues to be one of the best tools available for individuals to seek legal redress against large corporations and institutions, where they would otherwise be outmatched by the weight of legal resources these organizations can finance. This is once again the case, as a Swedish business leader has received funding for his case against one of Sweden’s prominent investment banks.Realtid covered the news that Kapatens, a leading Swedish litigation funder, is backing Lage Jonason’s claim against Mangold Fondkommission. The lawsuit centres around allegations by Mr. Jonason that Mangold unlawfully executed a forced sale of shares that Jonason had pledged as security. The sale of these shares in one company, which reportedly took place mostly in a single day, resulted in a massive 86 percent drop in the value of the company’s shares. Jonason’s claim alleges that the shares which were forcibly sold for a value of 20 million SEK, were previously valued at 150 million. Kapatens is funding the claim which is valued at approximately 99 million SEK, with the case being led by Nybron Advokater, a Stockholm-based boutique law firm.
In an update to one of the most significant sets of class action suits, Johnson & Johnson has been denied by an appellate court after it attempted to prematurely end class actions through the use of bankruptcy procedures.An article by Bloomberg covers the latest development in the ongoing series of lawsuits being brought against J&J by cancer victims, who allege that the company’s ‘tainted talc’ baby powder led to their cancer diagnosis. The federal appeals court in Philadelphia found that J&J was not allowed to block these cases, numbering over 40,000 lawsuits, by placing an individual business unit (LTL Management) into Chapter 11 bankruptcy.The panel of three judges ruled that J&J’s attempts to provide LTL protection under the bankruptcy code was not legitimate, given that the business was not faced with immediate financial danger. Leigh O’Dell, principal at Beasley Allen law firm, is leading thousands of these cases for cancer victims and stated that the panel’s ruling opened ‘the doors to the courthouse’ and condemned J&J’s ‘cynical legal strategy’.J&J is allowed to appeal the ruling, and if they are once again denied, will still have the option of appealing its case to the Supreme Court.
The use of the blockchain and the tokenization of litigation funding has been promoted by many parties as the next step in the digital transformation of the industry, unlocking new avenues of access to justice. In a recent post, one industry thought leader puts forward the argument that this technology can also be used to increase opportunities for litigation funding as a vehicle for social impact, and increase the potential for nonprofit legal funding.In a post by Aurelia Le Frapper, co-founder of blockchain litigation funding platform No Impunity, the potential benefits of tokenized litigation funding are outlined. Le Frapper highlights that by using fractional non fungible tokens, the ownership and funding of an individual lawsuit can be distributed more widely, and create more opportunities for impact investors to finance social impact lawsuits.Le Frapper also points out that this approach can increase the number of lawsuits that are able to be financed, by using a crowdfunding approach that brings a larger number of small value investors together. The article also describes a number of benefits enabled by this approach, including additional transparency provided by the blockchain, more efficient distribution of settlement funds and a more streamlined ability to ensure regulatory compliance through the tamper-proof blockchain records.
Among the various criticisms faced by the litigation funding industry, one that has found a resurgent voice in recent months has been the claim that allowing third-party funding of lawsuits in the U.S. is a threat to national security where foreign investors are financing lawsuits. This critique has been leveled by the Chamber of Commerce and a cadre of lawmakers, but in a new opinion piece, a top legal scholar seeks to combat these assertions.Writing for The Hill, M. Todd Henderson, Professor of Law at the University of Chicago Law School, argues that policy proposals which seek to curtail third-party funding only create an environment of ‘financial isolationism’ and would, in reality, have a negative impact on the U.S. economy and legal system. Henderson begins by returning to the guiding principle behind litigation funding, that a lack of financial capital should not be a barrier to entry for those seeking legal redress, and that the identity of the funder does not affect the merit of the case being brought.The op-ed also refutes the claim that litigation funding could jeopardize national security secrets, pointing out that not only are funders passive investors in the litigation process, but also if there are concerns around classified material, the courts have the ability to maintain that security through mechanisms such as protective orders. Additionally, Henderson points out that the U.S. is already a beneficiary of around $5 trillion in foreign direct investment, according to IMF data, and this particular industry should not be unjustly excluded from foreign investment that is actively welcomed in the wider economy.
On January 25, 2023, Litigation Finance Journal hosted a special digital event: Key Trends and Drivers for Litigation Funding in 2023. The hour-long panel discussion and audience Q&A was live-streamed on LinkedIn, and featured expert speakers including William Farrell, Jr. (WF), Co-Founder, Managing Director and General Counsel of Longford Capital, Laina Hammond (LH), Co-Founder, Managing Director and Senior Investment Officer of Validity Finance, and Louis Young (LY), Co-Founder and CEO of Augusta Ventures. The discussion was moderated by Rebecca Berrebi (RB), Founder and CEO of Avenue 33, LLC. The discussion spanned a broad spectrum of key issues facing the litigation funding industry in 2023. Below are some key takeaways from the event: RB: How does your underwriting change, given the varied risks across different legal sectors? Do you have different IRR requirements for different case types or jurisdictions? LH: At various points in time in our process, we are going to be assessing the risk of total loss. Antitrust, treaty arbitration, patent cases are riskier. When we’re calculating expected risk of loss, we take into account the various factors that make a case more risky—jurisdiction, collectability, other factors that dictate the IRR range. That is how we tie the risk factor to IRR, so the returns reflect the risk commensurate for any situation. WF: At Longford, our underwriting process remains the same across all legal sectors. But risk assessment is unique across opportunities. We look at 50 different characteristics for risk assessment. At Longford, and I imagine the same is true at funders like Validity and Augusta, there is a very strong demand for our financing, so we are able to pick only the most meritorious cases, rather than pricing risk for a range of cases. LY: We have a very controlled process in our underwriting, and it’s conducted in a very stock-standard framework. But that framework is a continual iterative process. Our underwriting changes as we resolve cases through wins and losses, where you learn things that you didn’t know in underwriting. If we had to build a portfolio like we did for our first portfolio, which was 60-70 investments with $200MM invested—if that took us three years to build at the time, it would take us four or five years now, given the fact that we’ve learned so many other things as we’ve invested. Changes in financial modeling have become far more complex and nuanced as to the particular cases, so the outcomes and scenarios that we run now are far more detailed. RB: The last prolonged recession helped jumpstart the litigation funding industry in the US. If we do have a prolonged recession, what do you see as the prospects for the industry this time around? Can we expect the same growth post-recession? LH: I think it’s tricky to accurately predict the impact of recessions on specialty industries like Litigation Finance, especially when the recession arises out of complicated geopolitical factors. That said, it’s entirely likely that a recession provides a boost for demand. Legal services will always be in demand, and the cost of legal disputes is going to continue to rise. In tough economic conditions, companies might be pushed to consider litigation finance as an alternative to the self-funding that they historically use for their litigation. This could also lead to an infusion of capital into the market, as investors look for ways to diversify into alternative assets that are uncorrelated to the broader market. LY: I don’t know if the last recession did jump start the industry. I remember one of the first trips I did across the U.S. – this was around 2014 or so. And there were a whole set of law firms who didn’t know about litigation funding, so they were taking on the risk themselves—they were in effect acting as litigation funders. I think what really spurred litigation funding was the entrepreneurial bent of these law firms, who said to themselves ‘ok we’ve been taking this risk on for our clients, and here is a way we can de-risk ourselves.’ It was that mindset, and it happened so quick. In 2014, I introduced myself, and it was like, ‘Nice to meet you, here’s the door.’ Then two years later, it was happening. You just had very savvy, sophisticated people within the law firms who saw litigation funding for what it was, and they’ve become champions of it. And those same law firms are championing litigation funding even more now, and that will spur the industry forward. RB: What insurance products look most interesting right now, and are there any you’d like to see in the future? WF: Over the past two years, the insurance industry seems to have identified our industry as a new and attractive source of business for the insurance industry. There are significant synergies and similarities between litigation finance investments and insurance products, and for the moment, insurance markets seem to be most comfortable placing insurance on judgement preservation, and that is because they perceive cases at that stage of the lifecycle to be more easily understood, evaluated, and priced. But other products are popping up every day—insurance wrappers, which can be around an entire fund, or offer judgement preservation or principal protection, or they could be more bespoke and wrapped around particular subsets of investments. Offering insurance products for individual investors within a fund, uniquely designed for that particular investor’s risk tolerances is on the horizon, and will be made available to investors and funds in our industry. At the end of the day, the costs of these products will be most important in determining whether the Litigation Finance industry will be able to find a way to work with the insurance industry. The cost of these products will be taken directly from the returns that might otherwise be achieved without insurance, and the evaluation of these costs against the risk that is being protected against, is what will determine whether insurance becomes a meaningful part of our business. RB: What are your thoughts on the 60 Minutes piece, and the resulting publicity for the industry? Is this a net-positive—all publicity is good publicity, or would the industry benefit from being more under-the-radar, as there might be a mainstream outcry over a single bad actor that could malign the entire industry? WF: The Litigation Finance industry has made great strides over the past 10 years, particularly when it comes to awareness and acceptance of our offerings among all of the effected constituencies. Litigation Finance also levels the economic playing field, to where disputes among companies are resolved on the merits, rather than on the financial wherewithal and strengths/weaknesses of the litigants. So it’s good for the legal system. I think that the more awareness we can achieve, the more acceptance and more use we will see. I am opposed to flying under the radar—I like the idea that the more that people know about our industry, the more they will see that we are doing good, because we are helping people access justice which might not otherwise be there for them.
Katonah NY. Modeso LLC D/B/A Rapidfunds (“RF”), today announced that they have signed an agreement with Amicus Capital (“AC”), a prominent investment firm in the legal financing market, establishing a partnership to provide financing to law firms throughout the United States. Through this partnership, RF and AC will market each other’s services to existing and prospective law firms on a nationwide basis by leveraging their extensive databases of law firms. This partnership will provide significant benefits to both organizations, as well as the lawyers they serve. By pooling their resources, RF and AC will be able to offer a comprehensive suite of financing options to law firms of all sizes. In addition, the two companies will be able to share knowledge and best practices, giving both organizations a competitive edge in the legal finance market.“Bill Tilley is a pioneer and seasoned expert in the settlement finance market” stated Peter J. Speziale the Company’s CEO and President. “We believe this partnership will make both companies stronger and will allow law firms to pursue financing with industry-leading terms.”About Rapidfunds:RapidFunds® was co-founded in 2004 by attorney Peter J. Speziale, as a solution to the cash flow problems contingent fee attorneys face. Running a law firm takes a lot of capital. Traditional lending institutions are generally not comfortable lending on contingent fee cases, and typically not to the extent necessary to resolve cash flow problems. Unlike these institutions, Rapidfunds fully understands the value of the assets contained in a law firm’s inventory of cases.About AMICUS Capital:More than two decades ago, Bill Tilley had a vision to mitigate the most systemic business challenge for law firms: wildly fluctuating cash flow. His solution was to apply business and finance philosophies to the legal industry, and in doing so, he ignited the litigation finance industry. Today, Amicus Capital Group is a leading provider of capital to law firms and attorneys, and Tilley’s pioneering work continues to shape the way that legal services are financed. By providing much-needed stability to the industry’s cash flow, Tilley has helped countless law firms to grow and thrive. In the process, he has changed the landscape of legal finance forever.AMICUS CAPITAL GROUP, LLC is a private finance company dedicated solely to the provision of innovative litigation finance and business services for trial lawyers. They are focused on stabilizing cash flow to increase growth, sustainability, and profitability. Amicus Capital Group offers savvy solutions at every stage of business, from financing litigation to managing expenses. By providing capital and expertise, they help law firms overcome the challenges of operating in an increasingly competitive marketplace. Whether you’re looking for working capital to grow your practice or ways to improve your bottom line, Amicus Capital Group can help.
Multinational technology companies are appearing as targets for antitrust lawsuits in several jurisdictions, with these tech giants facing scrutiny for how they may be misusing their dominant market positions. Whilst these antitrust cases have historically found more welcoming legal frameworks in Europe, an impending lawsuit against Google looks to follow that trend in the U.S.Reporting in CNET explains that the Department of Justice is bringing a lawsuit against Google in federal court, alleging that the company used its monopoly position to unjustly dominate the digital advertising market. This case follows similar legal actions in the UK and Europe, with Google accused of using anti-competitive practices to harm advertisers and publishers, as well as smaller competitors.CNET also reports that Google had sought to dissuade the Justice Department’s latest lawsuit by alleviating the concerns raised, having suggested that it would be “willing to split off its ad business.”This legal action has also drawn the attention of litigation funders, with LitFin announcing via LinkedIn that they are funding a group action against Google, and looking to represent media houses and publishers who have been damaged by Google’s actions.
Analysis of regulatory development in the European Union has largely focused on the potentially negative consequences of the proposed changes outlined in the Voss Report. However, there is equal opportunity for the EU’s Representative Action Directive to generate a wave of group action activity across the continent, with funders able to capitalize on these forthcoming opportunities.In a piece of analysis on Bloomberg Law, Keir Baker and Chris Warren-Smith of Morgan, Lewis & Bockius, examine the potential impact of the directive and how it could shape the European class action landscape in 2023 and beyond. With member states required to amend their own laws to fall in line with the directive by 25 June 2023, the continent will soon see a greater degree of standardization in the regulation of representative actions.Of most interest to funders will be the provision in the directive that requires member states to allow the use of litigation funding, with the caveats that the source of funding must be disclosed if there are perceived conflicts of interest, and that the financing should not shift the action “away from the protection of the collective interests of consumers.” The authors note that states such as Cyprus and Ireland, where litigation funding has previously been heavily restricted, will be most likely to experience a surge in representative action opportunities for funders.Baker and Warren-Smith emphasize that whilst the directive is designed to provide a more unified set of guidelines, it does allow for individual member states to tailor their implementation of the rules. This will include the standards set out for the use of opt-in or opt-out regimes, as well as the minimum number of class participants required for it to move ahead. Therefore, this may create a new environment in which those looking to bring collective actions will pick their jurisdiction of choice more carefully, with countries like the Netherlands likely to be hotbeds of activity given their willingness to go even further than the bounds of the directive in creating an accessible framework for representative actions.
Once viewed as a bold new frontier for retail investment, cryptocurrency has suffered in recent times with huge declines in the value of certain currencies, alongside a number of crypto companies either collapsing or falling foul of scandals involving customers being misled and defrauded. However, as many industry analysts have been speculating, it seems that the resulting bankruptcy filings of crypto firms is drawing the attention of litigation funders who may look to fund consumers’ claims and generate significant returns on investment.Reporting by Pensions & Investments discusses the recent crypto bankruptcies of companies such as Genesis and FTX, noting that the fallout from these collapses is likely to draw investor interest in related litigation. Commenting on the potential litigious activity, Brandon Baer, CIO of Contingency Capital, stated that the firm was looking at potential claims in this space, but there was not complete clarity at this stage as to how different consumers will be classified, such as whether a customer who deposited cash with FTX will be treated equally with a customer who deposited actual cryptocurrency.Mr Baer also highlighted that Contingency was seeing an uptick in interest in litigation finance from institutional investors such as pension funds and foundations. He emphasized the fact that litigation funding retains a degree of separation from investment assets more closely tied to the stock market, and therefore it is viewed as an opportunity for institutional entities to further diversify their portfolio.
The current economic climate seems to represent a perfect storm of destabilizing factors, with countries still dealing with the after effects of the pandemic, inflation on the rise and the war in Ukraine affecting supply chains and more. As a result, litigators are predicting one of their busiest years yet in terms of disputes, and a panel of London’s top legal professions have offered their perspectives on what key trends we can expect to see in the year ahead.Detailed in Legal Business, nine of London’s leading dispute lawyers weighed in on what 2023 would have in store for the world of disputes. Summarizing the overall climate, Julian Copeman, disputes partner at Herbert Smith Freehills, compared the situation to the 2008 financial crisis, where it took a couple of years for disputes to gain momentum, and in the same way, Covid-related disputes are likely to become a more prominent feature than ever.Looking at individual trends, litigation funding is identified as one of the key beneficiaries of this surge in activity. Alex Sciannaca, litigation partner at Hogan Lovells, confirms that he has seen an increase in interest from clients towards pursuing third-party funding of their claims. Copeman also speaks to the growing maturity of the funding industry, noting that funders with a wide portfolio of cases are able to lower their risk profile and will continue to attract investment despite the poor economic climate. Toby Robinson, a dispute resolution partner at Travers Smith, also highlights competition litigation as both a top trend and an attractive prospect for litigation funders, but does caution that claims which have issues establishing damages will be unlikely to attract outside financing. Linklaters’ global head of disputes, Alison Wilson, pinpoints ESG as a particularly fertile area for disputes in 2023, particularly around greenwashing claims and legal action being brought against governments.Other key dispute trends highlighted for 2023 include collective proceedings actions, crypto and blockchain litigation, and investigatory activity by regulatory bodies leading to more lawsuits.
An important reminder of the volatility of the funding industry has come into the spotlight, as a UK merchant banking group announced its litigation funding arm had failed to find success from its investment in cases.Reporting by The Law Society Gazette covered an update from Close Brothers Group announcing that its litigation funding business, Novitas, would be writing off £90 million from a portfolio of cases that had “limited prospects of successfully progressing through the courts”. This follows a decision in July 2021 by Close Brothers to withdraw from the litigation funding market, and not to pursue any new investments in the sector.Novitas was first acquired by the group in 2019, and was working with a number of different law firms when it suffered from a run of unfortunate events. According to reporting by the Gazette, Novitas had previously drawn the Financial Ombudsman’s (FOS) attention around its activity with solicitors, who allegedly pressured divorcing clients to enter into high-interest loans. Whilst this activity dated back prior to its acquisition by Close Brothers, it was only last month when Novitas was found by the FOS to have failed to execute adequate income verification on a borrower, and has been forced to repay both the interest and additional charges.
Despite being viewed as a less prominent market in the global scope of litigation funding, India continues to experience a regular cadence of legal finance activity. This is in large part due to the presence of LegalPay, the country’s leading funder, which once again made headlines with the announcement of its joint venture with Goldi Solar Group, a solar manufacturing business.Detailed in an article by BWDisrupt, LegalPay’s joint venture with Goldi Solar Group sees the funder acquire a minority stake in Padmalaya Finserve, a non-banking finance company (NBFC) dedicated to legal and insolvency financing. LegalPay secured an operational stake in the company, which aims to provide loans to cover legal costs through no-cost EMIs.LegalPay’s CEO, Kundan Shahi, emphasised that this joint venture would allow the funder to broaden its reach in the legal finance space and continue to innovate its service offering for businesses. Ishver Dholakiy, managing director of Goldi Solar, stated that “LegalPay as a partner brings their sector expertise and robust tech infrastructure necessary for establishing a strong dominance in the sector."
Critics of litigation funding often cite a myriad of reasons why the practice should come under increasing regulation, claiming it lacks transparency and that funders exert control over the litigation process. However, proponents of the industry are not remaining silent in the face of these arguments, with one funder highlighting the ethical nature of third-party legal funding.In a blog post on LinkedIn, Amicus Capital Group puts forward three core elements that establish litigation funding as a more ethical practice than other forms of lending or outside finance. Firstly, the article emphasises the non-recourse nature of the financing, which means clients are never liable to repay any costs if the case is unsuccessful. Litigation funding sets itself apart from other means of financing, as it assumes risk for cases without demanding financial return in the case of a negative outcome.Secondly, the idea that funders are controlling litigation is a misguided one. Funding agreements are the source of capital, but they are not designed to give funders control over the legal strategy, nor any decision-making capacity over areas such as settlement negotiations. Finally, the article reinforces the principle that funders do not jeopardize attorney-client privilege, and as has been demonstrated in recent cases, confidential information that is shared with the funder is not at risk of being made discoverable.Amicus’ blog post draws upon previous analysis by the ABA, which covered common misconceptions about litigation funding.
Whilst litigation funders and law firms often have a mutually beneficial relationship, this does not eliminate the possibility of the two parties being at odds with one another. That is the case in the UK, as Manolete Partners is suing law firm Sampson Coward over a dispute regarding the latter’s role as an escrow agent for one of Manolete’s clients.Reporting by Legal Futures provides an update in the dispute, as the High Court has denied Sampson Coward’s request for summary judgement of the claim. The case is centered around Manolete’s claim that Sampson Coward failed to adequately act as the escrow agent for funds lent to two property development businesses owned by Nigel Jeremy Weir. Manolete alleges that Sampson Coward allowed Mr Weir to use £2 million of the lenders’ financing for personal expenses, and that the law firm “improperly acted” on the sale of assets, which diverted profits from one of the companies without commercial justification.Sampson Coward had sought summary judgement on a number of grounds, including the basis that if a claim were to be brought around the use of the financing, then it must come from the lenders themselves and not the borrower. Deputy Master Teverson of the High Court denied the request, by stating that this reason and the other justifications provided by Sampson Coward were not sufficient basis for summary judgement
The recent history of group actions in the UK have demonstrated the substantial power of groups of individuals to seek legal redress against large entities, especially when supported by capital provided by litigation funders. However, as one recent case has demonstrated, these initial actions can only go so far, and in order to receive satisfactory financial compensation, these groups must continue to fight for their cause.An article by ComputerWeekly covers the latest developments in the ongoing campaign of former sub-postmasters who were impacted by the Post Office Horizon scandal. The victims of the scandal were erroneously blamed for accounting disparities caused by accounting software, which led to over 500 employees forced to pay huge fines and in some cases were sent to prison after being wrongfully convicted for fraud and theft. The Justice for Sub-postmasters Alliance (JFSA) succeeded in their group litigation order (GLO) in 2019, but despite being awarded damages totaling £58 million, only received £11 million after having to cover legal fees that had been paid by a funder.However, in June of last year, the JFSA succeeded once again, as a judicial review found that the government must pay for the difference in compensation. In an update last week, after an initial meeting between the GLO’s Compensation Scheme Advisory Board and the government’s Department for Business, Energy and Industry Strategy (BEIS), it was announced that additional compensation would be provided to “restore the claimants to the position that they would have been in if the scandal had not happened.”
Litigation funders often discuss the benefits of third-party funding for corporates in terms of shifting legal costs off their balance books, allowing companies to pursue beneficial litigation without incurring significant financial risks. Looking ahead to a year that will likely see corporate CFOs under financial pressure from market instability and potential recession, one funder has put forward its view on how CFOs can leverage legal finance to create value.Writing in the Burford Quarterly, Jordan Licht, chief financial officer at Burford Capital, suggests that CFOs should look at opportunities to turn the legal department into a domain for generating liquidity, rather than being a cost center for the company. Firstly, Licht emphasizes that where companies are able to leverage third-party funding, viable litigation claims should be treated like assets by CFOs, given the fact that they have the potential to return significant value without taking financial risk.Secondly, Licht puts forward the option of legal finance monetizations, where working capital is provided to advance part of an ongoing claim or outstanding award, thereby unlocking fresh liquidity for a CFO that can then be used for any other business priority. Finally, Licht returns to the key pillar of how CFOs should be using litigation finance: by reducing expenses and preserving capital during tough economic times, without needing to sacrifice the opportunity and financial return of pursuing legal claims.
Litigation funding has reached a level of maturity where it is now viewed as a common feature of many jurisdictions’ legal systems, rather than a rare occurrence, leading to wider conversations about how its use should be regulated by national governments. Whilst criticism of the practice exists from politicians and third-party pressure groups in the U.S., it is important to note the role of government agencies in shaping the future of regulation, including the Government Accountability Office (GAO).At the end of last year, the GAO released its study into the characteristics and trends of third-party litigation funding, aiming to provide an overarching picture of the current state of the market and the connected policy implications. The GAO stated that the purpose of this study was to fill the gap in public data about the industry, and to examine the issues raised by critics of litigation finance, such as questions around transparency and disclosure.The GAO’s study, which included an analysis of previously collected data by funders, reports by outside parties, and direct interviews with those involved in the industry, looked at all aspects of litigation finance between 2017 and 2021. The report included an examination of the advantages and disadvantages of third-party funding of litigation, as well as existing gaps in the markets and potential policy solutions and regulatory options.The GAO report is already receiving praise from industry participants. “The GAO report illustrates that proper regulation of the industry is welcome. The Alliance for Responsible Consumer Legal Funding (ARC) and its member companies welcome appropriate regulation,” said Eric Schuller, President of ARC, who added that “ARC members follow a set of best practices that are the industry standard.”The full report can be found here.
Disclosure remains one of the hottest topics in the world of litigation funding, as courts, legislators and pressure groups are all weighing in on the level of transparency that should be required for funding arrangements. However, a recent ruling from the Eastern District of Texas has reinforced the principle that funders and their clients should still be permitted a reasonable degree of confidentiality when it comes to documents shared under non-disclosure agreements.Analysis by Lake Whillans summarizes a decision from the Hardin v. Samsung Electronics case in Texas, where the court ruled the legal memoranda shared between a plaintiff’s counsel and prospective funders should not be open to discovery. In this patent infringement case, the defendant had sought discovery of a confidential memorandum that counsel had provided to funders prior to filing suit, arguing among other reasons that it was necessary to see the information in these documents relating to “valuations placed on [Plaintiff’s] patents”.The court did not find merit in Samsung’s arguments, holding that such documents were in fact protected attorney work, having been shared under a confidentiality agreement. This judgement aligned with the 5th circuit’s precedent that this kind of document should be protected from discoverability, given that its "primary motivating purpose” was to “aid in possible future litigation”.Despite the ongoing battles around disclosure and discoverability in patent infringement cases, funders will no doubt welcome the continued recognition of the principle of confidentiality between plaintiffs, their counsel and funders.
GLS Capital, one of the world's largest private investment firms focused on litigation funding, is honored to have three principal members of the GLS Capital Team named to the IAM Strategy 300 Global Leaders in 2023: Adam Gill, Jamison Lynch, and Joel Merkin.Founded by industry veterans, GLS Capital continues to broaden its global reach as one of the most experienced litigation finance firms in the industry, now with more than $600 million managed for alternative solutions for complex legal matters. Adam Gill, Managing Director of GLS Capital, shared the following statement after receiving the 2023 recognition:"The GLS Capital team is excited to be included within IAM's Strategy 300 Global Leaders guide for 2023. We built GLS Capital to provide clients more than just capital, but rather operate as a long-term strategic partner with deep experience in both law and finance. Inclusion in IAM's Global Leaders is highly regarded within our firm and across our client portfolio."Intellectual Asset Management ("IAM") is a trusted voice of news and analysis throughout the intellectual property industry. IAM annually highlights the top IP experts in the world through their IAM Strategy 300 Global Leaders guide, which draws from the worlds of private practice, consulting, and other service providers, along with specialists from the major IP markets in North America, Europe, and Asia. Together, these individuals and firms possess a wealth of IP expertise across disciplines and sectors.For more information about GLS Capital, please visit the corporate website, or call 312-900-0169. To learn more about IAM and its Strategy 300 Global Leaders 2023, click here.
Acknowledging both the industry’s global growth and the resurgence of critiques from those opposed to third-party funding, Validity Finance’s CEO offers his perspective on expectations for the litigation finance industry in 2023.In an opinion piece for Bloomberg Law, Ralph Sutton, founder and CEO of Validity Finance, argues that whilst U.S. funders have already expanded to major cities nationwide, he expects that funders will soon look to set up operations in smaller cities, including Denver, Palo Alto and Seattle. Importantly, Sutton notes that these locations will not see the same level of high-value cases that funders are used to reviewing in New York, but will add significant volume to bolster returns.Sutton also spotlights the increasingly important role that insurance is playing in the litigation finance space, predicting that this year will see more brokers emerge, and similarly, that there will be parallel growth in new tailored insurance products that funders will utilize. In addition to the tighter relationship between funders and insurers, Sutton suggests that funders will look to bolster their strategic relationships with law firms that go beyond the provision of capital, by providing value through portfolio structures.Finally, Mr Sutton emphasizes the need for broader education and awareness around the use of funding and its technical intersections with the existing legal structure, both for existing legal professionals, but equally importantly at the law school level.
AxiaFunder, the innovative litigation funding platform, has achieved a new milestone in the company’s trajectory, as it has been granted direct authorization from the Financial Conduct Authority (FCA) in the UK. This latest step follows a strong 2022 for the funder, having launched a new portfolio product in July of last year. An article by Peer2Peer Finance News reveals that AxiaFunder was directly authorized by the FCA last week, allowing it to further streamline its operating model. The funding platform had previously acted as an appointed representative of principal ShareIn, who will now act in a supporting role by providing AxiaFunder with compliance and onboarding services. AxiaFunder’s chief executive, Cormac Leech, stated that now that it has been directly authorized by the FCA, the company can focus on its growth plan which involves establishing working relationships with law firms and brokers to maximize its inflow of easy-to-process and smaller scale cases. Leech outlined the funder’s 2023 objective to achieve £1 million in funding per month by the end of the year.
The arena of international disputes saw a hive of activity in 2022, as jurisdictions around the world began to return to a faster pace in the wake of the pandemic and disruptive sub-sectors of the economy, bringing new areas of opportunity for litigation. Looking forward to the next 12 months, the founder of one of London’s boutique litigation firms has put forward her top trends to watch in the world of international disputes. Writing in The Global Legal Post, Natasha Harrison, founder and managing partner of Pallas Partners, has identified five key factors that she is keeping an eye on for 2023. Firstly, Harrison pinpoints securities litigation as being a lucrative area moving forward, driven by a healthy appetite for investment from litigation funders and opportunities for in-house counsels to generate significant financial gains from successful litigation. Looking at the global economic instability and ongoing financial pressures on businesses, Harrison also sees restructuring and insolvency disputes as a potential hotbed of activity. Similarly, fraud-based litigation is identified as another growth area, partially resulting from the aftereffects of the Covid-19 pandemic, and the misuse of relief funds from state governments. Moving into the world of acquisitions and transactions, Harrison points to a rise in private equity disputes as a key growth area, driven by the fallout from the high volume of transactions in 2020/21 that may come under scrutiny for issues around improper valuations or misrepresentation of financial statuses. Finally, Harrison sees competition litigation as fertile ground for increased activity, and once again, another area where the influence of litigation funding could play a significant role.
Bitcoin Satoshi Vision (BSV) launched with high hopes of digital asset innovation. Once at a market value over $8.1B, today BSV hovers around an $850M market cap. Softwhale, a litigation finance investment vehicle for digital assets, is now representing 243,000 UK residents in a first of its kind digital asset anti-competition trial. The fund is looking to clawback over £9.9B in damages from exchanges that delisted BSV trading activities. BNN Bloomberg profiles Robert Buckland MP (UK's former Lord Chancellor and Justice Secretary) and Lord David Currie (UK's first chairperson of the Competition Markets Authority) who are the founders of BSV Claims Limited. Lord Andrew Tyrie (former UK Conservative lawmaker) has been named to represent the firm's advisory board. Likewise, BNN Bloomberg reports controversial digital asset entrepreneur Calvin Ayre has launched Softwhale out of Antigua. Ayre is the CEO of Bodog, an online gambling platform and is the-self proclaimed 'largest BSV blockchain investor.’ BSV Claims Limited and Softwhale aim to reset BSV's utility as a legitimate digital asset investment. Both firms claim that anticompetitive behavior has defrauded investors and is the chief reason behind the downfall of BSV.
As LFJ reported last week, the UK financial services sector is bracing itself for a surge in litigation this year, as leading British banks look to be on the receiving end of a wave of class actions. However, this may not be the only driver of litigation activity for financial services entities in 2023, as a new study suggests that last year’s pension funds crisis could catalyze another wave of lawsuits targeting asset managers and advisers.Reporting by the Financial Times covers new research by the London Solicitors Litigation Association (LSLA), which found that UK lawyers are expecting a rise in legal activity relating to the fallout from the government’s ‘mini-budget’ and the impact on liability driven investment (LDI) strategies in September 2022. The LSLA’s president, Nicholas Heaton, suggested that it was likely that LDI-related lawsuits would begin to appear, and that whilst the volume of such claims was less certain, he highlighted that the presence of litigation funders would continue to drive the growth in class action suits.However, Anna Rogers, senior partner at Arc Pension Law, pointed out that the viability of these LDI claims and their ability to successfully receive significant compensation will not be straightforward. Rogers highlights that asset managers facing such litigation may be able to offer a credible defense by putting the burden of understanding on pension trustees, who could in turn place blame on investment consultants.
Disclosure in litigation funding continues to be one of the leading topics of discussion for the industry, particularly driven by recent U.S. patent dispute cases that have led to fiercely contested disclosure orders by federal courts. Whilst funders are largely resistant towards blanket disclosure orders, especially when it comes to the details of litigation funding agreements, one member organization that seeks to deter invalid patent assertions has made the argument for greater transparency.In an op-ed for Delaware Online, Jonathan Stroud, general counsel at Unified Patents, argues that as transparency is a central tenet of the justice system, funders who are involved in financing patent infringement lawsuits should have to meet the same transparency requirements as other participants in court cases. He argues that funders either explicitly or implicitly exert control over the litigation process, therefore it is in the courts’ interest to know both their identity and the degree of influence that these financiers have over the plaintiff’s litigation.Stroud cites familiar arguments that the presence of third-party funders both influence the litigation process, and increase legal costs for all parties. He also echoes recent claims by the Chamber of Commerce and State AG’s that litigation funding by foreign state and non-state actors represents a threat to U.S. security. Stroud concludes by encouraging more courts to follow the recent examples of Judge Connolly in Delaware, and enforce disclosure requirements for funders involved both in patent disputes and other litigation proceedings.
With the litigation funding industry experiencing exceptional growth despite the uncertain economic climate and instability across the globe, the practice is not only attracting specialist funders, but also interest from broader investment firms. As an investment opportunity largely insulated from macro-economic events, funds are increasingly seeking to diversify into the asset class. An article by Hedgeweek spotlights one such example, as Hedonova, a global hedge fund with offices in Los Angeles and Tallinn, has reported impressive financial growth last year due to its portfolio of alternative investments which include litigation finance. Hedonova saw its assets under management grow from $160 million to $400 million in 2022, whilst reporting an annual gain (post fees) of 32.8%.According to Hedonova’s website, litigation finance represents a maximum of 10% of its portfolio allocation and has experienced historical returns of 56.8%. The hedge fund has also partnered with traditional funders such as Burford Capital and LegalPay as part of these investments. In 2022 alone, Hedonova’s litigation finance investments generated a return of 58%.
Bryant Park Capital (“BPC”), a leading middle market investment bank with a focus in the specialty finance industry, announced today that DLF Management Corp., dba Dynamic Legal Funding, LLC (“DLF” or the “Company”), a leading provider of legal and medical funding, closed on a senior secured debt transaction with a large commercial bank. BPC served as the exclusive financial advisor to DLF in connection with this transaction. “Bryant Park Capital has been an immensely valuable partner to DLF in closing our first institutional credit facility. They helped us through every step of the process, and their expertise in the space allowed us to close an important transaction for DLF that will greatly enhance our growth and profitability. We could not have been happier to work with them,” said Brian Natanov, Founder and CEO of DLF. About Dynamic Legal Funding DLF Management Corp. is a leading provider of pre-settlement legal funding to plaintiffs with pending injury lawsuits. DLF also specializes in pre- and post-surgical funding to medical providers.Founded in 2017, DLF is based in New York, NY and provides funding to clients throughout the United States. For more information, visit www.dynamiclegalfunding.com. For more information about Bryant Park Capital, please visit www.bryantparkcapital.com.
As LFJ reported earlier this week, the UK has experienced a surge in class action lawsuits over the last year, and there are no signs that this trend is slowing as we begin 2023. Whilst Big Tech companies were identified as one of the main targets in our previous article, new research suggests that the UK’s largest banks are also a top target for class actions, and litigation funders are playing a key role in driving these claims.An article from Financial Reporter highlights new research by law firm RPC, which has identified 109 class or group actions against some of the UK’s largest financial institutions. Among the industry-leading firms targeted by these claims, Barclays is facing 41 actions, whilst HSBC and NatWest are also on the receiving end of a significant volume of cases, with 31 and 28 apiece. One of the key drivers of these claims is the aftermath of the LIBOR interest rate manipulation scandal, with 41 cases focusing on this wrongdoing and another 18 are targeted at banks alleged to be in breach of the US Anti-Terrorism Act. However, RPC’s Daniel Hemming argues that the “quantum of these cases” is high enough that it is regularly attracting the interest of litigation funders who are enthusiastically pursuing investments in these class actions.Simon Hart, another partner at RPC, states that whilst many of these claims focus on compliance violations, he expects ESG-related class actions to increasingly dominate the space in the years to come.
The use of litigation funding has been seen by many as a method for equalizing the balance between plaintiffs and defendants, providing the needed capital to enable parties to seek legal redress against larger and more well-financed entities. However, some legal analysts are concerned that despite its growing role in the litigation area, third-party funding is not being held to the same levels of transparency and disclosure as other parties involved in litigation.In an article on The National Law Review, Malerie Ma Roddy and Jonathan Judge of ArentFox Schiff LLP, raise the issue of litigation funders being exempt from the disclosure requirements applied to “corporate interests and insurance agreements”, which critics claim is creating an inequality in the system. The authors point out that while corporates with a financial stake in the plaintiff’s company and agreements with insurers face mandatory disclosure, courts have largely been hesitant to apply the same standards to funders.Roddy and Judge highlight the lack of commonality between states in terms of legislation outlining disclosure requirements, citing states such as Wisconsin, West Virginia and New Jersey as jurisdictions that have enacted mandatory disclosure rules for third-party funding of cases, whereas Illinois’s laws on litigation funding do not require automatic disclosure. The lack of federal legislation to unify disclosure requirements for funding agreements is pinpointed as the cause of this inconsistency.
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